Japan Crisis, and a Follow Up on our recommendations Update 1

Since our last post on 16th March 2011, many things as the world & news might make you feel has changed. At the heart of it all, we think the fundamental reasoning for many things that that lead us interested in precious metal. 

NOTICE OF CAUTION : We agree with George Soros, when he says that Precious Metal (Gold) is the ultimate bubble.While we might be wrong, and take responsibility ( not from an investment perspective, but analytical perspective) and take it a step further that the bubble is not about to burst.( Again in the light of further information we do reserve the right to change our opinion, and does not bear responsibility of posting the same information onto the blog, but shall try too on a timely and a regular basis as best as we can)

In our last update about,  Japan crisis we said that the markets did over react too much, and there was no need to be worried about Precious metals as such. Before we move ahead and make any analysis, and recommendations  (purely for academic basis), it makes all the sense to look at how Precious Metals have performed, because if they haven't performed well and our analysis wasn't right there is no point for you to waste your time reading. 

SILVER : Since we came out with our article, silver has risen approx. 22% in prices. Even though we think silver to benefit the most with inflation fears, we have reason to be cautioned about its sudden increase. While the long term story does remain intact with industrial growth, lower inventory levels, and increased inflation fear.In the short term Silver is notoriously known for its wild swings, which is hard for many people to take care off.In the short term we are a bit cautious, while the Mid and Long term prospects remain positive with inflation fear rising. 

Next up , GOLD

GOLD : Gold since the last article has been up by around 5.5 %. While many believe GOLD to be the best hedge against inflation we differ on our perspective. While it might go up higher and further in the future, we are not as confident about GOLD as we are about SILVER. ( which we in the short term are still concerned about). The reason for our displeasure with GOLD involves two factors , limited industrial usage , and decreasing inventory.

Since the start of the year, the Gold Inventory levels have been dropping consistently and infact are down approx 5-6 percent as of the date of the article.Whereas Silver does have a lot of industrial usage, and its price is inversely proportional to Inventory levels Gold has a direct relationship ( again on an observed basis) to Inventory Levels. Increasing prices , with decreasing Inventory levels are a cause of concern to us, and because it lies outside our circle of competence beyond the Japan crisis trade, we shall stay away from the same.

Gold Inventory Data.

contd....