March 2012 Archives

This Weeks Silver Takedown Great Opportunity to Buy

One of my favorite sources for information about the economy, the markets, and especially the precious metals market is the Financial Sense Newshour with Jim Puplava who hosted a special series of interviews this week in response to the Leap Year “take-down” of gold and silver on February 29th of this week.

John Doody sees gold stocks as very undervalued and believes it’s the best buying opportunity since 2008. Kathryn Derbes sees a silent army of buyers placing physical gold and silver in stronger hands, as physical metals buying becomes more intense. David Morgan sees paper shorts losing control over the silver market, and also believes the gold/silver ratio will drop from 50 to 35 this year, favoring silver over gold.

At one point during Wednesday’s trading, gold was down more than $100, while silver was trading down $3. Both metals have since recovered approximately 30 percent due to bargain hunters stepping in at the sub-$1,700 and sub-$34 levels, respectively, in the gold and silver markets.

Eric Sprott told King World News that a staggering 500 million ounces of paper silver traded hands during the takedown in the metals this week. Eric Sprott, Chairman of Sprott Asset Management, had this to say about what took place the day of the plunge in gold and silver:

“I can only imagine it’s the same forces that for the last twelve years have been at work in the gold market, trying to keep the volatility very large on the downside. As you are aware, we hardly ever get days when you get an intraday $100 rise in gold. When we look back at what happened (on Wednesday) we saw huge sell orders in gold and silver.”

Eric Sprott continues:

“When I look at the silver market in particular, in a 30 minute span we had sellers of 225 million equivalent paper ounces, in a market that in one year the silver miners only produce 800 million ounces. So again, it’s the paper markets overwhelming the physical market. It’s stunning to me that on a day like Feb. 29th we traded 500 million ounces of silver.”

Obama in Your Tank

A recent New York Sun editorial echoes the point often made by GoldMoney’s James Turk — that gasoline isn’t going up in price, but rather the dollar is going down in value, and that the relevant policy isn’t energy policy but monetary policy.

Read The Sun’s editorial here: “Obama in Your Tank“.

Making An Investment In Gold

No matter what the current gold bullion price is, it is never to late to invest. If you buy gold online, the number one thing to keep in mind is dollar cost averaging, or putting a set amount of money towards purchasing gold each month no matter what the cost is. This plan of action allows speculators to spread the risk of investment out over a period of time. Making an investment in gold is insurance, or protection, against worldwide doubt, currency debasement and inflation.

If you intend to purchase gold coins or gold bullion, ensure that you avoid the big premiums. Making an investment in gold successfully requires that you purchase it as near to its spot price, with a maximum premium being 10 p.c. If you buy a higher premium, the cost of gold will have to be higher up in range if you want to earn a profit.

Working out how much the premium is for a gold product, figure out the spot price and subject it from the amount the owner is referencing you. Divide your difference by the spot price and then multiply the quotient by 100. For example, if you purchased a gold bar that weighed an ounce for $1,225.90, and the spot price was $1,200, the bar would have a markup of 2.1 percent. To paraphrase, the cost of gold would only really have to increase another 2.1 % from the prevailing levels of spot price for you to come out quits on the purchase. But premiums are known to elevate as high as 75 percent — or perhaps considerably higher — depending on the item the premium is for.

If you’d like to avoid getting ripped off, it is important to keep in mind why you would like to invest in gold bullion. Keep close to the spot price if you are fascinated by a long term investment. To possess it for the usage of money, it is better to ditch the bullion and work with smaller coins — such as a tenth of an ounce — but you will have to pay the premium in that case.

If you are going to work with coins, it is also necessary to bear in mind that rare coin collecting should get left with the rare coin collectors; this is not as certain as investing in gold, and uncertainty must be evaded.

For over 29 years, Jake Mitchell has been an investment expert. Mr. Mitchell is always on top of the prevailing gold bullion price when he wants to buy gold online . Coupled with his experience, he features a B.A. Degree from Yale University as well as an M.B.A. From the Varsity of Virginia.