Gold, silver and Bitcoin as insurance.

Long time readers of my blog might recall that I hold some gold and silver.

Some readers might find this surprising since value investors like Buffett and Munger do not believe in holding precious metals.

In case you are relatively new to my blog and want to find out more, please read the following blog:

Why investors for income buy gold and silver?

I don't want to rehash the old blog.

Too lazy. ;p

Anyway, it has been many years since I bought more gold and silver.

When I took a look recently, I found that, together, gold and silver formed only 2% of my portfolio.

This is lower than what I think I should have as insurance against fiat currencies.

I was watching some videos on the topic when I stumbled on a video by Robert Kiyosaki who has always said that keeping some gold and silver was sensible.

However, in that particular video, there was a twist because he was also talking about Bitcoin and why we should keep some.

That was very intriguing to me as I don't remember him talking about Bitcoin before. 

To be fair, I don't follow him and what I know about him is probably dated.

The last time I blogged about him was in 2013:

Rich Dad, Poor Dad!

Anyway, long time readers might remember what I thought of Bitcoin before.

If you don't remember or if you are new, read this blog:

My final word on Bitcoin and friends.

Like the Dollar, Bitcoin was a currency to me but unlike the Dollar, other than being a digital currency, Bitcoin was not a fiat currency.

Then, while looking for more information, I found a video by Kevin O'Leary who said that institutional investors are looking at Bitcoin not just as a currency but as a property to hold.

So, just like gold, many institutional investors are looking to hold some Bitcoin.

Why?

They believe that Bitcoin is digital gold and, just like gold, Bitcoin is supposed to be a good store of value.

Digital gold for a digital age.

The truth is Bitcoin has gained recognition and a higher level of acceptance. 

It has become increasingly mainstream.

The network effect is very strong here.

Source: Investopedia.

So, if we believe in having insurance against fiat currencies, we might want to hold some gold, silver and also Bitcoin.

I already have some gold and silver.

After watching those videos, I started thinking of getting some Bitcoin.

I admit that I am a dinosaur when it comes to tech stuff.

Don't even have Whatsapp.

I am very set in my ways and relatively comfortable with what I am doing and what I already have.

In a more recent blog on retirement drawdown strategy, I said that, in my retirement, I don't want to worry about outliving my savings.

So, my retirement funding strategy is such that I would probably never have to draw on my savings. 

In fact, my savings could even grow in my retirement.

See:
Retirement drawdown strategy.

However, never say never.

Murphy's Law.

Fiat currencies are very flawed, after all, and having a crisis mentality and getting some insurance is probably a good idea.

So, I believe we need some insurance for this which is why I hold some gold and silver.

Just like how I stepped out of my comfort zone this year when I got some exposure to Chinese tech stocks, I decided to step out of my comfort zone once more to get some Bitcoin.

Why not simply get more gold and silver?

I could do that but, like I said earlier, digital gold is for a digital age.

I don't know what the future will bring but I really like "Sword Art Online" and "Log Horizon."

Is the Metaverse all hype or would it become mainstream?

I don't know.

I made the decision to get some Bitcoin some time after I decided to get some exposure to Chinese tech and both decisions surprised me for a short while.

Why a short while?

Well, considering that the prices of Chinese tech stocks and Bitcoin had already plunged significantly, maybe, it wasn't so surprising that I got interested when I did.

Anyway, the plan was to have Bitcoin make up 2% to 3% of my portfolio.

Then, together, gold, silver and Bitcoin would form 4% to 5% of my portfolio.

Ray Dalio's perspective on having a small percentage of our portfolio in Bitcoin for the sake of diversification resonates with me:

Still, I have only bought a tiny bit of Bitcoin so far and it isn't even 0.5% of my portfolio yet.

Why did I not buy more?

To invest in Chinese tech was to invest in undervalued productive assets and I nibbled even though price was down trending.

It was just to get a foot in the door.

In comparison, I cannot tell if Bitcoin is undervalued nor is Bitcoin a productive asset.

Bitcoin is just like gold and silver.

Alamak! 

How like that?

All I have to depend on is technical analysis.

Very dangerous for me as I am probably somewhat rusty and could get tetanus from the exercise.

Anyway, I am in no hurry to have Bitcoin form 2% to 3% of my portfolio.

I will take my time.

Bitcoin's price is very volatile and big price swings are pretty normal.

Looking at the chart, I see what is possibly a bear flag, Bitcoin could go higher before plunging again in price.

