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Best Precious metal Investment
Before we focus on the best Precious metal Investment, let’s recap the reasons for investing in Silver, Gold, Platinum, and Palladium:
- Global economic reset
- Inflation rate higher than bond yields
- Inflation rising rapidly
- Speculate in Mining stocks
- Diversify Portfolio
- End-of-the-World-as-We-Know-It (EOTWAWKI)
Let’s consider each of these possibilities and how we can invest accordingly.
Global economic reset - Inflation hedge - EOTWAWKI
These challenges all have the same solution: physical Precious metal under your personal control.
The objective in these scenarios is to preserve wealth across the transition from the existing system into whatever comes next.
History shows us that Gold will always be recognized as a store of value and Silver coinage will always be accepted as a medium of exchange for day-to-day transactions.
Precious metals investing specifically for EOTWAWKI (end of the World as we know it) or Global economic reset assumes that Gold and Silver will continue these roles in the new system.
Whether it is EOTWAWKI or Economic Reset we are preparing for, we have to have our Precious metals Investment in place ahead of time because there won’t be any announcements made before these events occur.
If (when) these scenarios come to pass, you will either have physical Precious metals in your personal control or you will wish you did.
Now let’s make a list of the Precious metals and get a ballpark idea of their prices.
Precious metals list
There are four metals that are commonly considered “precious”:
There is actually a fifth Precious metal: Rhodium. This scarce metal is used primarily as a catalyst in automotive catalytic convertors along with Platinum and Palladium.
Here are the five Precious metals listed by price in US Dollars on 04/24/2021:
IRA approved Precious metals
The Taxpayer Relief Act of 1997 expanded the types of assets that could be held inside IRAs (Individual Retirement Accounts) to include Precious metals.
IRS-approved metals include Gold, Silver, Platinum, and Palladium.
In general, IRA-acceptable Precious metals fall into two categories:
- Bullion bars and Coins of a specified fineness
- Coins from national Government mints
Numismatic or collectible Coins are not allowed.
Best Metal To Invest In 2021
When we really focus on the best metal to invest in 2021 we can narrow our list to just Silver and Gold.
For Investment purposes we want to focus on the Precious metals with the widest demand from Investors.
These are the people who will buy our metals when it is time to sell and there are far more Investors aware of Gold and Silver than Platinum or Palladium.
Silver vs Gold Investment
The price of Silver tends to move in synch with Gold.
If Gold is making a bullish move higher Silver will follow (or lead at times).
When Gold corrects Silver will grow weak and, most likely, join the correction.
The ratio of the Silver to Gold price is known as the Silver Gold ratio.
As we can see in the Silver to Gold ratio chart above, the ratio shows us when Silver is cheap relative to Gold, and vice-versa.
The Silver to Gold ratio today is telling Precious metals Investors in the current secular bull Market trend to favor Silver over Gold.
Silver is historically inexpensive to Gold right now and extremes in the Financial markets are always corrected in time (Mean reversion).
The price of Silver is going to climb along with Gold and the current Silver Gold ratio is going to return to a more historic value.
The combination of these two factors will make the percentage gains in Silver far higher than the gains in Gold.
Best Metal to Invest in 2020
One of the techniques we can use as Investors is to search for the Investments that outperformed last year and assume that they may continue outperforming in the current year.
Today we could search for "best metal to invest in 2020" on the internet or open an online charting tool and look at price charts for Silver and Gold.
Compiling price data in a table let's us compare how the two Precious metals performed in 2020.
Jan 1, 2019 price
Jan 1, 2021 price
Gain in 2020
Obviously Silver beat Gold hands-down in 2020.
Best Precious metal to Invest in 2021
Besides the Silver Gold ratio, there are additional reasons to favor Silver over Gold when choosing the best Precious metal to invest in 2021.
Clean energy initiatives like the Green New Deal will increase the demand for Silver as the World attempts to reduce its carbon footprint.
