Gold and silver have long been acknowledged as precious metals and were highly prized by prehistoric societies. In today's market, precious metals still have a place in the portfolio of an astute investor. A closer look at the three most liquid precious metals, silver, platinum, and gold, is highly illuminating as we investigate why precious metals continue to be an exceptionally undervalued asset class and appealing investment prospect.
Gold:
Gold
has increased in price 8 times out of the last ten years. This includes the
period from 2011 until the end of 2015's gold bear market. Over the past ten
years, gold bars investors have
traditionally seen the following returns during this specific, brief, and
cyclical time:
- Medium
returns of +6.85%;
- Average
returns of +5.21%
- The
highest recovery of +19.7% in 2011
You
can view price manipulation and short-term sell-offs only as "noise."
Still, they also present enormous chances for metal investors to stock up on
precious metals and diversify their portfolios at these steep discounts.
Silver
As
per research, silver is the only commodity whose price is significantly below
its 1980 highs and 50% below its 2011 peak. Given the rampant inflation, the
extreme levels of global money printing, and the zero percent interest rate
policies that have been in place for more than ten years. It is astounding that
the price of a "real commodity" is trading at only half the level 41
years ago. This offers a fascinating investing opportunity.
On
top of being the most reflective metal on the planet, silver is one of the most
unique metals on the periodic table.
Silver's
unique and well-established anti-microbial properties have been shown to
eradicate bacteria, fungi, and certain viruses successfully. The silver ions
with a positive charge (Ag+) are responsible for this antibacterial activity.
Again, these properties are unique to no other metal on the planet.
Silver
is the element that conducts electricity the best, followed by Copper and Gold.
Silver is famous as the best conductor because its electrons are more mobile
than other elements, making it more ideal than any other element for the
conductivity of electricity and heat.
These
utterly distinct characteristics are crucial when taking into account the
industrial demand for silver, which is soaring like a hockey stick even as
numbers for global industrial mining production have decreased year since 2016.
We only extract 7.7 ounces of silver from the earth for every ounce of gold
mined, making the gold-silver ratio for mine production 7.7 to 1.
Platinum (Pt)
We
are aware that the narrative of platinum is particularly intriguing because two
failed states—South Africa and Zimbabwe—produce 80% of the world's platinum.
The collapse of Eskom, the country's electricity network, as well as growing
civil unrest and escalating rioting, has received extensive media coverage. It
led to the deployment of 25,000 military personnel to help quell the unrest,
which has all had a significant negative impact on South Africa's economy,
which is now falling to new lows.
The
global industrial complexes sharply rising demand for platinum contrasts with
this immediate and long-term threat to the metal's supply.
In
addition to trading at a price that is a complete 50% below its 2008 top,
platinum's supply-demand situation has deteriorated globally. From now on, it
anticipates that this gap will increase every year.
In
2016, when rhodium was selling at US$ 750/oz, our research and models last
found anything this fantastic in a supply-demand exchange. With rising demand
and declining output, a scenario similar to those currently associated with the
apparent and expanding shortfalls in platinum is unfolding. With the price of
rhodium climbing to US$ 30,000/oz earlier this year, many of our clients
greatly benefited from this trade (+4,000%!). Although we should not anticipate
such spectacular returns from platinum, the potential is enormous.
How to buy precious metals?
Let's
examine the choices offered to individuals who want to invest in precious
metals.
·
Exchange-traded funds (ETFs) for commodities:
Exchange-traded
funds make buying and selling gold, silver, palladium, or Platinum simple and
liquid. You don't have a claim on the metal in the fund if you invest in ETFs
because you don't have access to the physical commodity. 5 gram gold bars
or silver coins will not be delivered to you in tangible form.
·
Common Stocks and Mutual Funds:
Shares
of precious metals miners are correlated with changes in the price of the
precious metals through common stocks and mutual funds. If you need to
understand how mining stocks are valued, staying with funds run by managers
with a track record of reliable performance might be a good idea.
·
Futures and Options:
The
futures and options markets provide liquidity and leverage for investors
looking to place significant wagers on metals. Derivative goods offer the most
critical potential for gains and losses.
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