Savvy investors have been stockpiling gold for the past 12 months, pushing its price through a new record this week (US$1600 an ounce). Is it now over-priced as an investment and what about the other metals?
Precious metals have been valuable commodities throughout the ages. Flaunt them in the good times, hoard them in the bad.
Gold has always been the favourite. It is rare and has traditionally been held by nations and citizens alike as a protection against inflation.
Right now is a perfect example of investors stocking up in the bad times but does that mean those watching on the sidelines have missed their buying opportunity?
Ron Currie, the sales and marketing director of the Perth Mint, explains “If you had five bars of gold in 1920 you could have bought a motor car. If you had five bars of gold today, you could still buy a motor car.”
Scott Meyer, senior trading analyst with Pioneer Futures says, "You’ve got to be careful because of where we are. To take a first stand in gold and say 'I'm bullish' just after we've hit $1,600 is like coming to a party at 2 am. Buying it up here, you're really taking a risk."
On the other hand, John Taylor, the founder of FX Concepts LLC in New York, the world's largest currency hedge fund, said the price will surge to $1,900 an ounce by October.
But there are the three other precious metals to be considered: silver, platinum and palladium.
Silver prices are much more volatile than gold, it sees less trading volume, and it is also prone to sharper moves than its sister metal.
However, “people often don’t think about silver, but in actual fact over the last 12 months it has outperformed gold. It’s gone up in percentage terms much more than gold has,” says Currie.
Platinum and palladium are usually ignored in Australia, but globally these metals are popular investments.
The global demand for cleaner fuel emissions and the rapid increase in the use of vehicles in developing nations means that demand for these metals is on the rise.
Of course, in boom times it’s easy to forget the bad times. From the mid-1970s to January 1980, gold experienced the same 700% rise as we’ve seen the last decade.
From January 1980 to June 1982, however, gold fell in value by 52%. As with any investment, there is always the possibility of failure.
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