Investing in precious metals/gems

[Insidious Von]

I was listening to The Money Show on the drive home today and the hosts were making dire predictions about the state of the American economy. Their premise is that investing precious metals/gems is the only sensible alternative to a wayward stock-market.

I'm not convinced; the economy of the USA isn't as badly off as they foresee and pick stocks is like play poker, if you're not prepared to lose the money don't do it. Nor do I believe that precious metals is the El Dorado that they make it out to be.

However I see that with our growing dependence on electronics metals like gold, silver, copper and platinum will increase in price. And diamonds are important in precision machining since cheaper alternatives as cutting tools are not as durable.

So my question is, does it make sense to put a large chunk of your savings into these commodities?

 

[landscaper]

put in what you can afford to lose, commodities are generally best left to the experts,

 

[wazup]

I would take the opposite view, they've spent trillions on stimulus and the economy is still in the tank. They've done everything possible to prop up the economy and it's still not working.

 

[mruptonogood]

I was listening to The Money Show on the drive home today and the hosts were making dire predictions about the state of the American economy. Their premise is that investing precious metals/gems is the only sensible alternative to a wayward stock-market.

I'm not convinced; the economy of the USA isn't as badly off as they foresee and pick stocks is like play poker, if you're not prepared to lose the money don't do it. Nor do I believe that precious metals is the El Dorado that they make it out to be.

However I see that with our growing dependence on electronics metals like gold, silver, copper and platinum will increase in price. And diamonds are important in precision machining since cheaper alternatives as cutting tools are not as durable.

So my question is, does it make sense to put a large chunk of your savings into these commodities?

Are you serious? You are not convinced the U.S. economy is fucked? Wha has happened after the stimulus dump? Nadda.............Oh I hear a car company is finally getting the fuck off welfare.
You know I brought this precious metals question up days ago on terb and asked if I should go with Silver investing. This plus a few other things have now convinced me. I'm buying Silver. Anyone got a Dump truck I can borrow? Problem is like I have been told I might have to sit on it awhile.

 

[Insidious Von]

I would take the opposite view, they've spent trillions on stimulus and the economy is still in the tank. They've done everything possible to prop up the economy and it's still not working.

You could be right. The US economy could help itself by allowing the Bush tax cuts to expire but a Republican controlled Congress will probably not allow that. That could drive the economy into the abyss and the Democrats would get the blame. The lessons of history are not lost on the Republicans; the Democrats won five successive Presidential elections after the Republicans got the blame for The Great Depression. As for precious metals the bigger dark horse will be what becomes of South Africa after Nelson Mandela takes his leave? If SA goes the way of Zimbabuwe the price of a variety of precious metals/gems could sky-rocket.

 

[wazup]

I've tried shorting the US market for about 10 months, I was way too early, now I'm damn near broke.

http://www.zerohedge.com/
http://theburningplatform.com/

Here's a couple websites I read, the market is also easily manipulated with this light volume.

 

[oil&gas]

......................................................
So my question is, does it make sense to put a large chunk of your savings into these commodities?

If you have a net worth of 10 million you would be fine
investing even as much as 9 million into commodities.
You can afford to lose 9 million and still live well. If you
own less than half a million I would suggest you to keep
the weight of precious metal investment to within 10--20%.

I am bullish on precious metals. But it is not like
there are no attractive investment opportunities in other
sectors.

 

[Ceiling Cat]

Slow but sure, thats the way to play it now. Banks, utilities get a dividend of 4% plus, get paid to wait for better times.

 

[hinz]

Slow but sure, thats the way to play it now. Banks, utilities get a dividend of 4% plus, get paid to wait for better times.

Buy a truck load of XDV over time and you'll be fine in non-registered account. Add CPD if you are not inclined to be big risk taker.

Haha...O'Leary is fun to watch since the days at ROBTV/BNN but IMHO his so-called business savvy and stock picking skills were suspect back then and still are. CB seems to share the same opinion.

http://www.canadianbusiness.com/managing/strategy/article.jsp?content=20100614_10016_10016

 

[nottyboi]

I would not mind buying a bit of physical gold, but having too much is not a good idea. If the doom scenario happens, having a ton of gold will get you killed. It is also possible the govt may decide to tax gold transactions which could severely depreciate it.

