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Saturday, April 23, 2011

Trend for 23rd of April 2011

Markets are closed today and most people are most probably ready to celebrate during holidays. I just wanted to write a few thoughts in terms of long term trends. I have already mentioned that when inflation is going up, commodities are a very good way to invest. That’s why gold and silver are perfect if you want to protect yourself against inflation. Historically silver is even better, because gold simply protects your wealth and silver helps to increase it. So, if you are worried about your melting wealth, silver is a good way to jump into. 

Even though the all time high for silver was at 50 dollars in 1980, it is not a big deal if it reaches the same price again. During those thirty years inflation has been steadily climbing up and the price of silver at 50 at those times would probably equal the price of silver at 150 dollars nowadays. So, we can see that there is a lot of place for the commodity to go up. Opportunities are still there.

It is also good during those inflationary periods to go long in so called commodity currencies: Australian dollar, Canadian dollar and New Zealand dollar. Those countries are rich in commodities, so they benefit a lot from the rise of prices in those things. Those countries also tend to have higher interest rates and can often be used in ‘carry trades’ to accumulate interest, especially in Japanese yen (where interest rates have been very low for a very long time). 

So, if you want to take advantage of times when inflation reins, you should invest in commodities and commodity currencies. Of course, do not forget to choose a proper time to jump into the markets. It is best to do after retracements. 

Read my previous post:

Gold and silver ratio

Trading financial markets carries a high level of risk, and may not be suitable for all investors. All information on the blog is of educational nature and cannot be considered as advice, recommendation or signals to trade in any financial markets.