Rising Gold and Silver: Essential to Any Investment Strategy
Source: Seeking Alpha, Jonathan Cavuoto (10/6/08)
Carlos Sanchez, a precious metals analyst at CPM Group says that if the rescue plan works, and supports the US recovery and the dollar, it could make for declines in gold and silver but adds “any effect of this nature is at least six months out. During that time, there will be continued uncertainty about whether the plan is improving the economy leaving precious metals to remain supported on safe-haven flows."
Mr. Sanchez said:
During that time, there will be continued uncertainty about whether the plan is improving the economy leaving precious metals to remain supported on safe-haven flows.
Mr. Sanchez is not alone. A Merrill Lynch research note that was circulated last week wrote: Once the immediate liquidity crisis subsides, the market should focus on the fiscal implications of the recent (legislative) measures, putting heavy downward pressure on the US dollar. A weaker US dollar should help support gold prices, as the two markets have been closely linked in the past year...
There are three very practical reasons for street-savvy investors to prefer silver over gold as a precious metals investment at this time. First, silver has all the monetary properties of gold, yet appears to represent substantially better investment value. For example, gold-to-silver price ratio has historically been 10:1.
Based upon Friday’s closing prices for open contracts, this ratio is currently 74-to-1…