Investors ask all the time, ‘Is it still important to invest a significant portion of my portfolio and savings in precious metals’?


My answer for the duration of the last twenty year bull market is still unchanged… Absolutely.  Precious metals investments are not like other investments.  It has a different purpose, a different trajectory, a different mindset.


Certainly, precious metals experience occasional price corrections, if fact we’re just emerging from a two year correction as I write this.  But precious metals are for the long haul.  They are your long term safety net . . .your economic uncertainty security system.


Precious metals carry several advantages over traditional market investments, making them an important sector of your overall portfolio.  What’s more, right now, global forces are converging to make this one of the most lucrative bull markets in the history of the yellow metal.  My confidence in recommending gold and precious metals to my valuable clients is stronger than ever.  Here’s why:


12 Reasons to Remain Bullish on Precious Metals


1. The U.S. Dollar is a Fiat Currency – Remember that our American currency is backed by no tangible asset. As long as someone else will accept your paper money in exchange for goods and services, it has value.  When that stops, it is worthless.  Think it can’t happen in the United States?  Never forget that no fiat currency has ever survived in the history of the world.


2. U.S. Debt is Increasing – There are no legal, or even moral constraints on the deficit spending rampant by our government. The United States is over $17 Trillion in debt, with over $1 Trillion being added every year.  Let us be clear: This debt will never be repaid.  The debt will continue to escalate until the international community refuses to accept our IOUs any further.  Once that happens, see #1 above.


3. The World’s Currencies are Currently Engaged in Competitive Devaluations – Every industrialized nation is looking for a competitive edge in the international marketplace. An advantage is reached when a nation allows its currency to devalue to a point where their exports become “cheaper” compared to their competition.  However, to obtain true value, compare any nation’s currency to gold over the past decade, they have all dropped like a rock.


4. Worldwide Inflation – The monetary aggregates of the industrialized nations (their cash and cash equivalents) have exploded over the past twenty years. This is the definition of inflation.  The money supply of the world is nearly 20 times what it was in 1986.  This is unprecedented worldwide.


5. Our Debt Now Exceeds Our GDP for the First Time – No country has ever returned from crossing this line of demarcation. A company in the same boat would be declared insolvent.


6. Interest Rates are Creeping Up – The U.S. has only been able to meet its debt obligations because of steadily declining interest rates. Higher rates now mean higher interest payments on our expanding debt.  The rate of increase in our overall debt will now mushroom as our overall interest rates explode.  It is a cycle which cannot be maintained.


7. The Stock Market is Weakening – The stock market has enjoyed the excess infusion of debt by the Fed each month as it scrambles to keep the economy on an even keel. Now as the Fed attempts to scale back, the market cannot sustain its gains.  This house of cards is wavering under the weight of propped up values and liquidity.


8. Large International Banks are Wavering – Signs of trouble are emerging in the operations of banks around the globe. The HSBC Bank of England recently restricted the amount of cash depositors are allowed to withdraw.  ICA clients report similar difficulties in withdrawing funds from overseas accounts.


9. The Implied Value of Gold – Utilizing a formula developed over four decades ago by a leading gold trader, gold is currently severely undervalued. Market indicators signal that gold should be trading at an exponentially higher value for the spot price than is currently shown.


10. Limited Downside Risk – The soundest investments are those with limited downside risk, coupled with significant upside potential. Fifteen years ago, McAlvany’s ICA sensed this emerging scenario in the precious metals markets, and strongly advised his clients to take bold positions in gold.  At the time, gold was selling at just $400.  Those investors who followed McAlvany’s very sage advice were handsomely rewarded.

Today, a second golden opportunity has emerged.  European banks are selling off considerable gold holdings due to outside influences.  We believe this is an excellent opportunity to begin or increase investors’ holdings in gold.  A $5000 price projection is not unreasonable given the fundamentals and market forces surrounding gold investment at this time.


11. Gold is Rare! – This fundamental principle cannot be overlooked when it comes to gold and other precious metals. All the gold mined since the dawn of time would fit into two Olympic swimming pools.  The market secret is there is less than 1% of actual gold compared to the number of paper ounces of gold traded.  The Canadian Broadcasting Company has produced a video, “The Secret World of Gold” revealing this alarming practice.  The reality is that the paper market for gold far surpasses the physical market for gold.  When the day of reckoning occurs, investors who hold physical gold in the form of coins or bars will be holding an investment that is exceeding rare and valuable on the world market.


12. The Current Bull Market in Gold – A secular bull market in gold historically lasts 18-21 years and goes through 3 distinct phases. Phase 1 starts with a quiet, yet steady accumulation of gold.  Phase 2 starts when more aggressive accumulation begins to take place.  Finally, Phase 3 begins when fear enters the market and the price begins to skyrocket.  The precious metals experts at ICA believe that we are coming up to the end of Phase 1 of the current bull market.  This is an exciting entry point into a market poised for expansion.  The largest gains are still ahead in this robust market.

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