Is It Time to Buy Gold and Silver?

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Have you ever thought about buying gold or silver as an investment for the future? I certainly have and I recently heard from my father that now might be the right time to buy. This simple statement peaked my interest enough for me to do some research and see what the trends looked like and what the experts had to say.

The Current Trends

As most of you know, gold and silver have hit record highs within the last couple of years, which was enough for me to shy away from this investment “opportunity”. It is obviously a bad idea to buy high and sell low. However, I have reviewed the trends over the past year and both gold and silver have been plummeting in value, which may mean that it is nearing the time to buy (you know, so we can actually buy low and sell high like the pros do). Take a look at the charts below:

The price of gold over the last 5 years
The price of gold over the last 5 years
The price of silver over the last 5 years.
The price of silver over the last 5 years.

So the trends are pointing to a low trough, which would mean that it may be your time to buy, but what do the experts say (keep in mind though, the experts aren’t always right…to put it nicely)?

The Experts’ Opinion on Gold and Silver

My research first lead me to Tom Aspray of Forbes magazine. He displayed his very complex analysis of the gold market, but this was his overall summary:

“Despite the various fundamental arguments for buying gold, the daily and weekly technical outlook is negative for both the metal, as well as, the miners. Clearly we will see further sharp rallies, but until we see some more positive signs from the OBV, it is best to be on the sidelines or short.”

So, not only is Tom not in favor of buying – he would actually rather short gold, meaning he believes that it will continue to go down in value.

Do you know who one of the largest (if not the largest) investors of gold is? It is not an individual investor or even a brokerage. Nope, it is the great land of China. Naturally, this lead me to the business article in the South China Morning Post:

“Gold price hovered below US$1,300 for most of the fourth quarter after falling to US$1,326 in the third from US$1,632 in the first. Some expect it to recover some ground later next year (2014), although room for more downside is seen in the first quarter.

Only a fall in the price of gold to marginal cash production costs of US$1,050 to US$1,150 would balance supply and demand.”

It appears that even the bullish Chinese gold investors are little shy about the price of gold over this next year.

My Take on the Prices of Gold and Silver

To be honest, I have been checking into the various ways to purchase silver, but I have not yet pulled the trigger on making a purchase. Based on my readings by Robert Kiyosaki, I believe that the stock market will continue to rise this year, which means that the value of gold will likely hold steady or fall. Beginning in 2015 and moving into 2016 may be a different story. At this time, it is believed that the next stock market crash will be upon us (due to baby boomer retirees pulling money out of the market at a large rate, thus shifting the supply and demand of the market, causing it to plummet). Historically, when the market takes a dive, the value of gold and silver skyrocket (like we saw just a few years ago).

In my opinion, history is about to repeat itself, but not yet this year. I will most likely hold off in my gold and silver investments until 2015 when their values reduce another 10-20%.

Have you invested in gold or silver? Will you in the future?

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Investing Money

Derek

AUTHOR Derek

My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.

12 Comments

    • I’m with you Joe. I don’t own either at this point either and will most likely hold out until 2015 when the market is at its peak (in my opinion of course).

  1. Wonder if you could buy some options since you believe they’ll deflate another 10%-20%?
    After all, in every market, there’s at least a loser and a winner. In decent/good markets there are winners on either side. 🙂
    Chris recently posted..Pullback from the market

    • That’s an interesting idea Chris. As I understand it though, with options you are mostly seeking short term losses or gains. Gold and silver tend to fluctuate slowly over time, which would make the options market a difficult one. Also, when I think of investing in precious metals, I am mostly interested in buying hard assets instead of a piece of paper that says I own gold. After all, if the market crashes severely, paper (dollars and certificates) will only be worth the value of paper, no matter what is printed on it. What is your opinion of this Chris? I am always curious in what you have to say because you are typically spot on.

    • Same here Grayson. Plus it’s more affordable. When do you think you’ll make a silver purchase? Would you be inclined to wait until 2015 as well?

  2. Are you interested in buying physical or paper?

    • I strongly advise the physical gold and silver. If the economy goes south, I want to have the precious metal in my hand, not a worthless piece of paper that supposedly means I own some.

  3. I’m starting to read more about the value of gold/silver and trying to decide whether it would be a wise investment. Based on this article alone, if I was to make my first purchase, I would do it at the beginning of an upward trend as I continue to monitor the charts.
    Howard recently posted..How Do Diamonds Hold Their Value?

    • Sounds like a great plan Howard! Let me know when you make your first investment. I would love to hear about it!

  4. I think my personal opinion depends on whether you intend to invest for long-term or buy and sell type of deal for short-term profits. For long-term probably so since gold is down though we might see it continue to decline, and for short term profits, obviously not. But then again investing is a gamble that we all ask ourselves should I or should I not?
    Meagan recently posted..What to do with Diamonds after Divorce

    • Good point Meagan. I try to live by Warren Buffett’s example and always invest for the long term, which means that it may certainly be time to invest soon.


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