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<p>[QUOTE=&quot;Morgan1878, post: 583049, member: 17869&quot;]Probably right about that. </p><p>&nbsp;</p><p>What&#039;s difficult is figuring out the timeframe. </p><p>&nbsp;</p><p>I read a lot of macro-economic articles since I work for an investment firm.</p><p>&nbsp;</p><p>For the economy to recover and grow, it will take an annual inflation rate of 3-4%. This is a higher rate than our government would like to see, but they would rather risk a higher inflation rate then having the economy in a deep recession for a prolonged period of time. In theory, this should be good for precious metal prices since with inflation we would expect to see a depreciating dollar. It may not necessarily happen that way though, if with a recovering economy and increased confidence enough people decide to use their money to either spend it on consumer goods or invest in in more traditional asset classes (viz. stocks &amp; bonds). In that scenario, gold may not move much at all. </p><p>&nbsp;</p><p>One interesting thing about gold is that it wouldn&#039;t take a lot of increased demand to move the price up substantially. It&#039;s in limited supply and getting more means digging it out of the ground. </p><p>&nbsp;</p><p>Silver is another story. It&#039;s cheap relative to gold. It has more industrial uses but is not as attractive as gold as a store of value. If you buy a large quantity of a precious metal, you have to factor in storage costs. Simply put, storage costs for silver are higher because the same dollar amount will take up more room. </p><p>&nbsp;</p><p>I have used gold for the past 5 years as <i>insurance</i> against &quot;tail risks&quot;.</p><p>Tail risk is an unlikely outcome such as an earthquake, war, pandemic or market crash. So I don&#039;t invest in it to make money. I use it to protect against events that I can&#039;t predict that would cause the rest of my portfolio to decrease in value. </p><p>&nbsp;</p><p>During those calamitous events, gold prices will generally rise. Like anything else, I would prefer to buy this <i>insurance</i> at a lower cost (when gold prices are lower). I learned about this strategy from people who have decades of success in all kinds of markets. They generally allocate about 5-10% of their total portfolio to precious metals, either in physical form or through investment vehicles such as stocks or mutual funds.</p><p>&nbsp;</p><p>Bottom line, since any smart investor realizes the limits of his ability to predict the future, diversification is key and precious metals should be part of the mix.[/QUOTE]</p><p><br /></p>

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