So, after getting my smallest toe in the door earlier in the week, I will pace myself and accumulate whenever price swings lower.

I might get some Etherium too as that's the runner up to Bitcoin in terms of market cap so that I wouldn't be putting all the eggs in one basket.

However, Etherium is not exactly digital gold and, so, exposure to Etherium should be relatively small.

What about Litecoin?

Litecoin is digital silver like Bitcoin is digital gold.

However, buying Litecoin using Gemini, the crypto exchange I signed up with, requires me to use Bitcoin to do so.

So, to avoid paying more commission, I will mostly stick to Bitcoin.

OK, back to the present.

Drumroll, please.

I have done it!

I am a newly minted holder of Bitcoin.

2022 is turning out to be a year of surprises on a personal level.

 

Like I said, after my initial tiny purchase, the strategy is to accumulate mainly Bitcoin whenever its price weakens.

With this strategy, if Bitcoin weakens in price, I buy more and if Bitcoin appreciates in price, it means I wouldn't have to buy as much to have it hit 2% to 3% of my portfolio.

So, whichever direction Bitcoin goes, I am good with it.

OK, long time readers know I believe in keeping an emergency fund.

Emergency fund is in a chest labelled: "CODE BLUE!"

See:

How much should we have in our emergency fund?

All my gold, silver and Bitcoin will go into another chest.

This chest will be labelled: "CODE RED!"

Please note that I am not getting Bitcoin because of some get rich quick idea. 

We want to be careful as there are people who would pitch it that way.

Source: MAS.

Remember, nobody cares more about our money than we do!

Recently published:
Recession is coming and cash is trash.

Related posts:

1. Investing with some common sense.

2. Nobody cares more about our money than we do!

3. Largest investments updated (1Q 2022.)

Why investors for income buy gold and silver?

It has been a long time since I blogged about having some precious metals in our portfolio and some newer readers might not even know I blogged about gold and silver before.


What do gold and silver have to do with investing for income?

Sounds like a scam?






If you think like this, congratulations! 

You will never fall victim to Geneva Gold and their friends!


Gold and silver coins can be mesmerising. 

I know. 

They look so shiny and beautiful. 

They twinkle, reflecting light. 

They look almost like they are winking at you.

I have a friend who fell so much in love with the two silver coins I gave him as birthday presents that he went and bought many more in different designs. 

I gave him bullion coins but he went and bought proof coins with numismatic value (i.e. worthy of collection). 

Oh, dear.


Anyway, why do I have gold and silver in my investment portfolio? 

Are they investments?






Many people say that we should have some precious metals in our portfolios. 

The late Dennis Ng had 7% of his portfolio in gold and silver, if I remember correctly. 


Dennis was concerned with the excessive money printing in the world and this is also why Jim Rogers says we should have some gold.


Fiat currencies are flawed. 

Governments around the world can print as much of their own money as they like. 

The supply is, theoretically, limitless. 






This infinite supply of paper money is unlike gold and silver as their supply is finite. 

Technology has not found a way to synthesize gold or silver.

Basic economics tells us that, over time, excessive money printing leads to immense inflationary pressure.

So, if you think that I buy gold and silver as an insurance against fiat currencies, you are right.






Of course, if we are traders, we can trade some gold and silver for profit. 

However, if we are investors for income, then, buying gold and silver requires an understanding that although precious metals are not income generating assets, they are probably important enough assets to keep some.

I can hear some protesting.


Yes, gold and silver are not income generating assets and it will even probably cost us some money to hold them. 

OK, even if we do not keep our gold and silver in a safe storage facility, we would still incur opportunity cost as the money used to buy gold and silver could have been invested in income producing assets instead.


Ouch. 

Yes, I know the feeling.

Do you believe in insurance? 

In the purest (and correct) form, insurance is an expense. 

It is not free of cost. 

It is not an investment. 

It doesn't generate income.

The elderly understand and believe in gold as they see it as a store of value.

I remember when gold got cheaper in years past, my grandma would go to the goldsmith to buy more gold. 

Not the best way to buy gold as I would have bought gold bullion coins instead but why did she think the way she did and did the thing she did?

I like to think that I understand.







So, should you buy some gold and silver? 

I suppose it will depend on what you believe in.


Related posts:
1. Where to buy gold?
2. Silver bullion coins.
3. Silver savings account.

Why we should buy the biggest and most expensive home?

Bro, good, knock some sense into her head!






