Market Swing a Reminder for Asset Diversification

Gold and silver closed down Friday, ending the week at $1535.50 and $27.40, respectively, leaving many to ponder the future of the metals.

For those who have chosen to protect their savings with precious metals, and not just to make a quick buck, we react to these events with a bigger-picture view: Remain diversified. If you put at least some of your assets into gold and silver even just a few years ago, Friday’s losses are just a bump in the road, but a bump that warns you not to fall into a complacent rut. Spread out your savings, not just in a variety of stocks, bonds and mutual funds, but into various types of assets.

Diversifying your portfolio will protect you from fluctuations that are normal for any market. But as it relates to precious metals, Friday’s move could be the type of over-exaggerated dip that’s typical of markets seeking direction from larger moves. Remember, the fundamentals for gold and silver haven’t changed one bit, plus we still have the same never-ending Quantitative Easing from the Fed, poor economic indicators for the U.S. economy and a Eurozone that is on the brink of collapse. So if you liked precious metals early last week, the chance to get in this week at a lower price means you have to love them now.

The bears are growling, but you must wait this one out. Remain diversified, and if you don’t already hold gold and silver in your portfolio, you may never have a better opportunity than this. A true gold investor is in for the long haul. Paper currencies come and go, but gold is everlasting. For proof of the protection it provides, look no further than Cyprus, which is selling some of its gold to keep its economy afloat.

The currency wars are starting to heat up, ironically, thanks to the yellow metal. Set your positions wisely in the market. Don’t allow your portfolio to become over specialized; stay sharp, and when the bubbles begin to burst, you can be certain that with gold and silver, you still have real value in your possession.

Precious metals on the move

London Fix PM price at week’s end, and change over previous Friday:

• Gold: $1535.50, down 2.1%
• Silver: $27.40, down 1.6%
• Platinum: $1514.00, down 1.1%
• Palladium: $715.50, down 0.6%

In the news

Despite recent losses, fundamentals still point to gold as attractive long-term investment
“Federal governments have been printing money at an unprecedented rate. We expect the strengthening of the economy and stock market to cause money supply to rise more than real growth and eventually lead to inflation. It is this expectation of paper currency debasement which makes gold an attractive long-term investment for us.” — John Reade, a partner and gold strategist at Paulson & Co. (link)

Gold never changes its value, currencies do
“Gold is always rallying somewhere; right now it is rallying in yen… At the end of the day you will come back to gold in dollars. I look for a dollar-gold move late this year or in 2014. Meantime you can always make money in gold, as in ‘it is always 5 o’clock somewhere…’ You’ve got to pick your currency.” — James Rickards (link)

Currency wars are going nuclear
“What can we expect? Prices will rise. Fuel and food costs will be higher by the time Mother’s Day gets here. And if you are thinking of buying a big-screen TV or other electronic gadgets from a Japanese manufacturer, or a Honda or Toyota, the time to do it is soon, before the much cheaper yen raises the price here.” — Jonathon M. Trugman, New York Post (link)

Chart of the week

History from 2006-07 poised to repeat itself?

The week ahead

• Cyprus contagion puts pressure on precious metals
• With money so cheap, housing looks like a good investment again in the U.S., but is it a another bubble that will burst?
• Will buying from China pick up on gold’s latest dip?