Bill’s Blog | September 15, 2021
Let’s talk Gold. I have written in the past that Gold (physical) as an asset class has been the best-performing investment in the last 20 years, outperforming all indexes in the world, averaging a 10% return (excluding cryptocurrency, but I will cover that later in the Blog).
I would strongly suggest you should consider owning a sizable amount of physical Gold as part of your wealth strategy. Harvard and a second US financial research group did independent research asking how much Gold should a person have in their portfolio to optimize and protect their overall wealth? Both groups based their research on extended periods, one going back to the 1930s and the other to the 1950s. Any guess? If you ask the average financial advisor, they may say zero %, or if they are more knowledgeable, some may venture to 2 to 5%. I have heard other financial experts suggest 10%; however, the two studies may surprise you. To optimize your wealth portfolio, they came up with 20 to 30% as the correct percentage. Some precious metals experts will even suggest higher. I recommend as a base 25% of physical Gold & Silver. You can then diversify by adding select precious metals miners that provide even more leverage to the sector with both risk and higher potential reward.
If a financial advisor is astute, they will suggest a small allocation of precious metals in the form of an EFT or mutual fund. As a note, this is not the same as physical ownership. I am not against having some investments in precious metal companies or funds. I do this myself. Still, I prefer individual companies after researching leadership, asset locations, size of deposits and preferably cash-flow and dividends. I also like having some exposer to quality explorers. Stocks are significantly higher risk and more volatile. This sector is highly undervalued, with even the majors trading below net assets value with sizable cash flow and dividends. Do your homework before you enter this sector. But during a bull market, stocks and PM funds can provide outstanding returns.
Over a decade ago, the model I developed was to educate clients on precious metals and teach them to do what I have done myself. First, own physical metals as part of a balanced approach to diversify, protect against the devaluing of our currency and potentially participate in a significant wealth transfer. So what are a few key reasons to own Gold?
- Gold is a pure monetary metal, and Central Banks hold over 34,000 tonnes of it, and many continue to add to their positions. Why? Gold is pure money with no counterparty risk or liabilities like bonds or equities. Gold was recently changed to a Tier One asset, meaning it has 100% value in a portfolio and the banking system.
- Gold historically has been a hedge against reckless politicians who run extreme deficits and destroy the paper currency value and purchasing power. The destruction of paper currencies has happened 100s of times historically. We are witnessing this today in almost all countries.
- Physical Gold vaulted by a reputable vault service provides exceptional liquidity and protection for your wealth. I use Brinks for myself and my clients with an outstanding record of never losing a client’s precious metals in over 150 years.
- Gold is a small market of less than 10 trillion in market cap. Currently, there is less than one-half of one percent of institutional buyers holding Gold. Thus, when fear hits the market, Gold is the go-to asset and will experience significant upside. Historically, this occurred in the 1970s with severe inflation/stagnation and the Great Financial Crisis of 2007 to 2011. We are currently in a far worse financial situation today with excessive unrepayable debts and growing economic uncertainty. Plus, the stock and bond markets are in extreme overvaluation based on all reputable metrics. The smart money has reallocated to value and defensive stocks and many adding hard assets.
- Currently, we are in the perfect scenario to hold Gold. But, one needs to be a contrarian and look at the global risks honestly. Truthfully, if Gold does do a considerable spike up, that means we are in a severe crisis, and this will not be good overall. However, you will be in a far better financial situation than others by holding precious metals. Based on my cycles research, I see more turmoil is on the way soon, and one should prepare accordingly (read my last Blog).
- Lastly, Gold has been in a consolidation phase and is slightly down YTD of -3%, compared to a 25% return last year. The metals price is healthy and in trading between $1780 and $1820 US. We need to see a decisive breakout above the $1820 resistance level. There is a strong probability that we will take out last year’s all-time high of $2069 in the next up-cycle (3 to 6 months). A great time to accumulate, as I have done myself several times this year with both physical Gold and Silver.
Silver is Gold’s little brother and more volatile than Gold. The volatility is a double-edged sword; however, when the bull fully resumes, Silver most likely will outperform Gold, as history suggests. However, Silver had a banner year in 2020 as the Fed expanded the currency by a record 25% of the entire US dollar monetary history. Remember, precious metals protect your purchasing power with massive debt expansion, as it did so with a 46% return in 2020. This year Silver is down, hovering sub-$24US, but up from the low of $21.81 last year. There are many reasons to purchase Silver, and here are a few.
- We have record monetary stimulus with interest rates at a historic low and negative when adjusted to inflation. Second, continuous bond purchasing to feed the massive government deficit spending is the perfect time to purchase hard assets. As a result, we continue to see many commodities rise in price: oil, natural gas, uranium, copper and nickel, to name a few. I have recently discussed the crazy real-estate markets, and farmland has been a hot commodity, especially the ultra-rich like Bill Gates. He has become the largest farmland holder in America.
