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Gold and Silver Investments – WHY AND HOW?

Gold and Silver Investments – WHY AND HOW?

Haitham Sadek 0 Comments

Commodities includes gold, silver, oil, coffee, cotton, etc. Over the years, gold has been considered the ultimate safe haven for many people and conventional wisdom said it would only go up in value during uncertain times. Then its price dropped more than 25% in 2003!

The above chart from Kitco.com shows the performance of the key commodities (Gold, Silver and Oil) vs. the stock market represented by the US S&P500 for the last 17 years. While Stocks outperformed all commodities for this period, both Gold and silver performed extremely well during the 2008 financial crisis up to 2013. However, from 2005 to 2011, S&P 500 lost 8% and property declined significantly, gold returned an impressive 350% and Silver an astounding 700% This suggests that Gold and Silver deserve a small portion in your portfolio as a protection against inflation and political instability. Stock market Guru Ray Dalio, the founder of Bridgewater Associates, suggests 15% of Gold and other commodities in his recommended portfolio that delivered 10% annually for the last 40 years with only 3.9% loss in 2008 vs. 38% loss for the S&P500. The details of the portfolio are in my report “Wealth Store”.

The simplest way to purchase gold is via ETFs (Exchange Traded Funds) which trade like shares of stock for investors. Example of Gold ETF is iShares Gold Trust with the ticker (IAU). IAU is a low-cost option for investors seeking to hold physical gold. It is a very stable fund, with sizeable assets under management and a grantor trust structure. The gold bars are held in vaults around the world. investors should know that long-term gains have noteworthy tax liabilities, since IAU is considered a collectible. Where IAU shines for buy-and-hold retail investors is its low expense ratio and strong liquidity.

Also, you can buy Gold/Silver at the silver bullion center in Singapore (www.silverbullion.com.sg) where Gold/Silver are physically stored in safe vaults protected by the government.

A Stable market is denoted with an average gold to silver ratio of 55:1 (i.e. Price per ounce for Gold is 55X the silver price per ounce). Currently the ratio is 76:1. This suggests that Silver is currently inexpensive in comparison to gold and it may be wise to buy silver.

Best Regards,
Haitham

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