Precious Metals Update

by | Aug 17, 2020 | Archives

Here’s a gold and silver update.

With gold reaching an all time high price, you have not heard much at this site about the Silver Dip, a speculative opportunity that uses leverage when gold is priced at a good value and the gold silver ratio is above 80.

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In January 2020, we reviewed the Silver Dip and I reminded readers of the Dip’s premise when I wrote:

Here are excerpts from our “Silver Dip 2019” report:

The value indicator the “Silver Dip” used in the 1980s and 2015 and now is simple. The strategy is based on the gold-silver ratio as a main indicator that the price of silver is a good value.

The threshold we watch for is a spread of 80. When the price of gold is 80 times (or more) higher than the price of silver history this suggests that silver is undervalued to gold and will rise faster than gold.

Rarely has the ratio been as high as 80, only five times in 36 years as the chart below shows.

In 2017 Platinum was the best option for speculation and the platinum ETF PPLT was recommended for the first time due to its ideal speculative position in 2017. That idea gold platinum ratio position remained throughout 2018 (we’ll review it later in this report), but the price trend of platinum also remained negative (and PPLT was stopped out) for the entire year.

Gold at or below $1,350 is also likely a good deal and the foundation of the Value Dip strategy is that ideal conditions are best when gold is in this price range.

As a general rule, platinum is undervalued when it sells for less than gold. As the chart below shows, platinum costs more than gold much more often than not. The fundamental reasons for platinum’s high price, including platinum’s supply scarcity, support this.

This suggested that both silver and platinum would rise faster than the price of gold, but gold’s price was too high to use the leveraged Silver Dip strategy.

In hindsight speculators would have done very well… but the Silver Dip strategy is extremely leveraged so our pricing suggestions are overly conservative. This means we’ll wait before we are borrowing to speculate in precious metals.

However, this does not mean one should not be investing in gold and silver to protect against inflation and the fall of the US dollar.

The review below by my friend Rich Checkan, at Asset Strategies International (1) shows some of the reasons why gold could well rise higher and silver probably even more.

Gary

Gold and Silver… Just Getting Started

By Rich Checkan

The most common question we hear lately is, “Now that gold has breached all-time highs, what’s next?”

It’s a fair question.

Our long-time readers know we have been beating the drum for gold and silver loudly since the fall of 2018. Some of you have taken action by buying gold and silver. Some of you have not.

Those of you who have bought gold and silver are quite pleased. But, no doubt, you are wondering how much further this can go. After all, in a little over one year since gold broke out, gold has already surpassed all-time highs.

That’s fast.

Those of you who haven’t bought gold and silver yet are, no doubt, wondering whether or not you missed your chance to participate in this bull market in precious metals.

Gold

Take a look at the gold chart below.

 

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Historical gold prices 5 year chart

Gold struggled to break through exceptionally strong resistance at $1,300. This is the point where it consolidated on it’s way down from all-time highs of $1,921.17 in September of 2011.

This formidable resistance was finally and aggressively breached in May 2019… establishing with certainty the new bull market. Gold did not take a breather again until it was near $1,550 per ounce in about a month or two.

From there, gold stair-stepped higher until March of this year… when Covid-19 fears spread worldwide and governments essential shutdown business worldwide in reaction to the spread of the pandemic.

Gold was already on fire, and this was akin to pouring kerosene on the fire. Next stop, new all-time highs.

Silver Does What Silver Does

You have heard us say often that gold is the precious metals leader. It sets the direction for the trend and establishes the bear or bull move.

Once the trend is set – for either lower or higher prices – silver lags initially, but it eventually follows gold and outpaces the price movement in either direction.

So, the pendulum swing for low and high prices is wider for silver than it is for gold. This is something you want to avoid as precious metals trends turn bearish, and it is something you want to take advantage of as precious metals prices turn bullish.

And, thus far in this bull market, silver has not disappointed. It is acting out its script to perfection.

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Historical silver prices 5 year chart

Back in May of 2019, silver initially followed gold higher, but it soon retreated. This is no doubt due to silver’s role as an industrial metal – even though it is monetary as well… but to a lesser extent. Silver lagged gold.