Whenever I tell people not to buy a home that stretches their finances to the max (and beyond), often, I would get the reply that if they don't buy a home that is as big as possible, that is as expensive as possible, they might not be able to afford something like it in future due to inflation.

I have blogged about how our homes are really consumption items and not investments although it is hard for many to accept that especially when they see real estate prices in Singapore sky rocketing in recent years.




Of course, in recent months, the mood has become a tad more cautious but many people still think of their homes as investments and assets which are a good hedge against inflation. 

A recent argument put forward by someone along this line provided the catalyst for this blog post.

That someone said recently that if I were willing to buy some physical gold and silver as a hedge against inflation, why not a bigger and more expensive home?

Well, I have to say that my motivation for having some gold and silver is, in fact, an insurance against the flaws of fiat currencies. 

Embedded in that motivation, therefore, is the belief that precious metals are a hedge against inflation. So, this person is right in this respect. 

However, his understanding is incomplete.

The vast majority of us have to use leverage in the purchase of a home. 

A home purchased with a loan is a liability for the next 20 years, 25 years, 30 years or whatever the duration of the loan should be.

Only a home that is fully paid with our own money is an asset. 

Before that, we might have control over the property and the ability to enjoy using it but we do not have ownership of the property.





Another point is that if we have developed a crisis mentality, we would know that having some precious metals as insurance also makes sense because they are portable. 

Our home, even a shoebox apartment like mine, is not portable. 

Well, there are exceptions, I suppose, and those who live in caravans and houseboats might be the really smart ones.





Finally, precious metals usually form less than 10% of our wealth, for those of us who have them. 

However, for most of us, our homes easily form 50% or more of our wealth. 

This is why people say that Singaporeans are asset rich but cash poor. 

That asset they are referring to is usually our home.

"Professor Benedict Koh, director of the Singapore Management University's Centre for Silver Security, says the asset-rich, cash-poor phenomenon is an outcome of over-investment in property. And the proportion of such seniors is only going to rise as the population ages, say Prof Koh and other observers.


"Ms Peh Kim Choo, director of Hua Mei Centre for Successful Ageing, is worried that the asset-rich, cash-poor problem will be exacerbated as baby-boomers retire over the next 20 years. This is the generation that entered the workforce after CPF and the message of home ownership were introduced, she says.


"As more of these folk retire, says Ms Peh, "that is where we will see a lot more of the asset-rich, cash-poor situation". It cuts across both public and private housing, she notes. Her centre has counselled such seniors living in larger HDB flats."

Source:
http://www.straitstimes.com/the-big-story/case-you-missed-it/story/asset-rich-cash-poor-retirees-speak-20131203

What makes thinking that we should get the biggest and most expensive homes we can afford now because real estate prices will always go up in the long term particularly risky is complacency, the lack of a contingency plan, the lack of a crisis mentality.

Of course, vested interests would want to propagate the belief that there is never a bad time to buy a home and we don't have to time the market.

Apart from questions we should be asking these vested interests, we should ask ourselves some questions.


What if we were to lose our jobs? 

What if we were unable to continue working for any reason? 

What if we had bought at the peak of the market? 

What if the property market should crash in the next few years?


Do we have the financial resources to cope in such instances and if we should have some financial resources, would these financial resources remain strong or weaken in tandem?





I have been through a few economic cycles. 

I have seen how bad the bust in an economic cycle could be and how they affected families and friends.

It could be that this time it is different as I certainly do not possess the ability to look into the future.

However, we might want to remind ourselves that although history does not repeat, it does rhyme.




Related posts:
1. Disastrous investments in the property market.
2. Singapore properties will surely make money.
3. Two questions to ask buying investment properties.
4. Buying a home within your means.
5. Buying a property: Affordability and value for money.

Silver Bullion Coins (Part 2).

I shared photos of some silver bullion coins more than a year ago in November 2012. Seriously, time flies. It doesn't feel like it has been so long.

Anyway, those were Canadian Maple Leaves.

Now, I am sharing photos of some other silver bullion coins that I have:

Part of my stash:

For my thoughts on why it is important to own some gold and silver bullion, click on the related post below and follow the links. I hope you will find it worth your while.

Related post:
Silver Bullion Coins.

How to be truly "rich" when the world collapses?

There is a very interesting article in the weekend edition of The Business Times. It is by Cai Haoxiang and he asks the question "What asset do you flee to when the world collapses?"

