Howdy folks,
I posted this originally on this board back about a dozen years ago during the PM bull market that ran from 2002 to 2011. Seeing that gold is up about 71% YTD and silver +147%, seems it might be appropriate to post an update. I've collected coins for 70 years and this is my third bull market in the metals. In that late 70s, during the Hunt Bros bull, I was finishing my degree (finally) in Econ on the GI bill augmented by a stash of 90% silver coinage I had bought out of change during a restaurant gig. The big bonanza from 2002 to 2011 was easy as I was working with self-manage retirement accounts. It was fun. Now, I'm retired and normally have our portfolios on cruise-control, but good golly, the bull is running.
As a qualifier, I've been suggesting a PM holding of 3-7% for decades as an investment. More than that is speculation, which is fine, but different.
First of all, physical bullion in your possession is the best of all possible ways to invest. Cripes, a roll of American Gold Eagles is about 2" tall and the size of a quarter in diameter. It's worth about $95,000 right now and you can stash it in the oatmeal box. A 100oz bar of silver is about $7700 and you can paint it black and use it as a door stop. Or you can buy bling, but not designer stuff. You don't want to pay a premium for the name.
Many of you, myself included, use self-managed retirement funds and taxable monies to invest and speculate. With the PMs, there are two ways of playing them - bullion and mining stocks. There are bullion ETFs but keep them tax-deferred or exempt as gains get hit at 28%. For myself, I will only deal with Sprott ETFs for bullion because they must have possession of the bullion before they can sell you shares. This is unlike most of the bullion ETFs which do not have this rule and can take your money and then go looking for physical bullion with which to back it up. Right now, acquiring physical bullion is an international problem, particularly silver.
The other way of investing is with the mining stocks. The gold and silver miners. Kitco has the best listing.
https://www.kitco.com/mining/mining-equitiesOf note is that over 70% of silver comes as a by-product of other mining - lead, zinc and copper. This is why it's hard to increase production to meet skyrocketing industrial demand. Some of these penny stocks are serious nosebleed stuff. That said, you can make a killing if you do your homework. While I own a few individual stocks [I just can't help myself], I choose to use ETFs that specialize in gold, silver, both, large cap, small cap miners, etc. Right now I'm riding SILJ, SGDJ, SLVR, PSLV, AND CEF.
Bias? Sure, I prefer silver to gold, although I am riding both. Silver has always exhibited much greater leverage than gold. In the Hunt Bros. bull, gold rose 3x, silver rose 10x. Same thing in the 2002-2011 bull and it's happening again right now. Why is this? I believe it involves that Gold Silver Ratio being artificial due to bullion having a paper price and physical price. Originally, I thought it was bullion ETFs, but now it seems to trace back to the 70's. There is also the supply issue which in the face of increased demand is huge. You've got Central banks and sovereign states buying and industrial usage has gone nuts. Feh, all this puts a bottom under the price.
BTW, an ounce of silver is now worth more than a barrel of oil.
and so it goes,
peace,
rono