And, the lag was historical. Typically, at the low point in a bear market, we tend to hit a peak Gold / Silver Ratio (GSR) of around 80. That means, it takes 80 ounces of silver to buy one once of gold. Before silver started sprinting higher, we hit a historical GSR peak of around 127 – 45% higher than normal!

You may recall, at that time, we were screaming about the amazing profit potential in silver.

Then, as gold prices started moving higher this past spring, silver started to follow it higher. And, according to script, it accelerated its pace as it caught-up to gold in percentage gain.

Right now, for the year, gold is up 32%. Silver is up 42%.

Compare that to equities. The DJIA is down 7%. The S&P 500 is up 2%. The Nasdaq is up 22%.

How High Can Gold and Silver Go?

Great question… often asked every day. Alas, we have no crystal balls either.

But, we do have a bit of history, some current considerations, and a reasonable rationale for what is possible.

Historically, bull markets in precious metals tend to be long. The previous two bull markets (1971 to 1980 and 2001 to 2011) lasted about a decade each. And, both were similar and significant in terms of gold and silver appreciation.

From 2001 to 2011, gold appreciated 650% – an average return of 65% per year for a decade. During the same period, silver appreciated 1,000% – an average per year of 100% for ten years.

Further, we would be foolish if we did not consider the future of the U.S. dollar. In response to the financial crisis of 2008 to 2009, the government expanded the money supply at unprecedented levels. So, it was no surprise to see price inflation as represented by a new all-time high gold price at $1,921.17 and a matching of the all-time high silver price at around $50.00.

This time around, the monetary expansion through stimulus already (with much more expected in addition) makes the reaction to the 2008 to 2009 crisis seem quite tame.

Rationally, it is not a stretch to see gold attain new highs somewhere between $3,000 and $4,000 per ounce. Silver should have no trouble touching previous highs at $50 per ounce.

Further, given the length of previous precious metals bull markets, it is entirely reasonable to see this market last for another eight to nine years.

Fear of Missing Out – FOMO

Again, no crystal balls. But, it would appear this particular fear is unfounded in early August 2020.

There are simply too many uncertainties…

Pandemic – and the economy’s ability to survive it
U.S. Presidential Election cycle
U.S. / Chinese tensions
Social crisis
Other lesser threats too numerous to list here

I expect to see global economies transition from deflationary pressures, to recession, to stagflation as inflationary pressures build. As that plays out, I fully expect gold and silver to cost more dollars in the future.

How can they not?

So, congratulations to those who acted since we started “screaming” in 2018.

And, for anyone looking to buy gold and silver going forward, I firmly believe…

Your wealth insurance premium for gold is still very low.
Your profit potential for silver is still very high.
Owning both gold and silver now is the best way I know for you to Keep What’s Yours!

Rich Checkan

Phone: (800) 831-0007 – email: infoasi@assetstrategies.com

Gain Safety, Profit & Get Paid Double

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The stock market has always been the best place of places to protect and increase wealth over the long haul.   Yet it’s also been the worst place to lose money, a lot of it, quickly.

There are only three reasons why we should invest.  We invest for income.  We invest to resell our investments for more than we had invested.  We invest to make our world a better place.

The goal of investing should be to stabilize our security, bring feelings of comfort and elimination of stress!

We should not invest in social networked protests that guarantee loss either.  This is like burning our houses down in protest.

If we want to change the world, we should invest in good equities that bring profit and use the extra wealth to create something beneficial for mankind.

We should not invest for fun, excitement or to get rich quickly. We should not divest in a panic due to market corrections.

This is why my core stock portfolio consists of 16 shares and this position has hardly changed in five years.  During this time we have been steadily accumulating the same Top Value ETFs  and have traded only a few times.

The study below shows a value based model portfolio that dates back to 1969 dramatically outperformed the US Market and almost every stock market in the world.

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Over 51 years the Top Value Strategy (with dividends reinvested) appreciated 12.5% per annum compared to the 10.74% for the Dow Jones industrial Index (with dividends reinvested).  This is a 1.76% per annum difference.  This may not seem like much, but in the long term the difference is huge.  12.5% increases $10,000 to $4,062,362.22!.  10.74% turned the Dow’s $10,000 into $1,817,734.62 in 51 years.

No matter how we look at it, over time, value investing always wins!

