You’ve probably heard the adage, “If you can’t beat ‘em, join ‘em”. Apparently, so has Warren Buffett. As the chart below illustrates, Gold bullion has outperformed Berkshire Hathaway so far this century. After decades of deriding Gold as an investment category, Warren has decided to add exposure to the precious metals in the portfolio he founded. It was reported this month that he recently purchased $565,000,000 worth of gold mining shares in June. One of the main reasons Gold is catching the eye of major investors is the “Golden Cross”, which occurred in 2019 and continues today. As the 2-minute video explains, Gold is in the early stages of a bull market, and wise investors are increasingly getting on board.
Several Billionaires Jumping Into Gold
Besides Warren Buffett, there are other famous billionaire hedge fund managers that have become vocal advocates for Gold ownership within the last couple of years. Sam Zell, Stanley Druckenmiller, Paul Tudor Jones, and Ray Dalio are among a growing list of Wall Street advocates for Gold. As we pointed out during our last visit to the floor of the New York Stock Exchange, Gold offers an attractive alternative to the risks and excesses of Wall Street. A growing number of investment professionals are beginning to agree. For those of us who arrived early at this party, this is welcomed news. For those still on the fence, this party is just getting started; come on in.
As the chart below indicates, even in a rising bull market there are days and weeks when the price of Gold and Silver declines temporarily. The same can be said of a bull market for any asset class. The point to remember is that those days and times offer an even better opportunity to add to your positions, in an asset class that is growing in price and popularity among Americans. Those concerned about the volatility of Gold prices must remember the volatility of the world we live in. When viewed against the backdrop of uncertainty that colors many aspects of life in 2020, Gold provides relative stability. The traditional “60/40” portfolio of stocks and bonds is not expected to provide the same stability or performance as in years’ past, which is why asset managers are turning to Gold.
Real Diversification Includes Gold and Silver
If we look at the amount of precious metals owned as an asset class in the typical investment portfolio today, it equates to approximately 0.50% for Gold, and 0.02% for Silver. Compared to the quantity of financial assets that can be created with either the stroke of a pen or a few clicks on a computer keyboard, precious metals are a true alternative proven over time and worth considering now. Some of the aforementioned billionaire hedge fund managers openly advocate for a 5-10% allocation to precious metals. Imagine what could happen, when money managers begin moving in that direction. As Warren Buffett recently confirmed, this process has already begun. What was previously unavailable to them due to peer pressure (money managers steered clear of precious metals), is becoming the next investment they cannot afford to be without. It is difficult to attain top performance numbers, without having exposure to top performing assets.
The world we live in today and for the foreseeable future, is better when we own Gold and Silver. In 1960, Gold represented 5% of investment assets owned. Historically, precious metals have averaged between 1% to 2.5% of investment assets owned. Even if we choose the lower range of 1%, it would require money managers and pension funds to devote $1,500,000,000,000 ($1.5 Trillion) more to precious metals than they did last year. In other words, $1.5 Trillion (at today’s prices) would only get the Gold ownership rate up to 1%. Typically, large investment and pension managers consider a 2% position to be meaningful. There is a long way to go here, with much wind at the backs of those who own and purchase precious metals.
$3,000 Gold Up Ahead
We were talking to you about $3,000 Gold before it became popular for companies like Citibank, Bank of America, or Goldman Sachs to do so. Some of their top analysts have begun to talk about $3-4,000 Gold in their projections discussed this year. It has become more common knowledge today, to speak in these terms. But as we discussed then, this has as much to do with what is happening to our currency than it does with what is happening with Gold itself. $Dollars are being created in ever-increasing numbers, along with the national debt. Then there’s the issue of national debt that can be tracked and traced (now $26 Trillion), versus an equally staggering amount that cannot be accounted for. This further decreases confidence in our currency, and has boosted demand for Gold worldwide.
What does all this mean? It means that in addition to investing in Gold or Silver because the fundamentals suggest to, we now have the added reality of investing professionals and the American public waking up to this fact. With supplies already tight (evidenced by premiums over spot received even when you sell), the additional demand coming into the Gold and Silver space is forming a new momentum that did not exist 2 years ago. When a wave is forming, there are opportunities to get positioned out in front. Whether we look at investing fundamentals, tightness of supply, a dovish Federal Reserve, or this latest boost to Gold demand with no corresponding increase of new supply, Gold and Silver are headed higher.
Precious Metals - A Proven Solution
Down days are a given, and one day soon will be seen as a gift. We recommend continuing to build your positions in Gold and Silver, and allowing the big fish entering this market to help propel your holdings (and your family’s financial future) into a purchasing power nirvana of the future. Wage increases are not always easy to come by. But you can maintain or improve quality of life in the future, when your savings are able to keep up with or surpass the rate of inflation. Consistently building a position in Gold and Silver has historically allowed people like you and I to do just that.