Reasons to Buy Gold or Silver

Gold and silver seem to be back to their 2011 levels. iShare Silver Trust (SLV) is trading at $28.41 while SPDR Gold Trust (GLD) is trading at $156.22.  Well, gold and silver spot price are also trading around $1600/oz and $29/oz respectively.  The talking heads at Bloomberg and CNBC are all now suggesting that it might be the end of the gold bull run.  After writing the earlier posting yesterday, I thought about it and decided that perhaps a more balanced view ought to be presented.

So in this posting, I will throw up some of the reasons to continue buying gold or silver.

Firstly, the world's central banks are now net buyers of gold, purchasing gold like never seen before.  According to the World Gold Council, central banks accounted for 12% of total demand for gold in 2012.  The demand for silver also seems to be rising and the supply does not seem to be able to keep up (at least that is what the silver bugs' charts are telling us).

Secondly, with all the money printing by the Feds, inflation is almost certain.  Gold and silver are thus a good hedge against inflation since many view them as the true store of value.  Many of these proponents are also predicting that the dollar will soon crash and that somehow, someday, the entire world will go back to the gold standard.

Thirdly,  while the prices of gold and silver might have corrected a fair bit for this year, the global outlook still looks uncertain.  The US debt is reaching alarming levels, Europe crisis, etc.  So it is not surprising that people are bullish on these 2 metals since they seem to have a negative correlation to the overall stock market/economy.

In any case, the people who argue for investing in gold or silver are still sticking to their guns that another bull run is in the making.  Will they be correct?