Although many would have expected Silver and Gold to be hitting all time highs during the recent market turmoil over the financial system, both metals have actually been hit pretty hard. Silver has fallen the most, going from $19.55 an ounce in July of last year to just less than $8.50. What made this happen?
Although there are theories of manipulation and governmental interference, we will focus on what is ‘known’. First, hedge funds were forced to sell their positions in the market as their clients withdrew their funds. Many of these institutions were highly leveraged, causing an even greater amount of selling. The second most apparent reason precious metal prices fell was the astonishing strength of the U.S. Dollar.
First, remember that Gold is a finite resource. There is only so much of it in the world, and then it's gone. This is a sharp contrast to the U.S. Dollar and other currencies that are able to be printed in both paper and digital form in virtually unlimited amounts.
Although we have been experiencing deflation in the recent months, inflation is expected to be rampant as the U.S. Government prints large amounts of money to deal with the current recession. The feds have shown absolutely no respect for the dollar and seem to have no problem diluting it to the highest extent to solve their other problems. All of these bailouts and the stimulus program put downward pressure on the dollar, and that pressure is substantial.
It is our belief that the recent deflationary period and liquidation of hedge funds have made the spot prices for Gold and Silver artificially low, making it an even more perfect trading/investment opportunity. Although it is possible to buy physical gold, one may want to consider investing in a gold company for greater returns. As gold prices rise, so will these companies' profits.
One company that could outperform all the rest is Hunt Gold Corp. (HGLC.PK). This gold mining and exploration company has a large portfolio of properties that hold great potential. The company is well funded and has planned aÂ continual drilling campaign forÂ this year to expand its gold resource and to advance its gold properties toward production. For more information, visit www.hglc.qualitystocks.net
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