GMAT Essays (AWA)

The following appeared in a strategy memorandum of an investment company:

"Over the past several years, investment in precious metals, such as gold and silver, has proven to be one of the most profitable investment strategies for our firm. Over the next decade, the demand for these metals is expected to be strong, largely driven by the economic growth of large emerging markets--China, India, and Russia. Thus, our investors are best served by increasing their exposure to precious metals to take advantage of this unique profit-making opportunity."


In the preceding company memorandum, the writer claims that gold and silver demand would be increasing in the next ten years and because of that, an investment in precious metals would be most appropriate for the company. The author supports his argument with information about the economic growth of large emerging countries like China, India and Russia and relates his reasoning with the past data of the rate of return on such investment in gold or silver. Though his claim may well have merit, the writer's statement is poorly reasoned, based on questionable assumptions and based solely on the evidence the author offers, we cannot accept his argument as valid.
Primary, the author erroneously assumes that economic boom in some large countries would definitely lead to increased demand in precious metals and therefore price of gold and silver would rise. Although such metals are widely used in some technological productions, an economic growth has no substantial relation with demand of gold and silver. In fact, recent studies showed that gold and silver prices are influenced by financial crisis and currency problems and in times of economic boom, precious metals tend to be cheaper.
Secondly, the writer falsely ignores other possible type of investments and wrongly assumes that putting money in gold or silver is the best decision for the company. However, it is entirely possible that investment in bonds or stocks would be more profitable than in precious metals. Moreover, the author mentions that past investments in such metals have been profitable and implies that probably their prices could have risen to a level so that an investment today would not be so wise.
In addition, the writer wrongly assumes that in the next decade, prices of gold and silver would always go up. Our modern economy is so unpredictable that it is virtually impossible for a single man to evaluate an asset's price in the next ten years. For example, gold price in the past ten years have changed its trend more than five times.
In sum, the argument is poorly reasoned, with unproven relations between demand and economic growth. The author fails to convince the reader that investment in gold and silver is the best decision because he does not provide substantial evidence and ignores other investment possibilities.

VERY well written, an exhibition.

Keep it up.

Whispering suggestion, small sentences.