Could Gold And Silver Bullion Be The Best Place To Invest Your Money For The Next Few Years?

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This is not going to be an easy article to write. Almost two years ago I wrote a similar article focusing on why investing in gold could be a smart move. This was around the time of Donald Trump’s surprise US presidential victory. Like the result of the UK Referendum to remain or leave the European Union, it was a classic black swan event, which very few foresaw. Around that time the conventional wisdom was that the world was going to go to hell in a handcart and that gold or anything seen with ‘defensive’ qualities was the place to invest your money. Gold in fact did not do much after Trump’s surprise win and actually went down in value. By the end of 2016 gold was just trading at less then $1200 an ounce. As of today gold is trading at $1232 an ounce.

Many analysts and others have been mystified by the lack of movement in the gold price over the last two years when one takes into account much of the geo-political situation and volatility engulfing the world. During that time period the biggest winners have been cryptocurrencies. 2017 was the year when Bitcoin and interest in other cryptocurrencies exploded. I mentioned Bitcoin briefly in my article from two years ago yet my understanding of the currency was limited. From January 2017 until the end of that year, the price of Bitcoin went mad shooting from $1000 a coin to almost $20,000 by December of that year. I remember being in a café in Amsterdam in June 2017 investigating Bitcoin further. Around that time the price was $2500 a coin. It had already more than tripled in value since the time I wrote my last article on gold around the start of November 2016. Even at that time I thought the price was overvalued and I was sceptical, especially since a new kind of herd mentality was manifesting. By that time interest in other cryptocurrencies was also taking hold. Ethereum, for many months just the preserve of hardcore crypto-heads and early adopters, was also exploding in value. It was my sister who first made me aware of Ethereum back in April 2017. Around that time the price was $50 a coin. At the start of the year the price was only $10 so it had an even bigger rise than Bitcoin. Yet two months later at the café in Amsterdam I was flabbergasted to witness the price shoot up even further to almost $400 a coin. Litecoin, the silver to Bitcoin’s gold, only around $4 a coin at the start of 2017, was trading at $30 a coin in June 2017. When the first surge of mainstream interest hit Bitcoin towards the end of 2013, Litecoin was by far the second most popular cryptocurrency. But since that first spike of interest, Litecoin (and Bitcoin) crashed and was in the doldrums for over three years before the next spike in 2017.

Since the start of 2018, the bubble burst for crypto and many cryptocurrencies lost a lot of their value. Interest still remains high and compared to the others, Bitcoin has held its value the best trading around the $6,500 mark over the last couple of months. You may be thinking why am I mentioning cryptocurrencies when the focus of this article is supposed to be on gold and silver? It is because there are some who think that certain cryptocurrencies take away the monopoly that precious metals have traditionally always had as a so-called ‘store of value’. It has been said that all the gold in the world amounts to the capacity of just three Olympic size swimming pools. It is scarce. Yet some argue that Bitcoin (and also Litecoin) is also a store of value since it has a supply cap of just 21 million coins. Two of the biggest investors in Bitcoin, the Winklevoss twins (also known for their association with Facebook), have gone as far as saying that Bitcoin will replace gold as a traditional store of value and that in the future, the scarcity of gold will be eroded by asteroid mining. It is true that Bitcoin has certain advantages gold doesn’t have. If you own lots of physical gold or silver you may have to store it in a vault and there will be storage charges. Moving it around with ease may also prove tricky. There is none of that with Bitcoin since it is digital and can also be used for swift payments. But that can also be its undoing; the fact that it is digital. In some countries such as Bolivia, it is illegal to trade Bitcoin or to use it as a payment method. At the end of the day, global governments can very easily outlaw it. Even if you had lots of Bitcoin in cold storage on an external hardrive in your bedroom it would be useless if that happened. That doesn’t mean to say I am against Bitcoin and crypto. I kind of have a secret admiration for it as, despite its volatility, it has enabled many ordinary citizens in some countries like Venezuela, which has been devastated by hyperinflation, to protect their hard earned savings from being further decimated in value. It isn’t always easy to acquire precious metals or even hard fiat currency for ordinary citizens in those parts of the world, so crypto can fill that gap in its accessibility.

