The best investment right now for any amount of money is gold and silver. As the U.S. dollar continues to plumb new depths, the precious metals are going to keep going up. By bailing out corrupt banks and lowering interest rates (the very thing that got us in this state in the first place), Bernanke is guaranteeing high inflation and a worthless dollar. All the while, Paulson and the Bush administration keep talking about controlling inflation and having a strong dollar.
The housing crisis is just getting underway (April, 2008) and it is going to get worse. That crisis is already reaching out into every area of life. People are losing homes. People are losing jobs. More people are declaring bankruptcy. More people are homeless. Food prices are going up to the extent that there are food riots around the world. Energy prices are going up.
Bernanke is pouring money into the system like there is no tomorrow. It’s like pouring gasoline on a fire. It is easy money and low interest rates that got us into this fix in the first place and Paulson and the Fed think that we can fix things by making the same mistakes.
In these troubled times, the investments that are going to survive the coming recession/depression are commodities and energy. Gold reached a high of about $1,030/ounce last month. Silver surpassed $21/ounce. Both have corrected, gold back to about $875/ounce and silver down to around $16/ounce. The correction has reversed somewhat but it may not be over.
Even at $1,000 gold and $21 silver, these metals are a steal. Gold won’t even reach its 1980 high of $850, in real terms, until it passes $2,000/ounce. Silver has yet to reach its 1980 high of $50/ounce. The precious metals are cheap and won’t be cheap for too much longer. The experts I trust are looking for $2,000 gold and $30 silver before year’s end.
Some think that silver will outpace gold in the final analysis because of its many industrial uses. Gold is mostly used in jewelry with few industrial applications. Platinum broke above $2,000/ounce and people are stealing catalytic converters to retrieve the platinum or palladium used in them. Both gold and silver are real money and have been real money for over $5,000 years.
As for how to take advantage of these metals, there are many possibilities. The easiest way to buy gold and silver is through Exchange Traded Funds (ETFs). The ones I am familiar with are StreetTracks Gold (GLD) and iShares Silver (SLV). These ETFs roughly follow the spot price of gold, a price that is fixed in London, New York, and other countries, every day.
Right now, GLD would cost you about $92/share. That represents one-tenth of an ounce of gold. So a full ounce of gold (10 shares) would cost about $920. A share of SLV costs the price of 10 ounces of silver. Right now, that would be about $178/share. I have a bid in to buy some SLV shares at $160. I hope silver corrects low enough for that buy to go through.
The advantage of the ETF is that you can move in and out of the shares quickly if you need to. For those who want to hold the metal itself in your hands, you can buy coins from any local coin dealer or online. You can buy new coins or, if you want to do a little additional speculating, you can buy older coins in hopes that they will go up faster than the value of gold or silver.
You can buy coins or bars from a company and have them keep your metals for you in their safe storage. For a certain amount of money, you can have your metals kept specifically for you. For a lesser price, your metals will be in with others and you will not own any specific bars or coins. In this situation, you can take delivery of your metals any time you want for a small shipping charge.
You can buy precious metals certificates, such as those from the Perth Mint in Australia. These certificates represent actual coins and bars that they have in their vaults. It should be mentioned that the ETFs also have actual gold and silver on hand to cover all of the shares they have sold. In fact, I believe that GLD is eighth in the world in terms of the amount of gold they have on hand, more than many countries.
Of course you can also buy precious metals stocks, but that is a whole other story and is much more complex than simply buying ETFs, the metals themselves, or certificates. I would buy $2,000 in gold and $2,000 in silver, when they have corrected downward enough. Then I would sit on it for one to five years or until everyone is into buying precious metals.
When your hairdresser, cab driver, or paperboy starts recommending that you buy precious metals, it is time to sell. Good luck and live long and prosper.