We have heard people saying that bonds are now a bad idea and that equities are preferred. So, many are invested and even fully invested in the stock market. No emergency fund? No war chest?

Singaporeans, of course, have a never ending love affair with real estate with many thinking that real estate prices on our tiny island will only see prices going higher. 

Someone told me that there is never a bad time to buy a property. Well, never say never. Those who bought a property here before the Asian Financial Crisis in the late 90s just broke even recently.

Then, there are the bears who believe that a correction is overdue and that the longer the bulls continue charging, the bigger the correction is going to be. 

There are people who do not believe in the rally. What are they doing? Staying 100% or close to 100% in cash and waiting to buy assets on the cheap.

However, in a situation where the world economy really collapses like in 1929, who wins?

"... how long can Singapore survive if there is a sustained global economic crisis? With zero natural resources and an economy heavily dependent on global trade flows, Singapore's economy is especially vulnerable when nobody wants to trade and people worry about clean water and edible plants, not chemicals and electronics.

"In rich, sophisticated Singapore populated with financiers, lawyers and plenty of middle managers, skills actually useful to survive an economic collapse might be startlingly in short supply...

"Build up a set of skills and contacts that people will want in good times and bad and you will never go hungry for as long as you live."

We could have tons of money, even gold and silver coins. Could they be worth more than food and clean water if these should suffer from scarcity? If Singapore's economy should go into a tailspin, would the FTs still want to come here? Who would rent all the spanking new condominiums which have been built? Could we see vacancy rate in the double digits?

"... gold can't be eaten... try convincing the chicken rice seller to take your Bitcoins as you fend off squatters from your multiple properties."

A sobering read with a dash of humour. Get a copy of this weekend's edition of The Business Times. The article is on page 5.

Disclosure:
AK71 is a shareholder of SPH. Every copy of The Business Times sold could contribute to AK71's financial well-being.

Related posts:
1. How to tell if you are rich?
2. Jim Rogers: Why I won't sell gold?
3. Never lose money in real estate?
4. Change to become richer.
5. The Millionaire Next Door.

Selling everything to buy more silver!

The latest issue of The EDGE provided me with much food for thought. However, the article on buying physical silver ended with a paragraph which if ingested might require us to take some digestive enzymes.

"There's going to be another big crash, we are really near it now," said Chin Kuan Yew, a businessman ... who sold all his properties, including his condominium, to buy more metal. "You have on the one hand the US printing money and the European Union is on the brink of collapse."

Although I advocate that all who can afford to do so should have 5% of their wealth in physical gold and silver as a form of insurance against the inherent flaws of fiat currencies, I feel that Mr. Chin is being somewhat extreme.

Selling his properties could be a good move because with the ongoing aggressive building, it is more likely than not that we would see a situation of oversupply in Singapore in the coming years which would mean lower rental rates and lower property prices.

Having most of his wealth in precious metals, however, smells of paranoia.

Related posts:
1. Gold and silver: Still important assets to own.
2. Never lose money in real estate and REITs?
3. Buy gold and silver as insurance.

Lightweight and good looking @ US$66.99 each:
Titanium 8mm Ring

Where to buy silver bullion coins?

I have been asked by many people where to buy silver bullion coins in Singapore. My standard reply has always been for them to perform a search online with the same words as the title of this blog post and they will have a list of companies which sell the coins here.

Recently, a reader asked me not where to buy the coins but whether it is cheaper to buy the coins online than buying the coins from a seller in Singapore. I thought I should share my reply to him here with anyone who might have a similar question.

Email from reader:

I'm your blog new follower about 1 month, thanks for sharing all the great info.
Regarding the canadian maple leaf silver, can I get it in Singapore for a cheaper price or I have to buy it online?

1.  (SG company)
2.  (Online overseas company)

Please advise me the above 2 sites or your own views to get a cheaper price.

My reply on 01 December 2012:

I buy from Singapore sellers because I do not buy in large enough quantity to make any cost savings from buying online significant.

For example, if we buy a tube of 25 1oz silver bullion coins from (SG company) today, price is S$1,187 or S$47.50 an oz.

Spot silver is at US$33 an oz or about S$41. (SG company) brings in the coins in bulk and by ocean freight. So, their cost of freight is quite low. If we were to buy only 25 coins from Canada, we would have to use DHL Express Worldwide or Federal Express which would be expensive and could easily cost S$80 to S$100 for a 1kg parcel.

