After recent volatility in the precious metals markets, many silver and gold investors are wondering if the top of these markets have been reached. In the attempt to determine if the purchase of physical silver or gold is still a prudent investment, the reasons behind the price fluctuations must be taken into account. The summary of these reasons, outlined below, still shows that the best strategy for precious metals investors is to purchase when prices fall and take profits at price peaks.
Lack Of Action By The Federal Reserve
Operation Twist, the Federal Reserve’s only real action to stimulate the bogged economy, was widely perceived as a move that will not likely stimulate anything. The vote is still out on whether the main aspect of the program, swapping short-term debt for long-term, was even a good idea. All commodities, including precious metals, were affected by the Fed’s failure to print more money, as was the expectation.
Hedge Fund Margin Calls
With cash stores at unprecedented lows, liquidity through sales of assets is sometimes the only hedge. Recent sell-offs in the stock market caught many hedge fund managers unprepared to cover the surge in margin calls by fleeing investors.
Investor Redemption On Mutual Funds
Mutual Funds were also hard hit by a flurry of sell orders. Profits were taken on precious metals to cover frenzied redemption by losing investors.
Slowed Growth In China
Growth of all global economies is slowing, as countries producing commodities experience drops in the valuation of their currencies. Hard hit commodities, like precious metals, have experienced margin hikes, which have likely enhanced their volatility.
The sum of these factors should be telling cash rich investors that the time is right for buying precious metals at bargain prices.
