Panic? Investors Flock to Physical Gold and Silver

by | Feb 25, 2009 | Precious Metals

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    An easy way for investors to get a piece of gold and silver’s action is to buy the metal via futures contracts or Exchange Traded funds. Investors are scared these days, and many are moving assets into precious metals in the hopes that the 5000 year old track record for the metals will continue into the future and preserve their wealth. In Worried Investors Want Gold On Hand, Carolyn Cui and Allen Sykora say that more and more investors are forgoing paper-trading and requesting physical delivery.

    Considering that investors have lost 40% or more in traditional investments over the last 18 months, recent news of Madoff and Stanford frauds, and a growing distrust in the goverment’s ability to stabilize financial markets, it’s easy to see why many investors are flocking to the physical form of the metals.

    -At the U.S. Mint, a total of 147,500 ounces of American Eagle gold bullion coins were sold in the first two months this year, a surge of 176% from the same period last year.

    -In December, 4.5% of gold contracts ended in delivery, compared with 3.4% a year earlier, according to the exchange. Investors also are taking delivery of silver, with contracts ending in delivery rising to 7.3% from 4.7%. December is typically a big month for deliveries, and in
    January, deliveries remained higher than the year before.

    -Rising delivery orders have kept Brink’s Inc., a major carrier for the Comex, busy. The Richmond, Va., company said it saw a large spike in clients shipping gold and silver from the exchange over the past few months.

    -The American Precious Metals Exchange ( is reporting their strongest months ever in sales of gold and silver

    It looks like demand for the metal is picking up. The long-term trend for gold is most definitely bullish. We may very well see inflation start kicking in around the globe in the next 12 months, which will lead to deterioration of not just the US Dollar, but the Pound and Euro, as well. Couple this with the possibility that Central Banks world-wide will make less gold available to the open market, and we could have the making of a serious gold bubble boom.

    We may see some volatlity in the metals, especially if a stock market rally occurs on the heels of President Obama’s speech and Ben Bernanke’s claims that the recession will end in 2009. I am in favor of acquiring gold and silver, even at this price ($970 per ounce and $13.90 per ounce respectively), but investors should be careful going forward. A pull back to $800 is not out of the question — we saw gold hit $1000 last summer, only to pull back to $700. Dollar-Cost-Averaging in may be the safest option for 2009.

    Whether you are a doom and gloomer, or simply an investor looking for a safehaven for part of your portfolio, gold and silver may be one of the few assets that will preserve wealth and retain purchasing power in the event of a currency collapse which has been forecasted by analysts like Peter Schiff, Marc Faber and Jim Rogers.


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