The ever-strengthening case for gold and silver investment

Every day the case for investing in gold and silver would appear to get stronger and stronger as worse economic news follows bad.  Gold and silver prices may get hit by stringent margin increases on some exchanges, yet still they bounce back.  It seems that whatever ammunition the gold bears (whoever they may be - and suspicion falls on ‘official' channels and major banks holding short positions here among others) throw at it the ‘monetary' precious metals regroup and bounce back after a perhaps initial sharp retreat.  It may well be that the bears are running out of ammunition!  Gold and silver may lose the odd battle but they are certainly winning the war.

As has been pointed out in these pages time and again over the past several months, or even years, the centre of gravity for gold demand is moving ever further eastwards, which means that whatever western institutions (and I use this term in its widest sense) may try to do to curb its enthusiastic breakout they are ultimately doomed to failure.  The Chinese, Indians and other eastern investors who are psychologically hard-wired into gold as the ultimate survival currency when times are bad - a factor which equally affects their government attitudes to the yellow metal - will call the tune and any splurge of western sales quickly provokes an even stronger purchase response from the East.

Silver will continue to be dragged up on gold's coattails, and given the far smaller market here we are likely to see more volatility - although it has been interesting to note silver's recent relative resilience to the occasional sharp gold price downward moves each time some obstacle is driven into  its advancing path.  It really cannot be too long before the magic $50 level for silver is surpassed and after a likely hiccup around this level, the floodgates could open.  I am not a believer in the Gold:Silver ratio falling down to 16 or even less - at least not in the foreseeable future, but 30 does not seem unreasonable and that would put silver at comfortably over $60 at the current gold price level.

All in all it seems to this observer that gold and silver are nowhere near their peaks yet.  $2000 gold and plus $50 silver have to remain as definite possibilities even this year and there is likely much higher to come ahead as the global economy seems nowhere yet near coming out of its severe downturn.  While continuing lack of global growth may not bode well for the short to medium term price patterns for industrial commodities it could well see gold and silver rise to ever increasing heights.

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