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By: Doug Fogel — July 28, 2020

A Precious Metals Horror Story

Back in 2011, I was convinced that gold was headed to $5,000 an ounce.

Silver?

An easy $100 per.

So over several weeks, I bought eight 1-ounce American Gold Eagles and 160 American Silver Eagles.

All told I spent close to $20,000.

I was working in marketing for a leading investment research publisher at the time, which was run by a legendary contrarian investor.

The guy was (still is) a huge proponent of having a significant portion of your wealth stored in physical gold and silver, and wrote about this extensively.

I took his advice to heart, as the logic he cited for holding precious metals was compelling.

That logic went something like this:

  • The Fed’s quantitative easing in the face of the 2007-2008 financial crisis had dumped trillions of dollars into the economy, which was certain to create serious inflation.
  • That inflation would incite the masses to protect their wealth with physical gold and silver.
  • The influx of all these new precious metals investors would cause gold and silver prices to explode.

In mid-summer 2011, that thesis seemed to be unfolding, which inspired me to make my gold and silver purchases.

Unfortunately, I bought my metal at the peak. And over ensuing years, I watched the value of my investments erode.

To make matters worse, I also bought a number of gold and silver mining stocks.

But, like my modest portfolio of precious metals, those stocks steadily lost value.

Several years later, thoroughly disgusted, I ended up selling the stocks and all my gold coins.

But I kept my silver.

And it looks like that may pay off, thanks to the historic tear silver is on.

Since May 20, it's shot up from $18.03 to $24.49 an ounce - a gain of 35.9%.

At the same time, the iShares Silver Trust (SLV) -- an ETF that seeks to replicate the performance of silver -- has risen from $16.36 to $22.77.

You may recall that on May 20 I recommended buying the SLV October 14.00 Strike Call option to take advantage of a possible spike in silver prices.

At the time, the option was selling for around $3.01... and at the close of yesterday, July 28, the mean price between the bid and the ask for that option was $8.69.

That represents a gain of 188%, a healthy return by anyone's standard.

The bottom line right now is that gold and silver are in a roaring bull market that's likely to continue to reward investors, including investors who choose to own the lyrical metal.

Some of the reasons:

  • Investors historically seek safe havens like gold during periods of extreme stock market volatility, which of course we’re experiencing today.
  • With the economy in recession, the demand for gold should keep rising.
  • The fear of political instability is running hot right now, which makes people uncertain about the future. Such uncertainty is usually a bullish tailwind for precious metals.
  • The fear that the dollar and other currencies will continue to lose value in the coming years is also very high today, thanks to the insane amount of money that’s been pumped out by central banks around the world.
  • The global coronavirus pandemic has incited Western investors seeking safety to purchase gold and silver.

For all of these reasons, demand for gold and silver bullion on the part of precious metals ETFs has increased by more than 600 tons this year, according to data compiled by Bloomberg.

You should consider following their lead and adding some bullion to your own holdings.

Of course, if you choose to do this, you'll have to decide whether to store it on your property or pay for storage.

I recommend keeping some gold and silver in your possession and under your control, such as one-ounce coins stored in a safe place at or near home.

Ideally, you should keep the equivalent of a few months’ living expenses stored in precious metals in this manner.

Once you’ve reached this level of security - assuming you want more of your wealth stored in bullion - I recommend hiring the services of a reputable precious metals purchase and storage facility that you can manage online.

There are several advantages to doing business with this kind of company:

  • It allows you to easily buy and sell gold and silver.
  • It typically results in paying less money in premiums than you would at your local precious metals dealer.
  • And you can trade your metals as quickly as you can with an ETF – but unlike investing in a bullion-backed fund, you have real ownership in the metal.

As for what precious metals purchase/storage companies to use, there are many to choose from.

Aside from ensuring you have the ability to manage your account online, just make sure whatever company you sign up with stores your metals in fully audited and insured independent vaults.

Also make sure the company has the ability to deliver your precious metals to you anywhere in the world via a bonded, insured carrier.

And above all else, make sure your chosen purchase/storage company does NOT pool your gold and silver with others – you want your gold to be YOUR gold.

That’s it for today.

To your financial health,

Doug Fogel

Editor, True Market Insiders

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