Reader Question: Do you recommend having gold and silver as part of your investment portfolio?
Dave Says: No, I do not. I also don’t recommend oil or corn futures. All of these are examples of commodities, and the commodities market is extremely volatile. In addition to the market being wildly volatile, the prices on commodities isn’t based on actual production. It’s based largely on a supply and demand curve. If there’s a shortage on one of them, the price shoots up.
For example, when you’re talking about gold and silver, there’s more demand than supply when the economy is bad. In this kind of scenario, people are fearful and lots of them run to buy gold. This drives up the price to unrealistically high levels.
Again, the price on a commodity isn’t based on anything other than fear or greed, and a supply and demand curve. The prices aren’t based on an actual production of income, like it is with stocks or real estate. I don’t buy commodities at all, especially gold and silver. I don’t recommend you buy them, either.