Since the beginning of human history, gold and silver have been considered to be highly precious and has been used as a store of value and as a medium of exhange. Even today, beautiful women want to wear gold and platinum necklaces and rings. This makes them look even more beautiful. Have you ever given a gold necklace or a ring to your loved one?
Over the centuries, gold and silver withstood the test of time and are still considered to the ultimate store of wealth and value as well as the ultimate medium of exchange. You go to any society and culture, you will find gold jewelry the most coveted item. For many centuries, global financial system was based on the gold standard. Even in Roman times, gold coins used to be the ultimate currency that could be used to trade with the barbarians. The gold standard was abandoned in 1973 and the world financial system is now based on the free floating currencies. This global financial system has its own drawbacks like there is a lot of volatility. You never know, in future, the world may again revert to the gold standard. Now if you are an investor, you must be thinking what's so special about these so called precious metals. Well, it is all the product of human psyche. If humans think something to be valuable, it becomes precious more so if it is in limited supply.
Now, you must know this fact that the precious metals market is in a boom for the last ten years. The precious metals bull market started in 2000 and still continues. Why? You may ask! Inflation tends to eat away your wealth. So in inflationary times like the last decade, wealhty people, all over the world tend to hoard their wealth in precious metals like gold, silver, platinum and palladium. The global economy is in a recession right now! Governments all over the world are printing money fast to ease this recession. This increase in money supply will result in high inflation in the coming years as the countries come out of their individual recessions. FED in US has been using helicopter money to stop the economy from freezing. Giving away huge chunks of cash to banks and other failing insurance companies that might have collapsed otherwise in the winter of recession. Once the economy starts to grow, this much more greenbacks in the economy is going to cause inflation to rise. The rise in inflation is going to drive more people to buy precious metals like gold, silver, platinum and palladium and make the precious market boom continue for many more years!
Now, at the start of the last decade, in 2000, the price of an ounce of gold was hovering aroung $288. But now, an ounce of gold is selling around $1,200, an unprecedented high price for gold even in it's long long history. No one could imagine a few years back that gold price would go this high. A rise from $288 to $1,200 is almost like a capital gain of 315%. Now, you can compare the performance of investing in gold over the last decade with the performance of passive investment in an index fund like Dow or the S&P 500. The return would be negligible.
As more and more money gets printed in the coming decade to ward off the effects of the crippling inflation, the boom in the precious metals market is going to continue for many more years to come. As an investor, before investing in precious metals, you should know that the longer the term of your investment in precious metal, the more chances their are of building your wealth.
You can even invest in precious metals to generate a steady income for yourself. For example by investing in dividend paying mining stocks or by using the covered call writing strategy on stocks of large mining companies. You can even invest in a Marketsafe certificates of deposit (CD) that are tied to precious metals like gold and silver. So if gold goes up, your CD can go up in value too without much risk.
You can even buy these precious metals for your loved ones and they will become more valuable with time. You can invest in precious metals mutual funds, precious metals ETFs or even learn how to trade gold, silver, platinum or palladium futures contracts. You can even invest in long term options on stock mining companies (LEAPs), invest in options on some gold index or precious metal ETF. Just keep this in mind, the bull market in precious metals is to stay for many more years. So, don't miss this bull market.
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