- Silver is a partial monetary metal but still plays a critical role in wealth preservation. Many Asian countries like India, China or Mexico (a major producer) annually buy huge tonnage for Jewelry, coins and other fineware items.
- Due to the desire to electrify the vehicle market and green energy in the coming decades, silver demand will increase dramatically due to its superb conductivity properties. In addition, silver demand continues to grow with its many uses like solar panels, cell phones, computers, high tech military devices, multiple medical applications, to name a few.
- Silver is a small market with about 1.3 trillion market cap (part of why it is volatile). However, when the market stops believing the Fed Chairs’ transitory inflation narrative, the upside of silvers price will be significant.
- We are still far below Silver’s all-time high of $50 US, and I am very bullish on its long-term price. I foresee Silver with a triple-digit price in the coming decade or even sooner with many other commodity experts. Yes, more volatile, but that is also what provides the upside potential.
- Silver needs to break the $26 resistance level, and I see it in the $30s soon, which means six to twelve months.
Now the Cryptocurrency markets. So if you love volatility, and I mean tenfold to Silver, then try crypto! This market is ideal for traders and not for the faint in heart. I have been active in this market since 2017 after the light bulb came on that Bitcoin and blockchain projects are incredible innovations and the future of money (digital money, data transfer/storage, keeping accurate records, and hundreds of other applications). What I understood in 2017 has become more real every month and year with the growing adoption and now a market cap of over two trillion dollars today. Last year alone, crypto’s market value was only several hundred billion.
2021 has been quite the rollercoaster ride, from a new record price for Bitcoin of over 64K US to a 50%+ crash and the recovery to its current price of just over 45K. However, if you are willing to trade this market (swing trade), you can make sizable profits. For example, I have harvested my account three times this year, recovering 100% of my capital and received a decent profit. Of course, the initial goal with all speculations is to get your capital back, and yes, all cryptocurrencies are speculation. Never invest money you cannot afford to lose and never use leverage unless you are a professional trader with deep pockets! So why even consider Bitcoin and other cryptocurrencies? I will share with you a few key points.
- There are a few billion people on our planet that have no traditional banking system. Legitimate Cryptocurrency projects have been filing this valid need.
- Significant financial institutions adoption with companies like Fidelity, PayPal, Visa, Greyscale. Hedge Funds and Billionaires like Michael Saylor, Mark Cuban, Elon Musk, Winklevoss twins, Kevin O’Leary, Etc. There are now several Crytpo ETFs.
- There are continuous large Corporations developing and adopting blockchain: Microsoft, IBM, Google, Walmart, Ford, DHL Express, Shell, Etc.
- Dozens of countries and central banks are developing their digital cryptocurrencies or embarrassing Bitcoin as legal tender like El Salvador: China, Russia, Korea, Japan, Venezuela, Estonia, Sweden, Dubai, Federal Reserve, ECB, Bank of England, and many others.
- Bitcoin has a technical resistance in the low 50 range, and it needs to do a sustaining breakout above $52K US, which could take out the all-time high. Many crypto analysts feel we could have another sizable pull back to the 20 to 30K range. If this plays out a perfect time to take a small position.
- We are still in the early stages of this story, maybe the second or third inning of nine, for those willing to EDUCATE themselves FIRST. It would be best if you learned the basics of how to attain cryptocurrency (buy and sell) and how to protect your new asset. I do offer a 3-hour crypto consulting session at $125 per hour. Bitcoin and other Altcoins can allow you to participate in a new asset class and diversify a small amount of your capital. Remember, this is 100% speculation, and you can potentially lose all of your capital—happy learning to those who embrace the adventure.
In summary, Gold, Silver and cryptocurrency are critical assets to purchase and a way to diversify your wealth with non-stop currency printing. Rule # one: Educate yourself before you deploy one dollar of capital. If you want to learn about Gold and Silver, you can download a free copy (PDF) of the NY Bestseller directly from my home page fivefoldfinancial.ca (scroll down the page): “GUIDE TO INVESTING IN GOLD AND SILVER” PROTECT YOUR FINANCIAL FUTURE.
My commitment is to provide sound financial education and quality solutions to grow and protect your wealth.
So please join me next week (September 22, noon PST) for a very insightful 45-minute interview-style webinar with the founder and CEO, Jean-Pierre Laporte of Integris Pension Management Inc. Brief Q&A to follow.
If you are an incorporated business owner or professional in Canada, you can qualify to have your own Personal Pension Plan with many benefits (superior to RRSP and IPP). So please register for this ZOOM session:
You are invited to a Zoom webinar.
When: September 22, 2021, 12:00 PM Vancouver
Topic: Join us to learn about the Personal Pension Plan with founder JP Laporte
Register in advance for this webinar:
After registering, you will receive a confirmation email containing information about joining the webinar.
All the best,