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Feb 23, 2012

The Top Commodities to Invest In

The top commodities to invest in, this is the most important question if you are thinking about investing in commodities. The two top most commodities that you must seriously consider investing in are gold and silver also known as the yellow metal and the white metal. Both these commodities are experiencing unprecedented boom for the last many years.
In 2011, gold prices made huge gains. The debasing of paper currencies is going on unabated. FED has lowered the interest rates on USD to the lowest level and plans to keep this low level for 2012. When interest rates fall, inflation rises in the economy. Inflation is considered to be the destroyer of wealth. Wealthy people in times of inflation always seek a safe haven for their wealth.
Gold has always been considered to a store of wealth in human history. It still holds this position in human mind. Gold prices historically have been observed to rise when the inflation in the global economy rises. This is precisely what has been happening in the past few years.
Gold prices started as low as $800 few years back. Last year, gold prices hit the historical high of $1,920 per troy ounce in September 2011. During 2011, this market saw unprecedented price hike. After reaching $1,920 per troy ounce, the price made a retracement and is now hovering around $1,700 per ounce.
It is being predicted by many market analyst that gold prices can reach $2,200 per ounce in 2012. This is in fact a conservative prediction. There are some market analyst who are bullish and say that gold prices can reach as high as $3,000 per ounce in 2012. Now, this can be a bold prediction. But most including Morgan Stanley is putting their reputation on the line by predicting that the gold price will hit $2,200 per ounce in 2012.
Keeping in view what happened in 2011, this is very much possible. Now consider the fact that the prices right now are hovering around $1,700 ounce. If the price does hit $2,200 per ounce in 2012, it means a capital gain of $500 on each ounce that you invested in.
Suppose, you had bought 10 ounces of gold costing you $17K. If the price does hit $2,200 per ounce, your investment will grow to $22K giving you a gain of 29%. Now, you can amplify this gain by using leverage. If you just use leverage of 5:1, you can turn this $17K into $110K in 2012. But always keep this in mind that prices can go up as well as go down. So, always use leverage with caution.