Friday, April 8, 2011

Outstanding Week for Gold and Silver

What an amazing week this has been for gold and silver.  Gold has hit record highs heading into the weekend and the strength of silver has lifted it solidly above $40 per share to close within pennies of $41.  The higher gold gets, the more that talk about bubbles begins to surface.  But I found this interesting commentary on the Kitco website which is where I go for all my precious metal related information.

I like the information presented that would argue against a bubble especially the comments about the lack of a price spike in terms of standard deviations.  These are the types of moves that mean a market is really stretched pretty thin and will likely snap back.  We are nowhere near that now.  Granted gold could easily settle into the summer since there is a seasonal aspect to gold.  But I think that may be less important with investment demand versus social demand.

I also think the comments about the gold as a percentage of total financial assets is a telling graphic as well.  There is clearly not the widespread interest that there was in 1980.  So until we see that number crossing 2%, we won't, in my opinion, be coming close to bubble territory.  Two percent is probably what might even be considered reasonable in terms of asset allocation.  There are many investors who have zero allocated to gold.

If you haven't invested in gold or silver, you may want to get some exposure.  You could do this quickly and easily with the precious metal ETFs such as GLD or SLV.  This is probably what I would do.  I would also look at using protective puts to lock in profits as they hit record highs along with the underlying bullion.  Also, feel free to learn more about gold by reading books from Amazon such as the one below.

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