Large 7.5 ounce California gold nugget

The Case For Investing In Gold And Silver

8 ounces of large Alaska gold nuggets

Have you noticed how much the price of gold has been increasing?  Here are some reasons why gold is a good investment......

Many investors are realizing that gold and silver now have an upside potential to appreciate that has not been seen since the early1980s. Similar to the situation of the late 1970’s, investors are once again seeing gold coins and bullion as an important hedge against the uncertainly of war, inflation and the potential destruction of wealth due to a shaky dollar. Gold’s recent performance is also attracting serious interest from investors because it has outperformed the S&P 500 index for the past five years in a row.

Because precious metal bullion moves independently from the stock market and bonds, gold has a tendency to lower the risk in your investment portfolio. In addition, by comparison with the minimal performance of savings accounts, precious metals really shine. There are essentially two broad categories of gold investors: those who want to hedge disaster and those who simply want to make a profit, but both are now actively investing in the market.

Investors know that when they convert paper money to gold or silver all they are really doing is transferring its value from a steadily declining paper currency to a precious metal that is in limited supply that has been rising in market value. Many investment professionals are saying that gold and silver are still near the beginning of a very long-term bull market, one expected to continue for many years. Some are even predicting that gold will hit a price over $2,000 per ounce within the next 5 to 8 years. This is a price which would be close to the high achieved by gold in 1980, corrected for inflation. The extremely strong long-term fundamentals of the gold market seem support this hypothesis.

Until the situation changed in the last year or two, serious exploration for new precious metals deposits had put on hold for nearly 20 years. Large companies engaged in limited exploration and little was found. Most of the large companies acquired ore by purchasing and absorbing other mining companies. To a large extent, this type of exploration by acquisition still continues. Now, the many of the deposits originally located during the 1970 and 1980s exploration boom are reaching the end of the line and only increasing prices for precious metals are keeping them open. For the last several years, world gold production has continually declined in spite of the huge price increases. It will take years to explore for and find new deposits, and many more years to actually bring those deposits into production. Many attractive locations for exploration are in politically unfriendly hands, and there is an open question about whether mining can proceed in these locations.  The fundamental forces of decreasing supply and increasing demand from China and India (Indian citizens buy more gold for investment than any other country) point toward a very bright future for gold and silver as well as other precious metals.


A big factor also affecting the price of gold in the fact that the US dollar has been steadily declining for years. The US exports its inflation to Asia in order to pay for its bill for finished products, and in recent years, Asia has put considerable money into US Treasury Bonds. Many Asian governments are realizing that this is not something that should continue forever and that diversification out of their dependence on falling dollar is definitely in their best interest. The US Dollar is at serious risk for further fall, with the likely cause being the up and coming Euro Central Bank interest rate hikes. The value of US Bonds declines when the dollar declines, and interest in continually buying up our debt is waning. Foreigners who do buy will continue to be at great risk, and this is something the foreigners have become acutely aware of. As our government continues to spend far beyond its means, the dollar is painted into a corner and is likely to continue its fall. All this leads to serious inflation as it takes more and more dollars to buy the same goods abroad when the dollar is worth less and less.

Another serious change to world gold markets is the fact that many governments who were abundant sellers of their gold reserves back in the 1990s have seen the need for diversification of their monetary assets and are now actually becoming net purchasers of the precious metals. Investors worldwide are seeking an investment alternative to the dollar, and gold, platinum and silver have emerged as investment vehicles of choice for mutual funds, hedge funds and even individual investors.


There are a number of potential ways to invest in the gold market, each with their various advantages and disadvantages. There is no question that American eagle gold coins as well as bullion bars are popular investment choices as they can be bought in various sizes. Exchange traded funds, a new possibility on the market is also making waves. On the following website, I have a full discussion of potential investment vehicles for investing in the gold market and a brief discussion of some of their advantages and dis-advantages.

Note: I am not an investment advisor and my opinions here should not be construed as advice. I am an independent investor and these opinions are mine alone. You should conduct your own research for any investments you make, and be aware of any and all risks.



Want to know a little bit more about this crazy prospector guy? Well, here's a little bit more about me, and how I got into prospecting: Chris' Prospecting Story  

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