 

[hinz]

If the doom scenario happens, having a ton of gold will get you killed.

In a doomsday scenario, gold isn't that useful compared to guns with tonnes of ammos, water, can of beans and last but not the least, cigarettes as money/medium of exchange.

Funny though none of the current perma bears/doomsaying talking heads at CNBC, Bloomberg or BNN suggest any one of the above. That alone makes you wonder what kind of hidden agendas, conflict of interests they have to spread the bad news overtime.

It is also possible the govt may decide to tax gold transactions which could severely depreciate it.

More likely the governments will seize/confiscate the gold bars by force/at gunpoint since the governments have monopoly on violence and enforcement.

 

[nottyboi]

In a doomsday scenario, gold isn't that useful compared to guns with tonnes of ammos, water, can of beans and last but not the least, cigarettes as money/medium of exchange.

Funny though none of the current perma bears/doomsaying talking heads at CNBC, Bloomberg or BNN suggest any one of the above. That alone makes you wonder what kind of hidden agendas, conflict of interests they have to spread the bad news overtime.



More likely the governments will seize/confiscate the gold bars by force/at gunpoint since the governments have monopoly on violence and enforcement.

They did do that once, but I think it may cause violence so maybe they willl just tax it instead.

 

[zardoz]

Don't follow the flock. When everyone thinks US economy is fucked, it is not. Everyone thought US economy was fucked during Vietnam war, and oil crisis in the 70s. USA always bounce back strong. They have the most balanced economy and resilient work force in the whole world. Even now, they are still much better shape than Europe, and believe or not lower government debt than Canada. Only time will tell. Canada is too dependent on commodity and resources. Just watch our loonies sink when oil prices tanks. US dollar is still the reserve currency in most of the governments in the world. It is everyone's interest - even for China to have a strong US economy

 

[nottyboi]

Don't follow the flock. When everyone thinks US economy is fucked, it is not. Everyone thought US economy was fucked during Vietnam war, and oil crisis in the 70s. USA always bounce back strong. They have the most balanced economy and resilient work force in the whole world. Even now, they are still much better shape than Europe, and believe or not lower government debt than Canada. Only time will tell. Canada is too dependent on commodity and resources. Just watch our loonies sink when oil prices tanks. US dollar is still the reserve currency in most of the governments in the world. It is everyone's interest - even for China to have a strong US economy

Yes Canada will be in rough shape when that happens. The rise in the loonie has pretty much wiped out our manufacturing... when commodities implode, we will be dropping like a stone due to lack of diversification.

 

[FOOTSNIFFER]

I would not mind buying a bit of physical gold, but having too much is not a good idea. If the doom scenario happens, having a ton of gold will get you killed. It is also possible the govt may decide to tax gold transactions which could severely depreciate it.

Yes, buy a little bit as a hedge against the loss of confidence in all money currencies.

The case for gold is simply that deflations are pretty much always followed by inflations (this analysis courtesy of a talk given by Tony Boekh, of the Bank Credit Analyst out of Montreal). The reason: The Fed along with the gov. pump alot of money into the banks, which usually precipitates a rise in the most liquid of the asset markets, such as the stock and bond markets. The higher values ascribed to these assets both bolsters the banks and refloating peoples' net worth, leaving both more predisposed and better able to borrow more money through an increase in their collateral for loans.

The longer a recession lasts, though, and the more that supply across the economy slowly declines (recessions are usually brought about because of a period of malinvestment in assets for which there isn't sufficient demand, which either deteriorates into obsolescence or is finally consumed), political pressure builds to keep 'priming the pump', to keep pumping greater and greater money into the system, and to not withdraw it until alot of the slack that was created in the economy during the recession is re-absorbed. By this time, the threat of inflation takes a back seat to the alleviation of suffering in the unemployed population....and so, the balance sheet of the Fed isn't reined in until it's too late. Credit growth spikes, the velocity of money rises as credit demand is revived in the midst of a recovery in 'animal spirits', and only too late does the Fed decide to bleed excess reserves from the financial markets. In other words, gold rises due entirely to the mistakes commited by the Fed. I find it quite curious that in the middle of a credit deleveraging across the entire world, that the inflation barometer par excellance is hovering at its highs. Alot of people are afraid.

