We buy gold and silver out of fear

We buy gold and silver when we are fearful.

The recent buying spree is due to the fear of crisis in Europe.

It seems that many countries in Europe are on the brink of bankruptcy.

United States is not any better in term of financial management, but its debt problem has not reached a crisis yet.

The situation in Greek is very worrying.

It is not just a financial problem anymore.  The sovereign debt increases the possibility of a major political crisis.

If the people revolt, and the government in Greek refuses to hold an early election, Greek could potentially become the next Libya.

The uncertainty is weighing down Euro.

Despite the fact that Euro is down, and US dollar strengthens, the price of gold and silver increases.

In many instances, the price of gold and silver heads in different direction with the US dollar.

In most cases, when US dollars decline in value, the price of precious metals goes up.

In this case of Eurozone crisis, the precious metals get more expensive while the US dollar strengthens.

Why do we buy gold and silver?

The reason is quite simple.

Some of us buy gold and silver because we can trust in physical things we can see and hold.

We know that paper assets are just paper assets.  The currencies in many countries are not backed by any asset at all.

These are just fiat currencies.  We can even compare them with monopoly money.

The governments can further devalue the currencies by printing more and more, and the value, that means the actual purchasing power, of current stocks declines.

For some people, they do not believe that gold and silver are any better than other forms of investments.

However, they can see the wisdom of investing for gains.

When the bull run starts, and we buy gold and silver at the start of the bull run, we stand to gain when we sell before the next crash.