Anyway, (SG company) probably makes some S$6.00 per coin or 15% gross profit. I feel that it is fair. The biggest advantage for buyers is being able to bring the coins home with us immediately after making payment.

Note: I have replaced the names of the two companies the reader mentioned in his email with generics so as not to appear partial to any party.

Related posts:
1. Silver bullion coins.
2. Buy gold and silver as insurance.

Buy gold and silver as insurance.

Anyone who is regularly reading news on personal finance would have come across articles on why gold and silver prices are set to rise even higher. Marc Faber and Jim Rogers, both people I respect, are just two prominent figures who have put forth compelling reasons to own some gold and silver.

Personally, when I started this blog, I also wrote about the real value of gold and why silver would be a better buy than gold after I researched the gold:silver ratio. I started a separate blog on the precious metals later on because I want to concentrate on blogging about investing for income here at ASSI.

We just have to do a quick check online to see how much the prices of gold and silver have appreciated since I started blogging three years ago to see how well anyone who invested in these metals have done in that time.

My current attitude towards buying physical gold and silver is like my attitude towards paying for insurance. To own physical gold and silver is an insurance against the inherent flaws of fiat currencies. Just like how we put aside a certain sum of money annually to pay for our insurance policies, I believe that setting aside 5% of my annual income for the purchase of gold and silver as insurance is not too much.

So, am I saying that I do not buy gold and silver now with the hope of making more money in S$ terms? Well, if we think of gold and silver as a form of money, then, buying gold and silver in the hope of making more money in our home currency is like forex trading. It would make more sense to trade in paper gold and silver then.

Buying physicals would be more suitable for anyone with a crisis mentality.

I am posting this article here in ASSI instead of my blog on the precious metals because the latter's readers are probably conversant with the reasons why we should be in precious metals. I want to reach out to readers here in ASSI who might not have any position in the precious metals yet.

Let me guess. Some of you are probably wondering if it is a good time to buy now. Well, if we believe in the thesis that the precious metals are set to rise much more in price over the next few years and if we are holding them as insurance instead of trading them for short term gain, the question becomes less important.

Technically, there is some near term weakness and if we want to wait to buy lower, a 5% correction in price could see buyers returning. Remember, however, that technical analysis is all about probability, never certainty. It never hurts to hedge.

Related posts:
1. Silver bullion coins.
2. Gold and silver: Important assets to own.
3. Gold or silver?
4. Silver: Some views.
5. Silver: Weekly chart.

Silver bullion coins.

Sharing photos of some silver bullion coins I own:

I still believe that people who have some extra cash should own some investment grade gold and silver as a hedge against the flaws of fiat currencies. Where silver is concerned, I think the Canadian Maple Leaf is one of the purest around. Relatively cheaper too.

Read my latest piece on the topic in my blog on precious metals:
Gold and silver: Still important assets to own.

Related post:
Buy gold and silver as insurance.

Silver: Price formed another lower high.

Staying cautious on silver has been the right thing to do. The declining 50dMA seems on track to forming a dead cross with the 100dMA in the near future with silver's price forming another lower high this week, closing the week at US$ 33.70 an ounce.

All eyes are on the 200dMA and whether silver's price could stay above this long term moving average. If the support holds up, we could see bulls coming back with a vengeance. If the support breaks, the bears could have a field day. The 200dMA is currently at US$ 31.71 an ounce.

A quick look at the weekly chart shows that the uptrend is still intact although the momentum has clearly weakened. RSI has gone under 50% which was acting as support. A lower low on the MACD is a forgone conclusion although it is currently still in positive territory.

I am maintaining the status quo. This is a time of waiting and could be a most unbearable period. A time to add to long positions would come and that is probably when the supports provided by the longer term MAs hold up. Till then, I just have to sit tight.

Related post:
Silver: Trying to find a base.

Tea with AK71: Taking taxis in Singapore.

I took a day's leave from work to run some errands. I sent my car for regular maintenance, went to the bank to sell some silver, did some laundry and, of course, blogging. See: Silver: Divestment for an 86% gain.

I would take the MRT usually if I were to be without a car. However, in some instances like from the car workshop, it is really far to walk to the nearest MRT station. I estimate it would be a 20 or 25 minutes walk and under a hot sun if I were to do it just now. Really didn't feel like perspiring too much. So, I flagged down a taxi.

It was my first time in a red color taxi. I think the company was TransCab. It was also my first time in a Toyota Wish. Not bad. Very spacious and it was a comfortable ride. The taxi driver was polite and asked me which route I would like to take to town too.