Our portfolio is built around a strategy that’s taught in my Purposeful Investing Course (Pi).  I call these shares my Pifolio.  The course shows how to use the value analysis of Keppler Asset Management to create a portfolio of ETFs that cover undervalued stock markets.  I have combined my 50 years of investing experience with the study of the mathematical market value analysis of Michael Keppler, CEO of Keppler Asset Management.

In my opinion, Keppler is one of the best market statisticians in the world.  Numerous very large fund managers use his analysis to manage billions of dollars in funds.  However because Keppler’s roots are in Germany (though he lives and operates from New York) all of his funds are registered for the European Union citizens, Americans cannot normally access his data.

I was lucky to have crossed paths with Michael over 25 years ago, so I am one of the few Americans who receive this data so I can share it with Pi subscribers.

The Pifolio analysis begins with Keppler’s research that continually monitors 46 stock markets and compares their value based on current book to price, cash flow to price, earnings to price, average dividend yield, return on equity and cash flow return.  Keppler looks at these numbers and takes market’s history into account.

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Michael Kepler CEO Keppler Asset Management.

Michael’s analysis is rational, mathematical and does not worry about short term ups and downs.  Keppler’s strategy is to diversify into an equally weighted portfolio of the MSCI Indices of each good value (BUY) markets.

This is an easy, simple and effective approach to zeroing in on value. Little time, management or guesswork is required.  You are investing in a diversified portfolio of good value indices.

A BUY rating for an index does NOT imply that any one stock in that country is an attractive investment.  This eliminates the need for hours of research aimed at picking specific shares.  It is not appropriate or enough to instruct a stockbroker to simply select stocks in the BUY rated countries.  Investing in the index is like investing in all the shares in the index.  You save time and gain incredible diversification because all you have to do is invest in the ETF to gain the profit potential of the entire market.

To achieve this goal of diversification the Pifolio consists of Country Index ETFs.

Country Index ETFs are similar to an index mutual fund but are shares normally traded on a major stock exchange that track an index of shares in a specific country.  ETFs do not try to beat the index they represent.  The management is passive and tries to emulate the performance of the index.

A country ETF provides diversification into a basket of equities in the country covered.  The expense ratios for most ETFs are lower than those of the average mutual fund so they provide diversification and cost efficiency.

Here is the Pifolio I personally held at the beginning of 2021.   There have been no changes since.

70% is diversified into Keppler’s good value (BUY rated) developed markets:  Germany, Hong Kong, Italy, Japan, Norway, Singapore, Spain and the United Kingdom.

30% of the Pifolio is invested in Keppler’s good value (BUY rated) emerging markets: China, Brazil, Chile, Colombia, South Korea, Malaysia and Taiwan.

There is one trick Pi subscribers learn about China which is different from the rest of the funds.

iShares Country ETFs make it easy to invest in each of the MSCI indicies of the good value BUY markets.

For example, the iShares MSCI Germany (symbol EWG) is a Country Index ETF  that tracks the investment results of the MSCI Germany Index. The fund invests at least 80% of its assets in the securities of its underlying index that primarily consists of all the large-and mid-capitalization companies traded on the Frankfurt Stock Exchange.

iShares is owned by Black Rock, Inc. the world’s largest asset manager with over $4 trillion in assets under management.

There is an iShares country ETF for every market in our Pifolio.

This year I celebrate my 53rd anniversary of writing about global investing. Our reports and seminars have helped readers have better lives, with less stress yet make fortunes during up and down markets for decades. This information is invaluable to investors large and small because even small amounts can easily be invested in the good value shares we cover in our seminar.

How you can create your own good value strategy.

Stock and currency markets are cyclical.  These cycles create extra profit for value investors who invest when everyone else has the markets wrong.  One special part of your course looks at how to spot value from cycles. Stocks rise from the cycle of war, productivity and demographics.  Cycles create recurring profits.  Economies and stock markets cycle up and down around every 15 to 20 years as shown in this graph.

The effect of war cycles on the US Stock Market since 1906.

Bull and bear cycles are based on cycles of human interaction, war, technology and productivity.  Economic downturns can create war.

