This will be kept short and sweet since the points to be made are really quite simple.
Don't sell your gold and silver based on what's happened in recent days and the growing cacophony of negative sentiment in this market.
As prices have tumbled, investment banks have been in a competitive race to see who can downgrade their gold and silver price forecasts further and faster.
Don't listen to them - their last ones weren't very good (that's why they are revising them).
What makes you think their new forecasts are any better?
Here's why you shouldn't listen to them and why you should hold onto your gold and silver.
Gold and silver prices will go far higher for one of two reasons:
- We enter a high inflation environment.
- We have another major financial crisis.
If you think that both of these outcomes will be avoided, then, by all means, dump your precious metals.
If I thought that we were on track for faster economic growth without higher inflation that would also have us sidestepping another major financial crisis, that's what I'd do.
Today's report on consumer prices (as detailed here) includes a sharp rise in core inflation and a huge 13 percent jump in energy prices that has yet to show up in the government's data. This suggests that the last two years of tame inflation data may soon come to an end.
As for the common perception that the world's troubles with credit and debt are now in the rear-view mirror, one has only to look at the fast-approaching "sequestration" cuts in the U.S. and the growing discord in Europe between France and Germany with an important election in Italy coming this weekend.
I'd put the chances of avoiding both of these outcomes - higher inflation and a new financial crisis - at exactly nil and that's why I'm not selling what forms a core part of my investment portfolio, namely, gold and silver coins and bars along with such exchange traded funds as the SPDR Gold Shares ETF (NYSEARCA:GLD) and the iShares Silver Trust (NYSEARCA:SLV).
If we happen to get both of the above then all bets are off.
That's when increasingly whimsical predictions for gold and silver prices will make a lot more sense than they do today.
To be sure, the recent sell-off in precious metals markets has been extreme and many investors new to this sector are no doubt wondering whether they've made the right decision to commit some portion of their assets to gold and silver.
But, important factors that have contributed to the price weakness that goes all the way back to 2011 may soon be coming to an end.
Today's report on consumer prices is the most tangible evidence so far that the days of falling inflation rates may already be over.
Disclosure: I am long GLD, SLV. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. I also own gold and silver coins and bars