These days, if I do take a taxi, I make it a point to avoid those older Toyota Crowns. For some reason, they make me feel like throwing up. They handle corners like a ship in stormy seas and, for some reason, I could smell exhaust in the cabin.

Hyundai Azera

The Hyundai Sonatas are really comfortable and I got an Azera when I came back from my recent vacation. My first time in one and it was very comfortable, more so than the Sonata. Of course, the best are still the Mercedes Benzes and London Cabs.

I enjoy my occasional taxi rides because I could look out the side windows and enjoy looking at Singapore, the people and places. When driving, I have to keep my eyes on the road. So, sitting in the back of a taxi is a real treat for me. A simple pleasure.

A new blog on gold and silver.

I have started a new blog, "Investments: Gold and Silver."  All my future posts on precious metals would be in this new blog instead of ASSI.

Strictly speaking, the mission of ASSI is to talk about investing in the stock market and more specifically, investing to secure a reliable stream of passive income from the stock market. However, I have so many ideas in my head that I use ASSI to blog about all of them.

Investing in precious metals does not generate any cashflow at all. So, hiving off the section on precious metals would help to give ASSI a bit more focus.  If the new blog on precious metals works out nicely, I could hive off other sections of ASSI.  It's a bit like asking banks in Singapore to divest their non-banking assets not so long ago. There I go day dreaming again. ;)

I would like to hear what readers think about this idea. I am still a new hand at blogging and would need to learn through trial and error. Your feedback is invaluable. Thanks in advance.

Gold and silver: New highs.

"Gold, up 2pc this year, is heading for its 10th consecutive annual gain, the longest winning streak since at least 1920. On Tuesday, bullion for immediate delivery added as much as $13, trading at $1,326.97 an ounce in early London trading....

"Also on Tuesday, silver advanced to a 30-year high, increasing 1.3pc to $22.2319 an ounce – the highest level since September 1980. "

Read complete article here.

Related post:
Gold can double from here over the next 5 years.
Buy more silver on weakness.

Gold can double from here over the next 5 years.

"Despite all the hype about its multi-year rally, gold is actually lagging many other commodities in that it hasn't yet eclipsed its 1980 high on an inflation-adjusted basis, Holmes says, noting the same is true of silver."


Posted Sep 28, 2010 12:00pm EDT by Aaron Task

Gold hits another record high of US$1,308.00, the eighth time it has hit a new high in the last two weeks!  Read article here.

Related posts:
Buy more silver on weakness. 
Real value of gold.

Buy more silver on weakness.

On 7 February 10, I mentioned that "Silver is a real asset, with real value, just like gold, as its supply is finite.  Fiat currencies, on the other hand, do not have any intrinsic value and more could be produced at will.  So, we expect silver to at least keep pace with inflation and in an inflationary environment, an investment in silver should protect our wealth from being eroded."

In that blog post, I mentioned that my research showed that silver was very undervalued and was trading at the higher end of the Gold:Silver ratio since 1980.

At that time, silver was US$15.15/oz while gold was US$ 1,052.20/oz.  It was just reported by Bloomberg today that "Gold for December delivery was 0.2 percent higher after reaching US$1,299.70 an ounce on the Comex in New York. Silver for immediate delivery in London climbed as much as 1.2 percent to US$21.3875 an ounce, the highest price since October 1980." Read article here.

Silver has gone from US$15.15 to US$21.38 an oz.  This is a gain of 41% in slightly more than 7 months.  Gold has gone from US$1,052.20 to US$1,299.70 an ounce.  This is a gain of 23.5% in the same period.  An investment in either one of these precious metals would have been very rewarding but silver has obviously outperformed gold by a large margin.

I am glad I bought some silver and I would like to buy more silver on weakness when the opportunity presents itself as I continue to believe that having some investment in precious metals is an essential part of anyone's portfolio. Silver is a laggard in the realm of precious metals and it is just catching up.

Do I have a target price for silver? Silver reached its peak in value on 15 January 1980 when 1 oz of gold could purchase only 14.9 oz of silver.  Based on today's price of gold at US$1,299.70 an ounce, it would mean US$87.22 an ounce for silver!  Mind boggling, isn't it? That would be 4 times higher than the current price!  Of course, I am not suggesting that silver would hit that price anytime soon, if it does go that high at all. I am merely putting things in perspective. Remember where the price was in February? Good luck.

