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« Permanent brain drain and other perils of the junior downturn | Main | Hathaway - Gold To Shock World With Rapid $1,000 Advance »
Monday
Jun172013

Three Current Themes Precious Metals Investors Need to Consider

Three Current Themes Precious Metals Investors Need to Consider

By Hard Assets Alliance Team

By Ed D'Agostino, General Manager, Hard Assets Alliance

I recently attended John Mauldin's Strategic Investor Conference, where I heard some of the world's brightest minds in finance and economics. From Paul McCully to Mohamed El-Erian, David Rosenberg to Noriel Roubini, the best of the best were on stage pontificating on the future.

And now I know exactly what the next five years will bring. Without a doubt, the next five years are sure to bring inflation. Perhaps double-digit inflation.

Unless, of course, we have a sustained period of deflation.

At the risk of being too cute, I'll just say that there was no consensus among the economists, investors, and attendees. And how could there be, really? I heard well-reasoned and convincing arguments for both sides of just about every major question facing investors today. The arguments for inflation and deflation were equally compelling.

One statement I did not hear was, "Everything is going to be fine."

There were, however, three common themes that should be of interest to precious metals investors.

1. The Expansion of Quantitative Easing in the Developed World

Japan is taking QE to new levels. They make the US Fed's quantitative easing look almost laissez faire by comparison. Japan's commitment to generating 2% inflation will come through an almost doubling of its monetary supply. The goal? To make Japanese companies more competitive in global markets through the devaluation of the Japanese yen, thereby stimulating growth and breaking their decades-long bout of deflation.

But Japan does not operate in a vacuum. Its actions will force other nations – think South Korea – to respond in kind. Samsung and Kia have made great strides over the past 10 years in the global marketplace. South Korea will not let Sony and Toyota compete on price without a fight. Which leads me directly into the second common theme discussed.

2. Currency Wars

The EU, the UK, and US are all continuing their easy-money policies. Mohamed El-Erian described the unfolding stress among the G20 nations as "currency tension." Less polite investors would call this the beginning of a currency war, and on a scale never seen before. I don't see this ending well.

It's another compelling reason to own precious metals.  

3. Precious Metals On Sale

The third common theme was the agreement that precious metals have been put on sale. Not surprisingly, there was no true consensus to explain the price volatility we've seen in the metals market over the past several weeks. So what did cause the dramatic price drop? A better question might be, "Will we ever know what caused the dramatic price drop?"; and I'm reasonably confident the answer to my last question is No. I like this analysis of JP Morgan's explanation from the folks at Zero Hedge.

THE LAST COUPLE OF MONTHS IN REVIEW

Rather than rehash what you've undoubtedly heard in the past few weeks, let's evaluate what happened after the price drop.

- Dealers large and small across North America ran out of inventory and had to wait days or weeks for their stocks to be replenished. The Hard Assets Alliance saw an unprecedented level of buying immediately after the price drop – and we were not alone. This phenomenal level of buying was matched the world over. Precious metal went on sale, and purchasers flocked to take advantage of the discount.  

- The Chinese continue to increase their precious metals purchases. Joe Yasinski from Gold Bullion International shared an interesting statistic with me. This year, the Shanghai Gold Exchange has taken delivery of over 1,030 tonnes of gold – just shy of all the gold mined this year.

- Overseas demand for physical precious metal remains as robust as ever. And while premiums for gold coins in the US have not kept pace with premiums for silver coins, they shot up dramatically overseas. Friends in Asia reported premiums on gold Maple Leafs of 25% at local dealers.

ENQUIRING MINDS WANT TO KNOW

I've fielded numerous questions since the correction. I answer almost every question with a question – frustrating, I know, but necessary. The first question I ask all investors interested in precious metals is, "What are your investment goals?"

As a tool for traders, physical metal is not ideal. You are likely better served investing in an ETF. Speculation is a big contributor to price volatility. Large investors with leveraged positions are forced to redeem when their margin calls are triggered. Those of us in the business of selling physical metal are hopeful that the speculators have been chased out of the metals market with this latest correction.

Once you've determined that there is a place for physical precious metals in your portfolio, the next question you'll likely ask is, "Is now the right time to buy?"

THE BOTTOM LINE FOR PRECIOUS METALS INVESTORS

The best way to invest in precious metals is to take advantage of price drops, average into your position, and don't stress over the daily price. The financial experts at John Mauldin's Strategic Investor Conference agree that precious metals have been put on sale. Could prices go lower from here? Of course; but remember, you are investing in precious metals to bring stability to an unstable world. Owning precious metals is an insurance policy for your wealth.

Grant Williams of Things that Make You Go Hmmm… may have said it best when he wrote, "I am a seller of gold. Just not yet – and certainly not anywhere close to this price."