I cannot predict the future of Bitcoin or where it and other cryptocurrencies may be heading. One of my biggest concerns regarding Bitcoin is that it is still far from being widely adopted and the people that own it are only doing so for speculative purposes. What’s more, I can only think of one place where I used Bitcoin and Litecoin to purchase something and that was at a Bitcoin café in Prague last year. Then again, more fool me if cryto goes an another epic bull run reaching dazzling new heights.

The reason why I like gold and silver is because neither are really in vogue at the moment. They are not as sexy or hot as crypto and I like the fact that the prices haven’t moved much and are still depressed compared with the new heights they both reached during the early part of this decade. Yet gold and silver can be frustrating assets to hold. If you go on YouTube there are no shortage of ‘gurus’ forecasting how gold will go to $10,000 an ounce and silver $1,000 an ounce. There is a lot of cynicism regarding gold and silver. Some argue that all those so called experts have been saying that gold will go to the moon for many years and it just hasn’t happened. Gold and silver haven’t moved much since the last spike around 2011-12 and so many gold and silver holders are understandably experiencing a heavy dose of fatigue and impatience.

Gold and silver prices are very difficult to predict and can sometimes move strongly for no rational reason at all. Traditional factors such as inflation, political instability, low interest rates, a weakening US dollar or a global stock market crash are no guarantee that a rise in the price of gold or silver will follow. Yet one thing is as clear as day; global debt levels are at an all time high. Not just in the developed world but also in the developing world especially in China. Most global stock markets have also been on a long bull run since 2009, yet this month we have witnessed the first signs of this bull market being derailed. In the process the price of gold began to rise, albeit very modestly. I would like to think that now the fortunes of gold and silver are finally about to change and I wouldn’t be surprised if at some point over the next few years, gold and silver prices started to go on a dazzling bull run similar to the one in the crypto space last year. If this happens sentiment towards these precious metals will change with a lot of ordinary investors wanting in to avoid FOMO (fear of missing out) syndrome thus enabling the price to rise higher. The beauty of the insane crypto bull run last year was that very few people saw it coming. If you read most of the comments on YouTube videos dated before 2017 relating to Bitcoin, most are negative and completely write off Bitcoin. A lot of that sentiment has changed now.

Generally, I prefer gold and silver bullion to owning shares in gold and silver mining companies. Yet on the other hand, just a modest rise in the price of gold and silver can cause an even bigger rise in the share price of gold and silver mining companies. What’s more, some of these companies also pay a dividend. But then you are also exposed to things like political risk if the mines are located in politically unstable parts of the world. Or company mismanagement etc. Owning gold and silver bullion protects you from these risks.

One site I like as a UK resident is called Bullion Vault. It enables one to invest in gold and silver bullion with no minimum limit. You can invest in just £10 worth of gold (which at current prices means owning less than a gram). And you can also choose the location of your vault in cities like London, Zurich, New York, Singapore etc. There are storage costs yet the storage costs are greater for silver than for gold. You do not own your metal physically in your hands (although there are bars you can purchase), but rest assured that the metal you purchase is yours safely in a vault and you would still own it even in the unlikely event that Bullion Vault itself went bust.

You can of course purchase gold and silver bars and coins, yet its your responsibility where you decide to store them. The Birmingham based BullionByPost is the largest online bullion dealer and a good contact to have.

 

Nicholas Peart

(c)All Rights Reserved

 

Disclaimer: The opinions expressed in the article are mine and shouldn’t be taken as gospel. It is always important to do your own research before making investment decisions. 

 

Image: mining.com

 

 

Is Now A Good Time To Buy Gold?

