It may not be very exciting but silver and gold trading prices have gone up consistently and to somewhere which you think may be too high. If you look at last year, you will be able to see the substantial gains. What is driving the gold trading price to such high levels and what is the alternative to buying gold, which is expensive at the current price?
Gold trading price has just went over $1,400 an ounce and silver trading price is over $29 an ounce. When you compare where it used to be (with gold as low as $250 and silver as low as $8 or $9), it is rather spectacular returns.
The markets think that there is a good chance that the financial recovery can gain traction and everything will go well and that explains the long period of consolidation. Then when the news showed huge amount of fear and uncertainty, the worries on the U.S. stimulation and the world’s foreign exchanges came back. But there are more than that is happening in the gold trading market. It is a combination of all these factors that has driven the price of gold to the current levels.
When the gold price is consolidating between $1,050 and $1,250, many people believe gold price may retreat from record highs as the jewelry sector and retail demand out of India. Then the high prices came to be accepted as prices failed to retreat. Jewelry demand has started to return steadily. We expect it to remain as it is or improve at these high levels, unless there is a very large jump upwards in the gold price.
So will price of gold trading highs or lows from now onwards?
The analyst and commentators in the market are focusing on whether price of gold will rise or fall right now. This is being the reason that developed world markets are focused on making money. Likewise, from the technical point of view, the chart of gold price is important to investors as they are looking to make profits from the market. However, they are not the major force in the gold market any more.
For the first time in so many Asian people’s lives, they now have a good amount of disposable income. As people who know the downside of life only too well they have a propensity to save, almost naturally. Up to 40% of the disposable income they have goes into bank deposits or into gold. As China grows, a larger and larger number of people enter the gold market for the first time. These buyers simply want to save in gold.
Even though there is lots of talk about gold and bullish on gold, you have to remember there are other ways besides buying gold. In the first place, gold may be quite expensive for most middle-class investors. They can’t afford to buy even one ounce of gold, let alone several. It’s just too expensive.
An alternative but riskier way to invest in gold is to look at gold prospects generator companies. These companies usually do the early field work in identifying prospects of drilling for gold, silver or even copper. Once a good prospect site is identified, they farm out these projects to willing partners but retain some equity stacks of the project.
In this way, these prospects generator companies are able to retain good potential upside for investors while at little capital outlay. If you want to invest in such companies, don’t place all your bets on one company but rather invest in a few of these companies.