Dear FutureMoneyTrends.com Member,
Lately with gold below $1,300 an ounce, we have received a lot of questions from members regarding the ownership of gold, silver, and the mining shares. I want to give you a few thoughts on the ownership of these assets in today’s digest, as well as my brutal thoughts on why I would never own a large cap miner, but love to own high quality juniors.
First off, everyone should hold at least 5-20% of their net worth in physical gold and silver, they are insurance for the worst case scenario. They are the only guarantee you have that no matter what happens, you will still have some wealth at the end of the day.
My top reason for gold ownership is insurance, 2nd to that is privacy. No one in the world knows how much you own, gold is a store of wealth outside of the banking system. I recommend physical ownership, 50% held in country and 50% held outside of your home country. Governments have a history of wealth confiscation and you should never hold all of your gold in one country.
Many of you probably can’t even stand the thought of not physically taking possession of all your gold, but you have to hedge against theft in your own country or your own house for that matter.
I personally buy physical silver almost every month, especially since April when silver fell below the cost of production for many of the major mining companies. Gold purchases are rare for me because I only purchase gold when it has a huge move down, which right now, I am a buyer below $1,300.
Owning gold is the prudent thing to do, especially in an environment of money printing and out of control deficit spending for the nation that is home to the world reserve fiat currency. In these times, you just have to own some gold.
Is it time to buy gold and silver? If you own none, YES! I would urgently buy the metals, you absolutely need the insurance. If you already own the precious metals, I think buying them now while they are selling for below the cost of production is an easy call.
Within 5 years I think silver is a 5 bagger from here and gold will probably more than double. The safe haven demand for these metals, combined with rising energy costs will ultimately drive prices much higher this decade.
I feel very comfortable giving a buy recommendation for silver up to $22 and for gold up to $1,300. It’s not to say they aren’t good buys above these prices, but below these prices I see an extreme value.
The mining shares have been in a severe bear market for the past 2 years and it looks like the good companies have bottomed.
I am open to only buying the junior shares, but I would be very strict in who you own. Demand evidence that they grew the company during the last 2 years, that people are of the highest quality, and that they have plenty of cash or a proven ability in raising capital without diluting shares.
Over the next 3 weeks we will be profiling two junior precious metals companies.
Company A is a gold exploration company that has been on a shopping spree; over the past year acquiring assets with already established gold resources.
Company B is a silver producer that has to have the most effective and efficient track record of any silver company publicly listed right now. From the formation of the company to silver production taking less than 2 years.
I only own the juniors because that is where the big returns are. Anyone who tells you to own the large mining companies like Barrick or Newmont for the long term is giving you really bad advice.
Look at the track records for these companies, most of the major mining shares are trading for less than they did in the 90’s when gold was closer to $300 an ounce.
You make money building mining companies, I do not recommend anyone buy a large cap miner. In my opinion, you are much better off owning companies like Becton Dickenson, Coca Cola, Exxon Mobile, Wells Fargo, and IBM when it comes to your long term holdings.
Remember, volatility does not equal risk… so yes, great companies can go down, but you won’t lose money owning the best companies in the world.
Have a prosperous week!
Share Disclosure: I am Long BDX, KO, XOM, and IBM.