As we’ve looked at the gold and silver markets over the past year, we’re encouraged that our view of the metals carving out a long-term base since the end of 2015 is the correct one. The 2017 chart looks especially encouraging.
It has made a series of higher highs and higher lows since December of 2016. This is the kind of price action one can expect after a multi-year decline, as it builds a base for the next multi-year climb. For the smart, patient investor, gold and silver are poised to do well over the next several years.
It’s tempting to chase the broader markets as they reach new highs. One only has to look back to 2007 and 1999 to see that such a strategy doesn’t normally pay off well. There are times to enter markets, and there are times to hold. There are also times to stay on the sidelines.
If you’ve participated in the broader market rally over the last 18 months, that’s great. Prominent investors, such as bond fund manager Bill Gross, offer a word of caution here. In a recent article, he stated that he sees the stock market risk at a level not seen since 2008:“Instead of buying low and selling high, you’re buying high and crossing your fingers.”
Then there are the crypto-currencies,which have been getting a lot of media attention recently. Ethereum and Bitcoin have been on a tear over the last few months. Beware of chasing hockey stick charts, however, as they generally do not end well.
As thinly traded as crypto markets are, sudden price movements are common. Sometimes even extreme movements develop, such as this week on one exchange when the price of Ethereum crashed from $320 to 10 cents before recovering to $296 later that day. This follows a drop from the all-time high price of nearly $400 just last week.
Gold and silver play a very important role in today’s world. They offer a 5000-year history of long-term protection when currencies and markets become volatile. There’s no question that we’re in a window of time where that is happening. Continuing to allocate a portion of your savings to metal seems to be a prudent choice.