I can think of at least a few disheartened souls who made meaningful investments in the precious metals sector who are wondering what the next catalyst might be for higher metals prices (and something that might even resurrect the dead mining stocks.) Here's one possibility: people hedging some of their equity winnings with real assets. Especially if a move that seems to only go in one direction leads value investors searching for a place to diversify from stocks.
It doesn't sound so far-fetched to me, because even with hedge funds reportedly heavily short metals like gold and silver (and with more than one investment house calling for lower prices) it looks like someone is supporting gold and silver prices. Put differently, people (including central banks) may have learned some lessons from 2008 and do understand (maybe just maybe) the role of real assets in their portfolios.
Over the last 8 months, news abounds that supports gold prices nearly 6 times where they were a mere decade ago. News ranging from unlimited quantitative easing whether here or in Japan, to requests from foreign central banks to have their physical gold in their own hands, to confiscations of bank accounts in places like Cyprus, to continued uncertainty regarding an unprecedented SIXTH year of ZERO percent interest rates. These developments-- along with the continuing currency wars-- would all seem to underpin investments like gold, silver or the PGMs.
And I even think I am not alone in holding fast to certain passe ideas about money and investing (even if our rulers don't want us to believe them). Ideas such as: 1) you cannot borrow your way to prosperity 2) debt does matter 3) currency debasement is not in the long-term interest of a nation's economy 4) central planners will fail to control where capital sloshes around the globe 5) and real assets, not equities, are the best way to manage wealth during times when our Lords of the Universe believe these last four points of mine aren't true.
I guess I am prepared to "go down with the ship" with my pesky doubts about global fiscal policies. But then I also remember who these people are who are now trying to blow a bubble in the equities market so as to encourage consumption, or the wealth effect. They are, in many cases, the exact same people who didn't see or who could not prevent the 2008 financial crisis. People like those in our own Federal Reserve who had at least some responsibility for the housing bubble. Remember that? When we were told that housing prices were hitting a permanent plateau and that it did not matter that people received mortgages with little to no income?
I recently even heard someone (forget where) claim that equities were the best inflation hedge for the years to come. I am going to bet that this person did not read about or live through the 1970s. Not even 5 years after the collapse of Lehman and I am sensing that old habits in the financial world die hard. On the other hand, I still have faith in people's common sense, and that they may have learned a couple of lessons from a few years back. I think they might consider hedging with gold and silver. No matter what certain unnamed investment houses say about the future of precious metals, I am confident that current precious metals prices represent real value, having done nothing for roughly two years (at least for gold and silver.)
For those trying to benefit from higher prices-- you have to take the view from 30,000 feet. I happen to look at the gold and silver charts and see a bull market, even if it is one that is tired. The mind game that is the market continues. Try not to be a casualty of it. At a moment when I am told most newsletter writers in the space are more bearish than ever, I still believe that future gains with precious metals will be one for the record books.
