Precious metals have hit record prices this year, and more and more people are clamouring for a share of the riches – almost to the point of obsession
In 2013, the Indian Space Research Organisation is planning its second moon mission, called Chandrayaan-2. One of its principal mandates is to find indications that mining the moon for precious metals will be worthwhile.
It is known that there is platinum and gold on the moon – the platinum comes from impacts from asteroids, but where the gold is from is not yet understood. A number of well-heeled investors are experimenting with ways to make mining precious metals on the moon profitable.
It should seem clear that, if we are to go searching for gold and platinum on the moon, there is considerable demand and value in the precious metals right here on earth. In recent years, investors have increasingly indicated their interest in gold, silver and platinum by driving the prices of these precious metals up considerably. All three metals have hit record prices in this year alone, driven by demand for a ‘hard asset’in what investors see as a world gone mad.
Hedge fund manager John A Paulson, who bet heavily on gold in 2010 and earned about $5 billion (£3.09 billion) in the process, thinks that the price of gold will rise to $4,000 per ounce from its current position at about $1,700 (£1,053).
Another fund manager who does not hold as much gold as Paulson, Sebastian Lyon of the Edinburgh-based Personal Assets Trust fund, switched a large investment in a gold ETF (exchange-traded fund) into physical gold recently, insisting that it would hold its value while paper currencies like the dollar and the pound plunged due to quantitative easing. It is true that we live in a time of unprecedented currency and stock market volatility, so the search for a new ‘hard asset’ is becoming obsessive.
Silver and platinum are receiving their due as potential ‘hard assets’ as well. But the value of each of these metals depends largely on industry demand for them, as they are used heavily in making electronics, medicine and many other useful things.
The problem with making a precious metal your ‘hard asset’ of choice is that precious metals don’t perform. They go up and down according to market sentiment.
Your investment in gold will never add value in the way that your investment in a small company will give it the opportunity to grow. Charlie Munger, Warren Buffet’s co-manager at Berkshire Hathaway, puts it this way: “You can polish your gold. You can look at it. But it will never do anything.”
Many investors take the different view that precious metals are a relatively safe option in an unstable world. The space required by London banks for storing precious metals in safe deposit boxes has doubled in the past two years. You can now buy gold at vending machines at the airport, or even at some supermarkets.
Of course, one isn’t required to actually own the stuff in order to invest in gold, silver or platinum. Funds and mining stocks provide alternatives that, some analysts say, are a cheaper and safer investment. Of course, these investments are exposed to currency risk, but not everyone believes that the world has gone mad.