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Four more years of precious metals as the top performing asset class?

By: Peter Cooper, Arabian Money

-- Posted Wednesday, 7 November 2012 | | Disqus

With President Obama safely back in the White House investors in precious metals can justly feel that the president’s promise that ‘the best is yet to come’ is aimed at them. For gold and silver outperformed every other asset class in his first term, and there is nothing like political continuity.

Investors in precious metals have pretty much doubled their money since Mr. Obama was first elected. In that same timeframe US equities have been on a roller-coaster ride to nowhere. Bonds have done better but nowhere near as good as gold and silver.

Trend is your friend

ArabianMoney bought into this trend a little over four years ago and has stuck with it ever since. The plunge of 2008-9 was a testing period but the recovery was swift and then highly profitable.

We’ve been pointing out the recent chart trends that signal $130 silver is around the corner (click here) and we have noted what gold superbug Jim Sinclair has been saying about post-election buying by the Chinese (click here). It’s already happening.

In September gold exports from Hong Kong to Mainland China rose 23 per cent year-on-year and were up 30 per cent from August. Gold exports from Hong Kong to China rocketed from 204 tonnes to 582 tonnes comparing the 12 months to end of September with the year before.

The Chinese are increasingly worried about holding US dollars. Japan has actually just overtaken China as a the largest holder of US treasuries. The Chinese want to own gold instead and those that think gold expensive buy silver.

They only know what we all know. Every major central bank in the world, including the Bank of China is printing money by buying its own bonds. More money in circulation pursuing a fixed supply of real assets pushes prices up. Real assets range from real estate to industrial commodities and gold and silver that are also considered the only money without a third party between you and your money.

Dubai traders are getting the message. Gold futures at the Dubai Gold and Commodities Exchange jumped by 490 per cent to 465,725 contracts in the year to end of October.

Price spikes

If you think gold and silver prices are high at $1,725 or $32 an ounce then be prepared for a shock over the next few years. The price of basic commodities like food and petrol will continue to rise alarmingly but this will be nothing by comparison to the price of gold and silver, as has been the case for the past four years.

There is also a strong possibility of a bubble forming and spike in the price of precious metals, something we just have not seen yet in a decade of price rises. That will happen when bond markets get into trouble as a contagion from what we already see in Greece and Spain, and investors return to the ultimate safe haven asset.

For when everybody decides precious metals are the only place to be that will be the time to cash out, but we are a long way from that day of reckoning. It could be four more years.


-- Posted Wednesday, 7 November 2012 | Digg This Article | Source:

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About Peter Cooper:
Oxford University educated financial journalist Peter Cooper found himself made redundant by Emap plc in London in the mid-1990s and decided to rebuild his career in Dubai as launch editor of the pioneering magazine Gulf Business. He returned briefly to London in 1999 to complete his first book, a history of the Bovis construction group.

Then in 2000 he went back to Dubai to become an Internet entrepreneur, just as the dot-com market crashed. But he stumbled across the opportunity to become a partner in, which later became the Middle East's leading English language business news website.

Over the course of the next seven years he had a ringside seat as editor-in-chief writing about the remarkable transformation of Dubai into a global business and financial hub city. At the same time prospered and was sold in 2006 to Emap plc for $27 million, completing the career circle back to where it began a decade earlier.

He remains a lively commentator and columnist as a freelance journalist based in Dubai and travels extensively each summer with his wife Svetlana. His financial blog is attracting increasing attention with its focus on investment in gold and silver as a means of prospering during a time of great consumer price inflation and asset price deflation.

Order my book online from this link


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