Silver and gold had an excellent year in 2026 with gold exceeding $5000 an ounce and silver passing $100 an ounce. If you believed what the pundits were saying on financial news programs you would have been convinced that precious metals are the future of investing. So, are precious metals good investments or are they investment traps designed to take away your wealth?
Gold and Silver Prices Over Time
As the chart from Macrotrends shows, silver tripled in price from the end of 2024 to the start of 2026. However, this was not the only such impressive rise in the price of silver. Similar rallies occurred in 2010 and 1979. The 1979 rally was when the Hunt brothers attempted to corner the silver market using options trades, failed and went bankrupt. The Hunt brothers long after argued that by owning two-thirds of all silver on earth they were establishing a hedge against inflation that was demolishing the US dollar. After both the 2010 rally and the 1979 to 80 rally, the price of silver fell back to previous levels thus erasing spectacular gains each time. Similarly, gold rallied during the 1970s after President Nixon took the US dollar off of the gold standard of $32 an ounce and peaked at $668 in 1980. Then the price slid down over the years to $259 by 2001 when low interest rates helped start its recovery to $1600 by 2011 and more than $5000 in early 2026. The point being that while gold and silver have had their rallies they have also been prone to price corrections and long periods of stagnation versus the US dollar.
Why Did Precious Metals Correct in 2026?
It remains to be seen where precious metals will go from their current levels. However, it is instructive to look not only at the impressive 2025 rally to understand precious metals as investments but also the early 2025 correction. Why did they correct? There was clearly profit taking and traders who were overextended but there was also a retreat from what was to some degree mindless enthusiasm based on shortsighted following of recent market gains. India and China were prime movers in this correction with individual investors deciding that the financial world was not about to collapse. Without a nagging belief in financial devastation, people in these countries found better places to put their money. The fact that central banks reduced their outlays for gold was a factor as well as belief that the US Federal Reserve was not about to collapse under pressure from US President Trump. When pundits have been steadily predicting disaster and traders have bid up a market as they swallow that story, there always comes a point where disaster has not occurred and sanity returns. In the recent case that sanity resulted in more rational pricing for precious metals. Of course those investors and traders who were over extended were forced to sell, which served to accentuate losses in the short term.
Is it Time Buy or Sell Precious Metals?
Famed investor Warren Buffett said that wise investors should be greedy when the market is scared and scared when the market is greedy. He routinely made profits by avoiding overpriced markets and then stepping in to pick up bargains after a correction. Is it time to pick up bargains in precious metals? Have prices fallen enough? Can we expect a prompt price recovery? If you look at the historical prices of gold and silver you can see two things. They have gained versus the dollar over the years and they have been prone to overshoot both on the upside and the downside. Looking at this, we do not expect to see a prompt price recovery but rather a price slump that will, after a few years, be erased by renewed speculation and enthusiasm for precious metals.
Are Precious Metals Good Long-Term Investments?
There is no question that the value of gold or silver will increase versus the dollar over time. The question is whether said increase will stay ahead of inflation and ahead of the stock market, real estate, etc. If you had put $1000 into stocks that tracked the S&P 500 in 1980 and reinvested all dividends your $1000 would be worth well over $100,000 today in 2026. The same thousand dollars as gold bullion would be worth less than $3000 today! Precious metals do not pay dividends or interest, although they are a hedge against inflation when compared to cash hidden beneath your mattress. Keep this in mind when you consider precious metals as long term investments.