For those who have followed this blog over the years, you know that I believe gold & silver to be your best “insurance” against economic calamity. We saw the parabolic rise in silver this year only to see it retreat to the $35 range, a normal market response. The underlying gold and silver stocks took a beating due to what I believe is a focused effort to shake people out of their positions. The bull will buck you off because that is what he does.
Last night’s network news finally reported on the meltdown happening in Greece. The unrest is not new but the average American is not exposed to ongoing economic calamities occurring around the world. Therefore his investments do not reflect the volatile realities of this interconnected planet. In the past, we have relied on the government to protect us from uncertainties just as a shepherd protects his flock. A shepherd will sacrifice himself for his sheep but that is not the case of those in power. Self interest prevails.
What are we to do? We must focus on what will have value after the smoke clears. If one looks at monetary history, the only monetary units that have survived men’s cunning devices are gold and silver because they cannot tinker with their value. Greed and fear have no power over those metals since they do not have any inherent liability attached to them. Gold and silver as well as land are primary assets. Gold and silver ETF’s (Exchange-traded funds) are secondary assets with claims against the actual metal. Gold & silver stocks are tertiary claims against the metal.
Owning gold and silver bullion is the safest of the three and you don’t have to worry about man’s performance. The other two have performance requirements attached to them so you must consider management’s track record and trust that they will continue to do the right thing. Gold and silver stocks provide the investor leverage for higher returns to offset this risk. Owning some of all three may not be a bad idea.
As long as gold & silver prices are at these levels, those companies who mine the metals are making money. As quarterly and annual reports come out, investors will get interested in the moneymakers and will push the price up. As the turmoil increases around the globe, the price of gold has the potential to go up to $12,500 in USD and silver has the potential in the $600 range. Those mining shares would rocket up with them. If we enter into a global depression that might reduce the price of these metals, would you rather own gold & silver or hold pieces of paper manipulated by man?
These are interesting times!