These are the primary areas where Silver will play a critical role in the Green movement:
Is Platinum a good Investment 2020
To fully explore whether Platinum is a good Investment in 2020 or any other year, we have to consider the two main categories of demand for the Precious metal:
Platinum has industrial demand as a Commodity. Its primary usage is in the automotive industry as a catalyst for catalytic converters.
Platinum Bullion is in demand as an Investment vehicle. It is included on the list of metals approved for a Precious metals IRA.
Let's take a look at a price chart of Platinum and talk about how the metal is performing.
In the Platinum price chart above (04/24/2021) we can see that the white metal broke out from a multi-year downtrend in late-2020.
There are several bullish factors in the chart that suggest the price of Platinum is heading higher:
Based on this chart we can draw a few conclusions:
Because the price breakout occurred during global lockdowns it isn't reasonable to assume that higher prices were caused by industrial demand.
If anything, the current push for electric vehicles (EVs) and Green Energy are more likely to result in decreased industrial demand for the Precious metal.
If Commodity demand didn't cause the price of Platinum to increase, it must have been Investment demand.
Investment demand - Inflation hedge
We can look at the price charts of Gold and Silver and see that those Investment vehicles also began strong rallies in late-2020 so the action in Platinum was not isolated.
It would appear that Investor interest in the Precious metals increased significantly in the Fall of 2020.
Platinum was able to sustain its rally into 2021 and continue higher while Silver and Gold suffered a series of price slap-downs which are not uncommon in those Markets.
The price of Gold is important to central bankers around the world so they attempt to manage its price. All of their past attempts at doing so have failed (see London Gold Pool) so there is no reason to think they will be successful this time.
The price of Silver acts as a Bellwether to rising Inflation so its price is also managed.
It is possible that the price of Platinum was allowed to increase because this Precious metal is not politically sensitive for central bankers. Nor is it perceived as a red flag for rising inflation.
Investing in Platinum vs Gold
In our discussion so far we have established that there is definitely Investment demand for Platinum.
The fact that Platinum is one of the IRA-approved Precious metals clearly establishes its credentials as an Investment vehicle.
What we haven't considered is whether Platinum is a better Investment than Gold.
One of the ways we can look at that question is by considering the Gold vs Platinum price ratio.
Based on the Gold vs Platinum ratio chart above (monthly time frame) we can make these observations:
Given that price of Platinum has been catapulting higher for a full 12 months (as of 04/24/21), if the ratio turns higher from here it will likely be because Gold starts to play catch-up with Platinum.
In other words, the current extreme in the Gold vs Platinum chart suggests that Gold is a better Investment than Platinum right now.
Investing in Platinum vs Silver
There are several reasons why Silver is a better Investment than Gold currently which means that investing in Silver today makes more sense than either Gold or Platinum.
We can illustrate this point by adding Platinum to our table of 2020 Precious metals price performance.
Jan 1, 2020 price
Jan 1, 2021 price
Gain in 2020
Obviously Platinum underperformed the other metals by a large margin in 2020.
While there was clearly Investor demand for the Precious metal, demand for Gold and Silver was higher.
We will only know in hindsight but it is likely that Gold and Silver will continue to outperform Platinum going forward.
While the IRS gives Platinum credibility as an Investment vehicle, the white metal does not have 5,000 years of history as a currency and protector of wealth.
When Investors seek to hedge against Inflation and protect their wealth through the Global Reset they are going to think of Silver and Gold long before Platinum crosses their minds.
Another challenge Platinum faces in an End-of-the-World scenario is that it looks just like Silver.
The average human being couldn't differentiate between the two metals but Silver is $26 an ounce (4/24/2021) while Platinum is $1229 an ounce. Good luck convincing the local grocer that your white metal is Platinum and not Silver.
Best Precious metal stocks 2020
The stocks of Silver and Gold Mining companies typically magnify the price movements of the Precious metals by 2 to 3 times on both the upside and downside.
Traders like to Swing trade the Mining stock sector specifically because of this volatility.
