We are seeing a unique phenomenon across the world with wide scale unrest, even occurring within the U.S. but for far different reasons. The price of silver is skyrocketing as predicted in previous articles, but the prices of other precious metals -- gold, palladium, and platinum -- are also heading up. What is causing this? Certainly, there should be inflation and a general devaluation in the currency, but inflation is under control or rather under wraps.
Middle East Turmoil Hikes the Price of Precious Metals
The price of gas at the pump has not disappointed doomsayers as it spikes upwards towards $4 per gallon. Yet the currency is surprisingly stable. An investor would have to say, what gives? While the monetary supply has expanded, which usually portends upward pressure on retail and especially wholesale prices, the pricing increases have been modest. The main reason for that is much of the money in circulation is still sidelined by banks. And unless and until they start lending and spending, inflation will be minimal.
Yes, the unrest in the Middle East has increased the price of oil to historic highs, and today's price of precious metals is rallying upward (click on chart image below). Also and significantly so, is the fact that silver's price relative to gold has decreased substantially. Only a few weeks ago, the relative price of silver to gold was 52. At the beginning of 2010 it was 60.
Silver is the Precious Metal to Own?
While all of the precious metals are a safe place in times of uncertainty, silver is rising in relative terms. Why? One of the opinons expressed today was inflation hedges, uncertain international political futures, and perhaps an undeserved, undervalued place for silver within the precious metals constellation. All of the metals have risen, although silver is at its 30-year high and palladium is at its 10-year high.
It can reasonably be expected that the rising tide of precious metals prices will carry all to new heights. Because even if and when the Middle East settles down, there is always the specter of the current Obama administration and the federal government monetizing the debt to ease the burden. This as a macroeconomic tool hasn't worked because of the aforementioned activity of the largest commercial banks. But overall, it probably will and the value of the currency will start to inflate at a greater rate, pushing the value of precious metals ever higher.
Most certainly, the only certainty is uncertainty on what the real future will be in terms of prices within the precious metals market. However, for the time being, precious metals may be a safer bet than the stock market over the next six months.
Nick Schklair - Nick Schklair, author, writer and business consultant has published a work on business startups in today's economy.
