Volatility of Silver is the Price of Outperformance

The gold price is down almost $100 and silver has shed a couple of dollars an ounce. That is bad news if you have just bought gold and silver. But if you have bought and hold for the past few years you would know it is only what to expect from these precious metals.

Price volatility is a price worth paying. Over the past five years the silver price has dropped suddenly by 60% and rebounded to twice the price of silver at the outset. The gold price has been less dramatic but still ranged in huge 30% price swings.

Winning Asset Class

Yet no other asset class has topped precious metals in that timeframe. The S&P 500 might be ahead so far this year, but it’s dead in the water over five years.

Immediately ahead of us we have the week prior to the US presidential election. If the Fed can do anything it ought to ensure a strong dollar for election day, and a strong dollar is usually bad news for gold and silver.

That said we have had a timely intervention by “Mr. Gold” Jim Sinclair with his assessment that the major bullion banks will use any market weakness in this period to switch their large short positions to the long side. That means they are about to go ‘all-in’ for a much higher gold price, and silver usually outperforms gold to the upside.

Should we not trust the judgement of the man who got gold’s decade long rally to $1,600 so right? Experience in financial markets is often wrongly dismissed by the young and foolish. Learning from those who know is commonsense, and we know from our own past experience that Mr. Sinclair is seldom wrong and most often right.

Experience Wins

The truly wise would surely prize this information and look to buy gold and silver on any major dips over the next few weeks. Selling out of stocks and going straight into precious metals would make a lot of sense to ArabianMoney and we surely can’t be entirely alone in this opinion.

Many stock market investors will indeed buy on the dips again, but equities are most probably not the best asset to be buying on the dip this time, or bonds for that matter with a clock ticking on low interest rates around the world. The last major opportunity to buy gold and silver at these prices is coming up fast.

About the Author
Peter Cooper

ArabianMoney.net editor and publisher Peter Cooper is based in the Dubai Media City, and has been working as a senior journalist in the region since 1996. He was then the founding editor of the Gulf Business, the first-ever business magazine published in Dubai. In the year 2000 he was a founding partner in the business news and information website ameinfo.com.

His book about ameinfo.com, ‘Opportunity Dubai: Making a Fortune in the Middle East’ was No.1 in The Daily Telegraph Book Club for six months. An Oxford graduate in politics and economics, Cooper spent a decade in London as a financial journalist specializing in real estate and construction. He is also the author of ‘Dubai Sabbatical: The Road to $5,000 Gold’.

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