Long-term Traders and Investors pick Mining stocks as a hedge against inflation and as a way to position for the Global Economic Reset which may be based on Precious metals.
Before we consider the best performing Precious metals stocks in 2020 let's sort the different types of Mining companies into buckets so we can compare them.
Precious metals Mining stocks
There are several categories of Mining stocks.
They are listed below from most conservative to most aggressive.
There are a handful of investment-grade precious metals Mining companies that regularly pay dividends.
The shares of these miners play double-duty in a Portfolio by providing the diversification / hedging role while also throwing off some income.
Royalty / Streaming Companies
Because traditional bankers charge exorbitant rates for mine development loans, royalty and streaming companies are able to play the banker or venture capitalist role in the Mining industry.
Mining companies trade a percentage of their future production (a royalty or stream) for cash that can be used to advance existing projects or acquire new ones.
In a Precious metals Bull Market the royalty / streaming Business model is very profitable because the cost of acquiring metal is fixed while its sales price continues to increase.
Producing miners have demonstrated that they can bring metal to market.
If we limit our Investments to these producing miners we significantly reduce our risk.
Emerging Mining companies will be recognized and rewarded by the market when they come online.
We can invest in these fledgling miners with the expectation that other Investors will buy the company once its new production becomes widely known.
Explorers / Developers
There are well over 2,000 companies in the Precious metals Mining sector.
Most of them can be classified as junior miners or exploration / development companies.
Only a few of these prospectors will ever discover an economically viable mineral deposit and turn it into a producing mine.
Most of these miners will burn through every penny of Investor capital they can get their hands on without ever producing a single ounce of Silver or Gold.
The share price of these companies tends to jump on positive press releases (typically drilling results) and then slowly dwindle back down as Investors lose interest.
Developing a mineral deposit into a producing mine takes multiple years so Investors move on to the next ‘big thing’.
In our Portfolio management we allocate some capital to a select few of these high-risk Precious metals stocks but keep the allocation small.
Best metal stocks to buy
The best Precious metals Mining stocks are the same for all Investors regardless of the county they live in.
What does make a difference is the stock exchanges that an Investor has access to.
For example, Americans have easy access to several major exchanges like the NASDAQ, NYSE, and S&P 500.
In an approved brokerage account they also have access to over-the-counter (OTC) listed securities or “penny stocks”.
Some brokerage accounts (for example, Interactive Brokers) provide American Investors access to the Canadian and Australian exchanges where most of the junior mining companies are listed.
Like Americans, investors in other countries will have easy access to their country's national exchanges but may have to jump through some hoops to gain access to foreign markets.
Market access is important because emerging miners are likely to be the outperformers in the current bull Market trend and those mining companies are primarily listed on the Canadian and Australian exchanges.
Without access to those markets US Investors are unable to invest in emerging miners unless they are comfortable with over-the-counter (OTC) listings.
Junior miners typically start with a listing on a Canadian or Australian exchange because the entry bar is low.
The US OTC markets also have low entry bars so most of the junior Mining companies acquire an OTC listing.
There is a higher risk of loss when Investing in OTC securities so we have to do our due diligence and select only the best junior Mining stocks.
In this short article we have talked about how to start investing in Precious metals.
Knowing how to invest in Precious metals can be intimidating at first but the knowledge is readily available for motivated do-it-yourselfers. There are also Investment advisers who specialize in the Precious metals if you prefer to have personal guidance for your Silver, Gold, and Platinum Investments.
The best Precious metal Investment will be different for each individual depending on their investing horizon and tolerance for risk.
If you have questions about structuring a Precious metals Portfolio, send an email to:
contact @ satoritraders.com.
Bryan V Post is a California-registered Investment Advisor Representative specializing in the Precious metals.
He is the founder and CEO of Satori Traders LLC, a California-registered Investment Advisor.
Bryan has worn numerous hats during his life:
Engineer, Portfolio manager, Precious metals Investor, Technical analyst, Proprietary trader, Swing trader.
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