Gold, Silver Are 'Uncertainty Magnets'

Source: CNN Money (4/5/11)

"Geopolitical concerns have eroded confidence in paper money, leading investors to pile into commodities—which, in turn, have reached multi-year and all-time highs."

Geopolitical concerns have eroded confidence in paper money, leading investors to pile into commodities—which, in turn, have reached multi-year and all-time highs.

Tensions in the Middle East and Libya have not abated, and Japan is dealing with post-earthquake rebuilding and ongoing nuclear issues.

"We have major issues going on both abroad and at home, and commodities are great uncertainty magnets," said PFG Best senior market analyst Phil Flynn.

The appeal of stocks has been somewhat tarnished by the volatile global situation, and bond investors "have been kind of forced out by the Fed's low interest rates," Flynn said.

Meanwhile, the physicality of commodities have boosted their appeal and made prices soar.

Precious Metals Shine

"We're almost going back to a barter system, where commodities have more value than paper," Flynn said. "People keep blaming the speculators, but there are good reasons to be in commodities."

In addition to the Middle East and Libya unrest, as well as the Japanese crisis, Flynn said investors are nervous about the U.S. budget deficit and seeing "paper money being pumped out" around the globe.

"People have lost confidence in paper currencies right now," Flynn said.

Instead, they're piling into gold and silver at a rapid clip. In Tuesday's session, gold for June delivery hit a record intraday high of $1,451.20 an ounce and a record settle of $1,452.50 an ounce.

Flynn said gold could soar as high as $2,000 an ounce in the coming months.

Silver has also been on a roll, having recently hit 30-year highs near $40 an ounce. On Tuesday, silver for May delivery gained 1.8% to settle at $39.18 an ounce.

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