Disclaimer

The Hard Assets Alliance website and the SmartMetals Investor are published by Hard Assets Alliance, LLC. Information contained in such publications is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. The information contained in such publications is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. The information in such publications may become outdated, and there is no obligation to update any such information.

Any Hard Assets Alliance publication or website and its content and images, as well as all copyright, trademark, and other rights therein, are owned by Hard Assets Alliance, LLC. No portion of any Hard Assets Alliance publication or website may be extracted or reproduced without permission of Hard Assets Alliance, LLC. Nothing contained herein shall be construed as conferring any license or right under any copyright, trademark, or other right of Hard Assets Alliance, LLC. Unauthorized use, reproduction, or rebroadcast of any content of any Hard Assets Alliance publication or website is prohibited and shall be considered an infringement and/or misappropriation of the proprietary rights of Hard Assets Alliance, LLC.

Hard Assets Alliance, LLC reserves the right to cancel any subscription at any time. Cancellation of a subscription may result from any unauthorized use or reproduction or rebroadcast of any Hard Assets Alliance publication or website, any infringement or misappropriation of Hard Assets Alliance, LLC's proprietary rights, or any other reason determined in the sole discretion of Hard Assets Alliance, LLC.

Affiliate Notice: Hard Assets Alliance has affiliate agreements in place that may include fee sharing. If you have a website or newsletter and would like to be considered for inclusion in the Hard Assets Alliance affiliate program, please contact us. Likewise, from time to time Hard Assets Alliance may engage in affiliate programs offered by other companies, though corporate policy firmly dictates that such agreements will have no influence on any product or service recommendations, nor alter the pricing that would otherwise be available in absence of such an agreement. As always, it is important that you do your own due diligence before transacting any business with any firm, for any product or service.

© 2013 Hard Assets Alliance, LLC.

...............................................................................

With gold, silver and Uranium stocks being out of favor one must decide if this is a problem or an opportunity. We have steadfastly refused to buy gold and silver mining stocks for the last two years and as evidenced by the HUI we feel that our decision to hold back has been vindicated. The damage done to the mining sector may not be over yet but this demise is starting to offer up some exciting opportunities in my view.

Great care will be needed in the selection process in order to generate a reasonable profit and that’s where our new venture begins. ‘Stock Trader’ has begun trading on behalf of ourselves and our much valued subscribers, all exciting stuff which we are really looking forward to, if you wish to join us then please subscribe below;

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Reader Comments (4)

Just a question. Most of the articles on this site seem to be bullish for gold, yet you guys are bearish on your sk options trading service. Why do you then post these articles like the one above, which to me seems bullish I.e the talk of more currency devaluation which I guess would send gold higher.

Thanks,
Gene

June 18, 2013 | Unregistered CommenterGene

If its illegal to naked short silver and other precious metals, why are those who do so still running around free? Is it national policy since these same people sold the fraudulent mortgage backed bonds? If we prosecute the crooks would that mean that their debt would fall on the publics ledger sheet? I'm a poor retired slob who scrapes to pay his bills every month and remain out of debt. while these big banksters continue gambling and when losing come to us stupid tax payers who bail him out. If we are a country "of laws" when will we say "no" and let them fail? This may be disruptive but at least we won't be "the new slaves" who save the crooked banker's behinds?.

June 18, 2013 | Unregistered CommenterRay Lng

I do agree with you in that we all should be responsible for our own debts and financial management and not socialize these debts.

http://www.sec.gov/answers/shortrestrict.htm

Short Sale Restrictions

A short sale is the sale of a stock that a seller does not own or a sale which is consummated by the delivery of a stock borrowed by, or for the account of, the seller. Short sales are normally settled by the delivery of a security borrowed by or on behalf of the seller. The short seller later closes out the position by returning the borrowed security to the stock lender, typically by purchasing securities on the open market. Short sellers typically hope to profit from a downward price movement or seek to hedge the risk of a long position in the same or a related security.

In February 2010 the Commission adopted a new short sale price test restriction, which is commonly referred to as the “alternative uptick rule.” The alternative uptick rule is designed to restrict short selling from further driving down the price of a stock that has dropped more than 10 percent in one day compared to the closing price on the previous day.

June 18, 2013 | Registered CommenterGold Prices

Gene,

We bring articles to this website from other writers and organisations in an attempt to present a broader view of the market and hopefully bring some balance to the debate. I didn't buy any PM stocks for two years, which is hard to do for a gold bull, but there is a time and a place to make acquisitions and that's why we started the 'Stock Trader' service.

Hope this helps,

Take care, Bob K

June 18, 2013 | Registered CommenterGold Prices

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