Image by: Tao Zhyn
By George Lamb
Gold, silver, platinum—cold hard metal. Is it finally affordable? Well, after years of being touted as some of the most valuable stuff on the planet, it seems these metals have tumbled as the dollars advanced to a five-year high cut demand, eliminating a whopping 2 billion dollars from the value of metal-backed funds.
You know what this means, right? Get it while the gettin’s good, people. Gold has been notoriously seen as…well, gold. And if you have the chance to take advantage of this recent downfall of metal, I’d suggest you do so. Here are some things you need to know about precious metal if you do plan on heeding my words.
The Rise & Fall Of Metals
After years of being at the top of the food chain, gold and silver plummeted to four year lows due to the ascending of the Bloomberg Dollar Spot Index after republicans managed to get control from the democrats in U.S. midterm elections. Yea I know, way over my head as well, but basically, in a nutshell, approximately 1.6 billion dollars were erased from the value of metals.
The main reason for this drastic drop is the fact that the federal reserve is in the process of raising interest rates of banks, which will result in the cutting of gold’s allure due to the up-rise in the strength of the dollar. The immediate future of gold is looking pretty bleak indeed, as the first back-to-back annual drops since 1998, and higher cost mining firms who extract the once coveted metals are paying the price.
Scott gardener, a man who assists in the management of nearly $500 million at Verdmont Capital SA in Panama City claimed in a recent interview: “People expect policies from the Republicans that lend confidence to the outlook for the economy. Conservatives by nature are more hawkish and that is pushing the dollar higher. People do not see the need for gold.”
I suppose the guy has a point there: if it aint’ broke don’t fix it. And apparently cold hard cash has reclaimed the throne in favor of gold, re-establishing its value amongst the world. This may make you want to think twice about investing thousands of dollars into that gold watch you’ve been looking at, as you might find yourself unpleasantly surprised with its decrease in value in the coming years. A study showed that Gold futures for December delivery slipped 2% to settle at $1,145.70 per ounce at 1:55 in Comex, New York after reaching the lowest price since April of 2010—$1,137.
Another man by the name of David Govett, the owner of precious metals at Marex Spectron Group in London said, “As long as the U.S. economy stays on track and the dollar remains strong, the metals will continue to stay under pressure. The only positive in a sea of precious negativity is the fact that the markets are getting themselves shorter and shorter the lower we go. At some point there will be a short-covering move.”
Keep your dollars close at heart, because if the guys in charge say metal is under pressure, then you can bet it is. Just this year Platinum has dropped 12 percent this year, and all the research indicate that Platinum—and metals alike—show no signs of coming out victorious in the tug of war against the dollar.
As stated above, the mining companies are the ones accepting the worst blows, as production costs of mining companies are dropping and mining companies are essentially losing money on every ounce of metal mined. “As gold climbed to a record high in $1,923.70,” Mike Schroder, the fund manager at Old Mutual Investment Group, said. “In 2011, mining costs were allowed to spiral and mines were built assuming high prices.
Metal has indeed hitting rock bottom with the speed of a penny off a sky scraper. And this is good general knowledge to have in case you plan on doing some mining anytime soon—or in case you plan on making any heavy investments into any fancy metals any time soon.
Has this article spoiled any future plans of you buying that amazing Rolex? Tell us how else you plan on spending your money in the comments section below.