Gold and silver set to deliver remarkable gains

It would, however, be good news for gold as a safe haven asset and as a natural reserve currency. Money has to flow somewhere and in troubled times it goes into gold and silver, partly because of the absence of alternatives.

Both the gold and silver markets are narrow, and so price increases will be very significant. The whole of the quoted gold mining sector is valued at less than half the value of Microsoft.

Gold and silver have actually been persistently undervalued for years. Even in the recent metals rally precious metals have seriously lagged the performance of industrial metals like copper and nickel.

Opportunity knocks

Buying an asset cheaply and selling it later when prices rise is how to make money as an investor. So why should gold and silver continue their bull run while other asset classes falter?

World investment funds shift from asset class to asset class as market forces dictate. Equities were top pick in 2000, then money shifted into real estate, most recently bonds have had a good run. But if you are looking for an asset that is still cheaper than it was over 25 years' ago then precious metals are your choice.

What would spur investor interest further? Probably it will be like other asset classes and the main force will become momentum itself. One person will understand why, then another and so on.

It is certainly the case that the best-read articles on AME Info are now frequently about gold. Interestingly six months ago real estate was always the best-read category. Clearly times are changing.

No mania yet

Moreover, there is still time for new gold bugs to invest. The gold market moved briefly to $725 an ounce earlier this year but has not shown any of the signs of the type of investment mania that you might associate with a market top.

The parallel is surely with the dot-com bubble - which was slow to form in the late 1990s and prone to ups and downs before its spectacular 1999 to March 2000 blow-off period. Will precious metals deliver the same returns?

Well, the lesson of the dot-com era was surely to buy and sell too early. We have seen the same cycle of boom-to-bust in Arabian stock markets recently, and the next place will be in precious metals. The fact that you are now reading this article closely is the best indication that this will happen.

Investors will bid up physical gold and silver prices as they get on board this investment cycle. But for the best leverage on the gold or silver price you need to look at futures trading, perhaps on the new Dubai Gold & Commodities Exchange. Or buy the junior exploration companies that will be the dot-com-style participants in this particular boom.

Finally, what will cause a real spike to the top in precious metals? Surely an unexpected geopolitical event, so expect the unexpected.