A few other factors supporting prices is that supply is not growing as much as it used to be, and the rise in wealth of places that put alot of stock in gold as a store of value, like India and the Middle east.

 

[nottyboi]

Yes, buy a little bit as a hedge against the loss of confidence in all money currencies.

The case for gold is simply that deflations are pretty much always followed by inflations (this analysis courtesy of a talk given by Tony Boekh, of the Bank Credit Analyst out of Montreal). The reason: The Fed along with the gov. pump alot of money into the banks, which usually precipitates a rise in the most liquid of the asset markets, such as the stock and bond markets. The higher values ascribed to these assets both bolsters the banks and refloating peoples' net worth, leaving both more predisposed and better able to borrow more money through an increase in their collateral for loans.

The longer a recession lasts, though, and the more that supply across the economy slowly declines (recessions are usually brought about because of a period of malinvestment in assets for which there isn't sufficient demand, which either deteriorates into obsolescence or is finally consumed), political pressure builds to keep 'priming the pump', to keep pumping greater and greater money into the system, and to not withdraw it until alot of the slack that was created in the economy during the recession is re-absorbed. By this time, the threat of inflation takes a back seat to the alleviation of suffering in the unemployed population....and so, the balance sheet of the Fed isn't reined in until it's too late. Credit growth spikes, the velocity of money rises as credit demand is revived in the midst of a recovery in 'animal spirits', and only too late does the Fed decide to bleed excess reserves from the financial markets. In other words, gold rises due entirely to the mistakes commited by the Fed. I find it quite curious that in the middle of a credit deleveraging across the entire world, that the inflation barometer par excellance is hovering at its highs. Alot of people are afraid.

A few other factors supporting prices is that supply is not growing as much as it used to be, and the rise in wealth of places that put alot of stock in gold as a store of value, like India and the Middle east.

I think Silver is also a good option. You can buy it with less money...walking around with 1 ounce of silver in your pocket is a $25 bill as opposed to a $1200 bill for gold... (less likely to get killed for it) plus silver is an important industrial metal unlike gold.

 

[fun-guy]

So my question is, does it make sense to put a large chunk of your savings into these commodities?

Absolutely not does it make sense to put a large chunk of your savings into commodities, then again it makes not sense to put a large chunk of money into anything, balance investing is important to avoid a major downturn in any segment of your investments. Commodities should make up a portion of your investment strategy, the amount is dependent on your risk tolerance, funds available, and othe factors. Copper has increased significantly recently and gold is again poised for a run at $1300 and above, currently at $1225, up $10 and looking stong.

A balanced portfolio is key with not too much weight in any category.

 

[hinz]

Yes Canada will be in rough shape when that happens. The rise in the loonie has pretty much wiped out our manufacturing... when commodities implode, we will be dropping like a stone due to lack of diversification.

I am sure Jim Chanos is shorting Loonie, Aussie dollars and the commodity companies as a strategy to short on China since it's almost impossible to sell short big time on A-shares listed in Shanghai.

 

[hinz]

I think Silver is also a good option. You can buy it with less money...walking around with 1 ounce of silver in your pocket is a $25 bill as opposed to a $1200 bill for gold... (less likely to get killed for it) plus silver is an important industrial metal unlike gold.

LOL, the Omaha figured that out years ago by buying truck load of physical silver until Uncle Sam discovered the accumulation and tried to stop him by hinting Berkshire as silver market "manipulator".

Funny to know his buddy Bill Gates is one of the largest shareholders of Pan American Silver.

In the meantime, I expect there will be significant profit taking when the spot price of silver is approaching to $20 an ounce.

 

[homerjsimpson]

None of the fundamentals have improved. Just because banks were allowed to take bad assets off their balance sheet doesn't mean they're not still there.

Take a look at this chart on Mortgage Rate Resets in the US:

Then watch this video: