Buy Low Sell High: The Price of Gold And Silver Has Finally Hit Bedrock

It’s been a rough couple of years for those of us who invest in precious metals, and I speak from experience as someone who’s a frequent buyer of physical silver. We’ve watched gold and silver climb for over a decade, only to see it lose a lot of ground in recent years. It’s easy to forget that precious metals, like any investment, are capable of extreme highs and lows.

Just because the fundamentals of an investment are solid, doesn’t mean its price isn’t going to swing from time to time. Real investing isn’t about what you think the price is going to be tomorrow, or next week or next month. It’s about what the price is going to be 10 or 20 years down the road. What’s it going to be worth when you retire?

With that said, I sense that now is a good time to explain just what is going on with the price of gold and silver.

The marketplace is and always will be, one of hell of a fickle beast. If you’re not playing for the long term, it’ll eat you alive and clean its teeth with your bones. Sorry for putting that graphic image in your mind, but it’s a truth that most people don’t seem to realize. It never occurs them that when you buy low and sell high, somebody is going to lose. If you sell at the right time, then your holding a cash prize that used to belong to somebody else. If you sell at the wrong time well, now your money belongs to somebody else.

So if metals are getting devoured by that fickle beast, then who’s got it on a leash? Who’s winning at the moment?

The dollar for one. It’s been going up in value for the first time in years. In fact, the Federal Reserve is worried that the dollar is too strong (are they insane?). Second, is the stock market. Despite some bumps in the road, it’s seen some pretty impressive gains over the past couple of years.

But again, markets will rise and fall despite their fundamentals, which the dollar and the stock market have none. There’s nothing really backing the growth of the stock market. It’s being bloated by all the money the fed has been dumping into the economy. Now that the Fed has scaled back its quantitative easing, it’s only a matter of time before the stock market bursts, and all of that money starts rushing into the real economy. This will certainly cause inflation and put an end to the dollar’s recent gains.

And that’s when you can expect metals to go up in value. People run to metals when the economy isn’t doing well. The booming dollar and rising stock market has given the illusion that the economy is recovering when it clearly isn’t, and the kinds of people who throw all their money into the stock market, are the same kinds of people who will believe this illusion. Suddenly the current price of gold and silver makes a lot of sense, because whether we like it or not, the price of metals is determined by the stock market.

It’s kind of ridiculous when you think about it. You have a physical object that has inherent value, and yet if you try to buy that physical object, its price is determined by a highly manipulated and inflated stock market. The price is made by the kind of people who think the stock market has value, and will think nothing of gambling their life savings on it. They put their money on whatever bandwagon is going up, and they usually do it after it’s too late. So even if the price of metals weren’t being manipulated, it’s still being determined by people who are no better than dogs chasing cars.

For further proof of just how far removed the stock market prices are from the inherent value of these metals, look no further than the cost of mining them. Apparently gold costs between $1100 and $1200 mine, smelt, and sell. Most estimates I’ve heard for silver range between $10 and $20 per ounce. That means that in all likelihood, mining companies haven’t been profiting for some time, and probably lost some money during the recent price dip.

And all because the phony stock market decides what the price of silver should be. I have to believe there will be a drop in precious metal production in the near future. There’s no way these companies can sustain themselves at these profit margins.

So what should you do? Well if you’ve already bought precious metals at a higher price, hold onto them. Remember, you’ve got to think long term. Don’t run with the rest of those dogs chasing their cars. You know the gains in this economy are artificial, and you know that when things get bad, people begin rushing into metals and the prices can get pretty high. If you didn’t know that, then you probably wouldn’t have bought the metals in the first place.

And what if you haven’t bought any metals? Well, the prices have pretty much reached bedrock. Sure they could go lower, but they’ll be going lower than the price to mine them. That’s probably the reason why the price of gold and silver have already begun to recover. The past two years have been the best time to buy. If you get in now, you won’t just be preserving your wealth through a tough economy, you’ll be getting in on it before the rest of the panicked herd dives in.