A new record! Gold prices struck a record $1,300.07 an ounce in afternoon trade on the London Bullion Market as investors sought a safe haven for their money amid increased uncertainty over the global economic outlook. Silver, meanwhile, jumped to $21.44 an ounce . Published: 5:44PM BST 24 Sep 2010 - Read article here.

Related posts:
Gold or silver?
Gold nearing US$1,300 an ounce.

Gold nearing US$1,300 an ounce.

Gold is currently at US$1,293.50 an ounce and silver is at US$21.05 an ounce, even higher than just a week ago when I said "I see immediate support for gold at US$1,260.00 an ounce and immediate support for silver at US$20.20 an ounce.  Gold is now challenging resistance at US$1,270.00 and if it does break this, it could go much higher."

The Fed seems ready to increase liquidity in the US economy and this could possibly cause the US$ to depreciate further. What this might translate into is greater inflationary pressure in the USA in time and I have been a staunch believer of this eventuality as informed by Dr Marc Faber and Mr. Jim Rogers.

The worst thing to invest in would be the US government bonds (treasuries) as bondholders would basically be seeing their wealth eroding away as the US$ depreciates in value.  This is precisely why the Chinese government is so concerned since they are the world's largest holder of US$ debt, after Japan. However, in the short term, they could see bond prices bumping upwards because the Fed would buy bonds to keep interest rates low in an effort to encourage borrowing by the private sector.

Could gold go much higher?  It is my believe that it would but it would not be a straight line up.  The real value of gold is closer to US$2,000 an ounce and this would take time to materialise. So, for anyone who is thinking of having some exposure to the precious metal, it is my opinion that buying on pullbacks as supports are retested would be the way to go.

Related posts:
Gold and Silver highest in the last 12 months.
Real value of gold.

Gold and Silver highest in the last 12 months.

Gold is currently at US$1,267.51 an ounce while silver is currently at US$20.42 an ounce. These prices are higher than in June 2010 when I blogged (again) about how we should hold some gold and silver as a hedge against all other forms of investments and against fiat currencies. What little exposure I have to these two precious metals is turning out rather nicely.

In the short run, I see immediate support for gold at US$1,260.00 an ounce and immediate support for silver at US$20.20 an ounce.  Gold is now challenging resistance at US$1,270.00 and if it does break this, it could go much higher.

On 20 June 2010, I blogged that "if we believe in charting, silver's longer term trend is still up and I would buy more on weakness." That view has not changed.

Related post:
Hedging and precious metals.

Gold hit $1,269.45 on the London Bullion Market on Tuesday afternoon, beating the previous record of $1,265.30 struck on June 21. Read article here.

Addition on 15 Sep 10:
Gold prices under the continuous contract set a new all-time high of $1274.60 per ounce, well above the previous all time high of $1266.50 per ounce. Silver prices continued their ascent as well. Specifically, the December contract for the precious metal hit $20.55 per ounce.

Some views from Marc and Jim.

Marc Faber thinks that the Fed would embark on more quantitative easing (aka print more money) in September or October:



Jim Rogers says to buy silver as it is 70% below its all time high:



Jim Rogers also mentioned that sugar is a good investment because a lot of it is being used in the production of alternative fuel.  Now, with the US limiting offshore drilling for crude oil, shortages might develop and that could mean higher crude oil prices in future.  I would keep an eye on CPO price which has been recovering strongly lately.  That affects CPO counters like Golden Agriculture.

Related posts:
Gold or silver?
Why Golden Agriculture?

Hedging and precious metals.

I have always liked hedging. Why? Because there are very few absolutes in this world. Anything is possible and we can only work on probabilities.  So, plans which do not take into consideration how things might go awry are not sound ones. Even with hedging and contingency plans in place, we might still end up with the shorter end of the stick sometimes. Well, the Chinese has a saying: "Humans plan but the Heavens fulfill."  Sometimes, things do go wrong.  Do what we can to reduce risks but we cannot eliminate risks.

My greatest losses in investments usually resulted from not taking enough precautionary measures to reduce risks. Sometimes, I just threw caution to the wind and went with my heart and, in most such instances, ended up with a broken heart and a thinner wallet. Actually, the pain from such experiences is good in a perverse way because I would then go back to basics and become very cautious again. This is what being human is about, perhaps.

Gold has hit a new record high of US$ 1,258 an ounce.  I have talked about buying physical gold as a hedge against all other forms of investments and against fiat currencies for some time now.  However, with gold's price rising higher and higher, silver is looking more and more attractive.

