Here's what Professional Investors do in 2019
Smart Investors live by these three rules:
Investor Rule #1: No market keeps on rising forever, investing in undervalued assets is key
Investor Rule #2: Diversification is key
Investor Rule #3: Buy low, sell high
In this article we will explain why we view gold and silver as “must have” investments in every portfolio. The author, Stefan Kraemer, is founder and CEO of CelticGold and has over 22 years experience in the financial industry, as an independent financial advisor.
2019 Investment rule #1: Have at least 20% of your portfolio in gold and silver. Why?
If you plan to buy low and sell high, then you need to buy into a market that is currently trading at low valuations.
Gold and Silver are one of the few investments that are currently undervalued.
2019 Investment rule #2: Make sound decisions, but there’s no rush
When buying gold and silver keep in mind that the market will usually move sideways until a “Black Swan” type event occurs. If there is no such event, gold will perform in a cyclical pattern. We believe the next cyclical bull market in gold and silver will be in the 2020 to 2022 time frame.
In our view, 2019 and 2020 represent an opportunity for investors to accumulate physical gold and silver. One of our recommended buying strategies is to accumulate gold and silver on price dips. Averaging your purchases over time and during periods where prices correct will reduce risk and volatility in your gold and silver portfolio.
At CelticGold we are happy to serve all investors from orders of 100 Euros and more, providing premium service over the entire, what we call bullion life cycle: Buy - store/ship - sell.
Below are four charts showing how the timing is now right for diversification into gold and silver.
Chart 1: Gold Price 1999-2019
The usual pattern for gold and silver markets is a long period of sideways movement, followed by a multi-year bull market. The above chart shows the gold price movements from 1999 to 2019 - a 20 Year chart. Following the historical pattern, we may conclude that after new all-time highs in 2012, the next cycle up will start 2020-2022.
Which is a better investment? Stocks vs Gold and Silver
The two charts below show the relative performance of gold and silver vs stocks in a 20 year and 30 year timeframe. The relative performance shows the fluctuation in percent of the different assets. Red and Blue are stocks (S&P 500), yellow is gold and grey is silver.
If we had bought 1 equal unit, for example 1,000 USD worth in the S&P 500, Gold and Silver, how would each have performed, compared to each other? What people seem to ignore when comparing against indices, is that it’s not enough to buy the shares and then forget about it. Indices constantly remove and add companies.
The majority of advisors will claim that gold and silver do not perform as well as stocks. Is that really the case?
Chart 2: Stocks vs Gold and Silver 20 Year
The data shows that both Gold and Silver have outperformed stocks since the year 2000.
We can also see that silver is currently lower in performance but overshot gold in 2011 by more than double.
The next chart reveals a bit more about the timing of gold and silver investments:
Chart 3: Stocks vs Gold and Silver 30 Year
The above chart is the same relative performance chart but showing a 30 year timeframe. We can see stocks outperforming both metals. Only silver had valuations exceeding current stock values in 2011.
There’s a few finer points we can draw from the above chart in order to make sound decisions:
Silver, once it starts rising usually outperforms all other asset classes in a short period of time
Timing is always key when investing in any market. For example: If you would have sold stocks in 2000 and invested in gold and silver, you would have outperformed stocks by factor 3, or 300%.
We currently see a phase where gold and silver are undervalued compared to stocks. This suggests that the timing may be right to invest in gold and silver.
Chart 4: Gold/Dow Jones
The above chart shows the ratio of Gold and the Dow Jones. Gold became overvalued at a ratio of 1:6 in 2012 and has now moved to undervalued again at 1:20. Back in 2002 the ratio was 1:40.
We are not sure if we would see ratios exceeding 1:30 again. Any ratio above 1:20 will provide good buying opportunities for gold.
Smart Money Moved into Gold, including Central Banks
According to the World Gold Council survey, 18% of the Central Banks will add to their gold position. The percentages are rising. The IMF reported big gold purchases in January:
Argentina - 7 Tons
Russia - 6.2 Tons
Columbia - 5.4 Tons
Basel 3 ruled gold as a tier one asset (ultra-safe). In addition, in China and Russia most of the mining output stays within the country and is bought by the central bank.
2019 Investment rule #3: Have your exposure to systemic risks in check
Please follow the link below to an in-depth discussion about system risks. It is an important cross-check in any portfolio.
There are only two assets available that are truly out of the system: Crypto and Precious Metals. Crypto is still a highly speculative asset, but has properties that are very unique. For example, the transportability. Gold in comparison is much more stable, easy to move and easy to store - to talk in Crypto terms: Physical gold is the safest “cold storage” you could invest in.
To Summarize Up:
Systemic risks keep growing, move some assets into safety.
Gold and Silver are undervalued, smart money started to move into these markets from December 2018 onwards. Which means gold and silver are low in price and value.
The next big movement should start in 2020 - 2022.
Silver tends to appreciate in value much faster and higher than any other asset. Silver is currently the most undervalued asset available to investors.
Diversification is key to investment success.
Timing is key to investment success. We view 2019 and 2020 as transition years. Shifting away from stocks, bonds and real estate and diversifying into gold and silver.
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