I have often wondered about the fact that institutional investors are very light in precious metals. In talking with others about this, it is often pointed out that "big money" avoids investing in gold and silver for two main reasons:
1) the perception among owners of pension funds that gold and silver are not "productive positions" (they don't "do" anything to increase value like a stock might)
2) the perception that gold prices in particular are subject to manipulation.
Companies (stocks) typically exert some form of "control" over their own price destiny to the extent that they can make decisions to do things that will increase their value. Precious metals are simply commodities without any inherent control over their own price, nor do they have any ability to stop the perceived manipulation of naked short sellers, central banks, or other speculators.
"Big Money" institutions such as retirement pension funds may never jump into gold because gold prices do not always demonstrate the expected "rational behavior" in the marketplace. They evade reliable predictability.
They may also be considered "only a defensive position" used to preserve wealth in time of financial crisis and declining paper-asset values.
Just look at the latest trends in gold and silver prices (as of Sept 5th) and it's clear that something is affecting prices other than free-market forces...
I say this because there is a shortage of physical metal in the marketplace, yet prices have steadily and dramatically declined in the past several weeks. What is going on?
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