Gold and Silver

Until the precious metals began going down, metal mania had gripped some investors.  Not only could you buy silver and gold bars, but you could buy mutual funds and ETFs that allowed you to own gold second-hand.  The problem with investing commodities is that they don’t produce any income and, in fact, cost money to store.

Both gold and silver have had a history of dizzying volatility.  It seems to go in spurts.  According to an article by Ann Marsh  in the December 2011 issue of Financial Planning magazine, adjusted for inflation gold reached a high of $2305 during the last bubble with ended in january 1980.

The rationale behind investing in gold (and silver to a lesser extent) is that it is a hedge against inflation.  Another driver is the rise of the Indian and Chinese middle class, both of which are buying more gold jewelry; and by industrial demand, for silver in particular.

There is nothing wrong with owning gold, silver, or the ETFs that are a substitute for buying the actual metal.  But keep in mind that these a speculative investments with a long history of wild swoops.  Don’t over-extend in these kinds of securities.

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