Gold and silver were tIn times of troubles, some look to friends, some prayer, some party, and smart investors buy precious metals like gold and silver. With gold hitting a record $1600 per ounce this week and silver heading up towards the previous May high, it looks like the investment community is nervous and seeking safety in what is known as “safe haven” commodities like gold and silver.
And why should people not be nervous? Europe is on the verge of falling apart and the US debt level has reached astronomical levels. The solutions presented for both seem to be to increase borrowing which defies rationality itself. Both entities cannot pay their debts and in Europe’s case, the countries that have money are being forced to flush money into countries that have little in order to keep the Union together.
In America, Republicans and Democrats are locked in a childish squabble on how to raise the debt ceiling. (Maybe both parties should take a look at the southern Somalia and get perspective on what real problems are). They may even print more money although Bernanke says that’s a long shot. We have seen ridiculous things happen before and many of them have come from chairman’s mouth.
So what does gold and silver offer?
Safety is the key word because it is in physical product that people find safety. In reality, gold has very little real value other than what we have given it throughout human history because it is not a very useful commodity (unless you want gold fillings). Silver is useful, particularly in Tomahawk missiles, because of it’s conductivity. Asian countries seem to have a hunger for resources and even though China has slowed considerably and looks to be in danger of its own crisis, the emerging markets in that part of the world still need raw materials.
What is particularly interesting is that gold and silver are reaching high levels at a time in the year when traditionally, prices have remained flat. With deals to be struck by the end of the month, investors will keep a watchful eye on what is being said and what is actually being done.