The last few weeks have been not been nice to investors of any kind. Stocks in particular have been hit extremely hard and during the sell off it seemed that anything with a bid would be sold including the metals. For a while it seemed that gold’s safe haven status was gone. However in the last few days gold has been gaining back all that it lost especially in currencies other than the US dollar. In fact for most of the global currencies, gold is now at all time historic highs.
This sell off in metals dropped the gold price around $200 an ounce and pushed silver prices down to 11 year lows. Only problem is, these prices were all in the paper market futures market where little if any physical metal trades hands. However, there were refiners eager to take delivery at these low prices and it took hardly any time at all to see the physical inventory dissappear almost over night. All a person needs to do is go to websites like Kitco.com and go to their bullion store to see “OUT OF STOCK” notices on most of the gold and silver bullion products like you see in the image below. When you do find physical metal for sale you will find gold priced about $200 over spot and silver about $6 over spot. This shows the fallacy in the metals markets pricing and one of the reasons gold bugs have been telling people to invest in physical metal only. There’s an old saying that says, “If you can’t hold it, you don’t own it.” Now those who wish to buy physical metal are finding that there could be wait times of up to several weeks for delivery.
Owning physical gold is one of the best way to preserve wealth. The reason I like gold and silver for that matter is that both of these metals have been used as money for thousands of years. It’s really only been in the last 40 odd years that money has not been backed by gold and that is one of the reason why the world is in the condition it is in. Too much cheap free money in the wrong hands wrecking everything for the rest of us. Should currencies return to any kind of gold standard you can bet the price will not be where it is today. It will be a lot higher in my opinion.
If this virus continues and markets stay shakey, shares in good gold companies should do well also as we saw in the last few days. After being sold off like everything else a lot of the major gold stocks will continue back up and will without a doubt be making new highs. I see Barrick is paying a dividend now although quite meager, it is one of the few gold companies that are paying something to shareholders. As gold prices rise and production cost come down, especially fuel costs, these companies should be able to raise their dividends even more for shareholders. There are also gold royalty companies out there whose stock will also be just like gold and these are avenues that could be explored for wealth preservation also.
Another way for people to own physical gold is of course by owning a mining claim. Mining claims are relativily cheap compared to what you can potentially get out of the ground. I have see claims that sold for anywhere between $5,000 and $20,000 that have produced a substanial amount of gold for the owner and in short order and now with this virus causing work stoppages and job loses, owning a mining claim starts to make sense more all the time. During the 1930’s despression a lot of people who had lost their jobs ended up mining the creeks for whatever gold they could find. For many it was the only way to provide for their families. Today is no different except people in general might be more hesitant to the working conditions and radical change of livelyhood. Of course mining in itself can be a very costly venture and does come with substantial risk but as the price of gold rises the risk becomes more acceptable.
Now I know there are lots of people out there who will not buy any gold do to the fact that it doesn’t give them any return on investment and they are partially correct. Yes gold does not pay out a monthly or quarterly dividend, but it does over the long term hold it’s value and keeps up well even with inflation. When you consider now that the bank rates are almost zero per cent and your famous GIC or savings rates are going to be virtually zero from now on, gold does pay out very well in the end as you can see by the chart below. In fact in most currencies world wide that return has been 10% annum for the past 15 years.
Owning any kind of metal is a wise decision. It never really looses it’s value. It’s easy to store and in small denominations it’s easy to purchase goods or convert in any currency world wide. Even in these time you can get started investing in metals. You don’t need to buy an ounce of gold. You can buy a gram. Same goes for silver, Just buy half an ounce if one ounce is too much. Buy a bit monthly and over time it will add up. Keep it physical and you will have something of great value in a time of need.
Remember, gold and silver but especially gold, always shines when times get tough. It’s the safe haven the world runs to when the “shit hits the fan.” Always has been and probably always will be.
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