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Investing in the 2009 recession: love over gold and silver

Battle with gold:

The situation has changed. Investing in this safe zone is now a complicated and risky task for business companies and individuals. Employment is much more complicated than in previous years. And all this is happening because the plague of the financial crisis is spreading all over the world.

The crisis started to show its impact from mid 2007 and 2008 when many stock markets crashed and several other financial institutions collapsed making unemployment explode as the main problem of the country. Many richer nations came together to seek a bailout package to bail out their financial systems. In this volatile financial condition, it is obvious that investors are more concerned about safe investment to survive in this thorny period of crisis. So what can be as simple as the solution?

Today, it is the most important question on everyone’s mind.

Invest in gold and silver:

Gold and silver has always been a better solution in the crucial period of financial crisis. Even in the period of the great depression (1932-1936), when the government set the price of gold, the value of silver doubled, rewarding its investors with good returns. Similarly, in the next long bear market which was 1968-1980. Silver rose from around $2 in 1968 to a peak of around $50 in 1980. It is the economic trend that gold shares will rise during inflation and during deflation. Investing in gold is a good hedge against inflation. Where gold rises as the value of the dollar falls. And as the government cuts interest rates significantly and prints money wildly, it creates inflation to make up for that deflation. So this leads to substantially higher gold prices. Therefore, investing in gold coins reduces the risk in our investment portfolio.

Reasons to invest in silver:

  • Silver is a precious metal that is used and valued as money. Because the supply of silver cannot simply be printed or increased by simple computer input, it retains its purchasing power over time. The expansion of the supply of silver is a methodical and enduring process that requires significant human effort, investment, exploration, discovery, production, transportation and storage of a physical item. The precious metal element of an investment is very attractive when other currencies are losing their purchasing power.
  • Silver has unique characteristics that are almost invaluable for commercial use. Silver is used and consumed by all modern societies. It is used in medical supplies, photography, computer chips, and in a growing aspect of our lives. Because most products, such as a computer, require a very small amount of the metal in the finished product, users of the metal will pay almost any price for silver in the event of a potential shortage. With large emerging countries like China and India with billions of new consumers, commercial demand for silver is another extremely bullish factor to consider.
  • Another key reason to invest in silver is the recognition of “paper silver” and its negative impact on the price of real silver. Paper silver is a paper contract representing silver that may not necessarily be backed by an actual physical silver bar. E.g:
  • Financial institutions currently sell silver certificates for pooled silver accounts. We understand that these pooled account certificates can be far superior to the actual silver available anywhere in the world. Any short position held by institutions is potentially a major suppressor of the price of silver in the open market.
  • Futures markets are another example of a paper contract representing physical silver. It is believed that there are more short contract positions in the silver futures markets than can be physically delivered if necessary. This unnatural condition may be another inhibitor to price appreciation.
  • In rare silver price spikes like the 1970s when silver rose from less than two dollars to more than fifty dollars. This is an aggressive appreciation of around 2700%. We believe that we are currently in similar market conditions and could potentially repeat this significant growth.

Reasons to invest in gold:

  • According to the World Gold Council, members of the Central Bank Gold Deal have sold 297 metric tons of gold so far in the deal year. This suggests that the full quota of 500 shades will not hit the markets this year. Less supply usually means a higher price.
  • Production from the world’s gold mines remains flat. The large increases in the price of gold observed in recent years have not stimulated any significant increase in world gold production. In fact, production may show a small decline in the coming years. Production is already falling off a cliff in South Africa, previously the world’s largest gold producer.
  • Demand for jewelery in India, the world’s largest manufacturing market, is beginning to recover, while emerging markets such as China and Vietnam are taking a hit as their populations earn more money and therefore buy more gold.
  • SPDR Gold Shares (GLD) formerly known as the Street Tracks Gold ETF, whose exchange-traded fund holds physical gold and tracks the metal very closely. As inflation takes off and the value of the dollar falls, gold should rise.


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