On 7 February, I blogged about how silver offered more value than gold. I said "Silver is currently trading at the higher end of the Gold:Silver ratio since 1980. Silver is now US$15.15/oz while gold is US$ 1,052.20/oz. This gives us a ratio of 69.45 to 1. This is closer to the historical high of 99.8 to 1. So, there seems to be some truth in the claim that silver is undervalued now and that it is a laggard in the realm of precious metals or it could also mean that gold is simply too expensive. Some hedging might not be a bad idea."

At that time, a reader mentioned that it might be better to wait for US$12 to US$13 an ounce before accumulating silver and my reply was "Yes, I saw the head and shoulders pattern and the neckline broken. There is support at US$15. This, however, was violated recently as price dipped below US$15 for a while but recovered. I see support at US$14 as well. US$12-13? Possible, of course.

 "But with limited downside compared to the potential upside, I prefer to average in slowly. After all, TA shows where the supports are but it does not mean that the supports will be hit. I will buy some at current price level and if it weakens, I will accumulate. I believe in hedging."
 
Anyone who went ahead and started a Silver Savings Account with UOB back in February then would be in the money today. 

Now, with gold at US$ 1,258 an ounce and silver at US$ 19.17 an ounce, one ounce of gold would buy you 65.62 ounces of silver.  Compared to 7 February when one ounce of gold could have bought you 69.45 ounces of silver, the rate at which the price of silver is rising since then is faster than gold's.  If we believe in charting, silver's longer term trend is still up and I would buy more on weakness.

Related post:
Gold at US$1,210 an ounce.

Gold or silver?

I have blogged about gold and how it might be a good idea to buy some to protect our wealth against a backdrop of higher inflation.  For almost a year now, I have been hearing from various quarters that silver is undervalued and from a value perspective, it is a better buy than gold.  Certainly, Marc Faber and Jim Rogers, two of the greatest financial brains of our time seem to think so.  This is not a new idea but it is to me since I have not seriously looked into this before.

Silver is a real asset, with real value, just like gold, as its supply is finite.  Fiat currencies, on the other hand, do not have any intrinsic value and more could be produced at will.  So, we expect silver to at least keep pace with inflation and in an inflationary environment, an investment in silver should protect our wealth from being eroded.

So, I decided that I should do some research on the subject even though I am quite comfortable with my current choices in investments.  If I decide not to buy any silver in the end, I would have gained some useful knowledge anyway, I rationalised.  I found much information and I am now posting what I feel are some interesting findings.

From MoneyWeek, 24 April 09:

Indeed, well over half of the annual silver supply is now used by industry (in sectors ranging from medicine to aerospace), compared to around 11% for gold. In precious metal upswings, it tends to outperform gold: the "same drivers as gold driving a smaller market ensures that", says Franklin Sanders of The Money Changer.......

.....Once sentiment turns, however, silver can tumble rapidly...

From Mineweb, 5 Nov 09:

The longer term trend channel for silver began on March 21st, 2003 at a low of $4.35 and has upper resistance of $51 and lower support at $12. Such volatility has always been very high because, with the silver market only about 2% that of gold, even a small amount of money flowing into silver has a huge impact.


The medium term trend channel began with a lengthy March through August 2007 consolidation base of $13 - $14 and currently has upper resistance at $32 and lower support at $13.


The Gold:Silver ratio has ranged from 14.9-to-1 in January 15, 1980 at the time of the record high gold and silver prices to 99.8-to-1 on February 22, 1991 when the price of silver was particularly depressed.


The current short term trend channel began in November 2008 at $8.79 and currently has upper resistance at $22 and lower support at $15.50.

Silver is currently trading at the higher end of the Gold:Silver ratio since 1980.  Silver is now US$15.15/oz while gold is US$ 1,052.20/oz.  This gives us a ratio of 69.45 to 1.  This is closer to the historical high of 99.8 to 1.
So, there seems to be some truth in the claim that silver is undervalued now and that it is a laggard in the realm of precious metals or it could also mean that gold is simply too expensive.  Some hedging might not be a bad idea.

There is a very easy way to gain exposure to silver in Singapore through a Silver Savings Account with UOB.  I might just start an account.  Just like gold, I will probably be buying silver with an aim to protect my wealth with the increased likelihood of higher inflation in the coming years.  It will not be for trading.

Related posts:
Gold as an insurance against inflation.
101 investment choices.