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This is something I’ve been thinking about a lot these last few months. Looking at all the current global events including the upcoming US elections and the sense that the world is becoming increasingly unhinged, could gold (and by extension other precious metals such as silver) be a good place to put some of your savings/hard earned cash into?

Gold has traditionally been the place to put your money into during times of global unrest. Out of all the world currencies, the US dollar is often seen as the main currency. If you live in a country where the local currency is notoriously unstable, it is often seen as a smart idea to have any cash savings in US dollars. Especially since, unlike other major currencies such as the Euro or British Pound, the US dollar is accepted absolutely everywhere. Yet what happens when even the US dollar becomes unstable? This is where gold comes in.

All paper currencies, whether you have US dollars or Zambian Kwacha, are all just that; paper currencies. Furthermore, if the government wanted to, it could print more and more of its currency thus increasing the money supply and triggering inflation which reduces the value of a country’s currency against other currencies. Unlike paper money, gold is highly prized for its scarcity.

Gold can be seen more as a security to protect your money as opposed to making money. Of course if you buy gold at $1,300 an ounce and the price a few months later is $1,600, you would have made a nice profit if you ever decided to convert some of your gold back into cash (and conversely, if the gold price went down to $1000 and you needed cash you would be selling your gold at a loss).

There are also of course digital currencies out there with Bitcoin being the the most well known, established and traded of all the global digital currencies. Even if digital currencies may be seen as the future of money especially with the Bitcoin (which was once the pariah of the financial world) becoming increasingly accepted and recognised as a legitimate global currency, this is a world where my expertise is limited. I am also scared by the high chance of wild fluctuations and the whole intangibility of it all. Gold just seems less complicated. It is a precious tangible metal with a limited supply and that is all I need to know.

Looking at the gold price chart of the last twenty years, gold has already had a hell of a run going from a low of just $252 an ounce in 1999 to a high of $1889 an ounce in 2011. The current gold price as I write this article is $1307 an ounce; still several multiples of its 1999 low yet a good chunk lower than its 2011 high. Some say that the gold price could surpass its 2011 high and breach the $2000 an ounce mark if the world really did begin to tilt off its axis and spin in some crazy time signature. Yet predicting the future price of gold is a fool’s game. What I can say with ‘certainty’ though is that during times of ‘uncertainty’, gold is a good thing to have.

 

How To Purchase Gold

Gold can be purchased physically in the forms of established gold coins and gold bars. It can be good to personally own some bits of physical gold and keep them in a safety box (or dig a deep hole somewhere in your garden to hide and store them – just make sure you don’t forget where you put them!). On the other hand having lots of physical gold in the house can create a feeling of insecurity. If you are lucky enough to have a big gold pile, it would be best to keep it in a robust security vault by an established and reputable firm. Below I am listing some useful contacts…

Apmex based in Oklahoma, USA, is the world’s largest online retailer of precious metals selling more than 10,000 gold, silver, platinum and palladium products in the form of bars, coins, bullion, rare collectible editions etc.

BullionByPost based in Birmingham, UK is the UKs largest online gold dealer and a good contact to have if you are a UK resident.

For Australian residents, The Perth Mint is a good contact.

Other established global gold/precious metals dealers include the Canadian company Kitco and the Indian company RiddiSiddhi Bullion Limited.

The London based company BullionVault is an online peer to peer gold and silver bullion exchange. Since its founding in 2005, the company has been very successful. This is also a great place to trade gold and silver if you don’t have much money at your disposal since there is no minimum amount of gold or silver you can trade. BullionVault charges a flat 0.5% – 0.05% fee per trade depending on the amount of gold or silver you buy or sell. The other additional costs are the annual fees for storing and insuring the gold and silver you purchase which are 0.12% (0.01% per month – $4 minimum) of the value of your gold and 0.48% (0.04% per month – $8 minimum) of the value of your silver

 

By Nicholas Peart

5th November 2016

(All rights reserved)

 

image source: http://www.therealasset.co.uk