I understand the sentiment on both sides of the coin as it pertains to precious metals, yet it is a difference of opinion that makes a market. One buyer always needs a seller, and vice-versa. I never subscribe to straight line theories, for everything has a beginning and an end, and over the last decade or so, I’ve seen the same exact argument about the dot-com revolution and housing emanating from the same characters.
One can easily get lost within the daily charts, conflicting media stories, and opposing opinions, and it is often said that sometimes one must take a step back and look at the big picture – the simple big picture, that is. And what better way than to look at the monthly price chart over a few decades, especially as the new year starts. The chart for the Nasdaq below is a reminder of what happened at the turn of the century:
Click to enlarge.
The next chart shows gold’s ascent, and the rise in earnest started around December 2005, way before the words “crisis” and “instability” were even part of our daily vocabulary, and thanks to the brilliant marketing campaign devised by the World Gold Council.
The last chart depicts silver since 1970, forming a perfect smiley face pattern, as opposed to gold’s crooked smile.
Certainly one can get rewarded or killed both ways by the short-term price fluctuations, but as I look at the charts above, the word "risk" comes to mind, and the probability that precious metals will continue their rise is pretty bleak in my book. Furthermore, we’re in an environment where the dollar is still king, and interest rates will start rising, whether central banks like it or not.
The latest gold and silver rebound was attributed to Citigroup's Chief Technical Analyst, Tom Fitzpatrik, according to Zero Hedge, and he sees gold hitting $2,400, defying gravity as illustrated by the chart above.
I am certain that most everyone is smart enough to make a decision, especially when presented with unbiased information and simple pictures, and if one truly believes that precious metals are a good long-term investment at this juncture, please don’t let anyone tell you otherwise, whether your money is in physical metals, ETFs such as SPDR Gold Trust (GLD), iShares Gold Trust (IAU) and iShares Silver Trust (SLV), or miners of all colors and stripes.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.