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Stock traders are running for the hills at the prospect of a looming fiscal cliff. Gold and silver investors should see it as a prime buying opportunity.
Since Tuesday’s election, U.S. financial markets have plummeted more than 3%. Meanwhile, gold and silver prices have sharply increased.
Gold started the week at just over $1,680 an ounce. It’s now up to $1,738.40 – a 3.5% hike. Silver prices have shot up just as much on a percentage basis. The sudden upward movement of the two metals has been almost the exact inverse of the markets.
Most of that movement can be traced to the fiscal cliff.
Fiscal cliff is the term economists are using to describe President Obama’s Budget Control Act, which will impose government spending cuts and higher taxes starting on January 1, 2013. Should it take effect, some say it will plunge the U.S. economy into another recession.
The good news for commodity investors is that concerns about the fiscal cliff have boosted the appeal of safe-haven assets such as gold and silver.
Investor fear is palpable at the moment. Just look at the VIX – a.k.a. the volatility index, a.k.a. the “fear gauge”. It rose to its highest level since July on Wednesday.
Investors are afraid to buy stocks with this fiscal-cliff cloud hanging over them. Those clouds will only grow darker as we inch closer to the December 31 deadline – which should only further inflate investors’ fear balloon.
More people will flock to gold and silver. So unless a deal is struck to avoid this so-called fiscal cliff, gold and silver prices should continue to rise well into the New Year.
November, at least, is always a good month for gold. Since 2000, the metal has risen an average of 4% – almost double the returns of any other month. And winter is always the strongest seasonal for silver.
Add in the fiscal cliff, and we could be in for a very big push in the coming months.
Good investing,
Chris Preston
P.S. Don’t like the fiscal cliff? Here’s your chance to do something about it. Wyatt Investment Research is circulating a petition asking Congress to stop the Budget Control Act from going into effect. Click here to sign the petition, and have a copy of it sent directly to your representative in the U.S. Senate.