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The chart above shows the war – stock market cycle.  Military struggles (like the Civil War, WWI, WWII and the Cold War: WW III) super charge inventiveness that creates new forms of productivity…the steam engine, the internal combustion engine,  production line processes, jet engines, TV, farming techniques, plastics, telephone, computer and lastly during the Cold War, the internet.  The military technology shifts to domestic use.  A boom is created that leads to excess.  Excess leads to correction. Correction creates an economic downturn and again to war.

The next four years will be a period of high overseas stock growth.

The chart below shows the last 26 years of real-time forecasting by the global equity analyst we track to make our portfolio decisions.

The analyst is Keppler Asset Management and the index they create The KAM Equally Weighted World Index is 15.4% below the value that the analyst forecast four years ago in September 2016.

The chart shows how in the past, two and a half decades there have been four opportunities (red Xs) when the entry levels in global markets were below or around the lower valuation band.  In the previous three low points like this, there has always been the highest growth and positive returns three to five years later.

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So it’s good to know that if you invest in global stock markets overall, now, you’ll make capital gains over the next four or five years.

More importantly you get paid more income now!

Current markets have turned economic history upside down.  Normally bonds pay the highest interest rates and add safety to a portfolio.  Not in recent years!

The standard now is that equities have been paying a higher yield than bonds.

Top value stock markets (shown below) pay higher dividends.  That’s one of the main reasons they are considered top value.   They improve diversification, give the best long term profit potential, and as the chart below shows, pay almost twice the the average US dividend yield. 

keppler 4-2021

Plus Value ETFs are Safer

The people who dominate stock markets include a pack of thieves.  This fact has always been true.

Shares in stock markets are manipulated all the time.  Stock markets (in fact almost all types of markets) are led by sharks plain and simple.  Count on this fact.  This is the nature of the beast and the number one goal of many big businesses is to take as much of your money as they can to line their pockets.

A study of 92 years of investment returns shows that, despite the fraud and cheating and deceit, stock markets are still a good way to make your money grow… if you invest long term and diversify.

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Our Purposeful Investing Course (Pi) strategy makes it harder for cheaters to grab your wealth because it’s very hard to manipulate an entire stock market, much less a dozen or so stock markets around the world.

Manipulators have a hard time tricking an entire market, especially larger markets.  If you get the best value country ETFs, your chances of long term profits improve.

Pi teaches an an easy, simple and effective approach to zeroing in on value because little time, management and guesswork is required.  You are investing in a diversified portfolio of good value indices.

Sticking to math based stock market value and country ETFs eliminates the need for hours of research aimed at picking specific shares.   Investing in an index is like investing in all the major shares of the market.  You save time because all you have to do is invest in the ETF to gain the profit potential of the entire market.

Here’s how you can create your own good value strategy.

I would like to send you, on a no risk basis, a 130 page basic training course that teaches the good value strategy I use.  You learn all the Pi strategies, what they are, how to use them and what each can do for you, your lifestyle and investing.

You also begin receiving regular emailed Pifiolio updates and online access to all the Pifolio updates of the last two years.  Each update examines the current activity in a Pifolio, how it is changing, why and how the changes might help your investing or not.

You also receive a 100+ page PDF value analysis of 46 stock markets (23 developed markets and 23 emerging stock markets).  This analysis looks at the price to book, price to earnings, average yield and much more of all 46 markets.

This year I will celebrate my 53rd anniversary of global investing and writing about global investing.  Our reports and seminars have helped readers have better lives, with less stress yet make fortunes during up and down markets for decades.  This information is invaluable to investors large and small because even small amounts can easily be invested in the good value shares we cover in the Pi course.

Time is your friend when you use a good value strategy.  The longer you can hold onto a well balanced good value portfolio, the better the odds of outstanding success.

A 45 year portfolio study shows that holding a diversified good value portfolio (based on a  good value strategy) for 13 month’s time, increases the probability of higher performance to 70%.  However those who can hold the portfolio for five years gain a 88% probability of beating the bellwether in the market and after ten years the probability increases to 97.5%.

Subscribe to the first year of The Personal investing Course (Pi).  The annual fee is $299, but to introduce you to this online, course that is based on real time investing, I am knocking $124.50 off the subscription.

Save $124.50 If You Act Now

The global recovery from the pandemic is going to take years, so we have not only lowered the inital fee for the course, we have reduced the subscription to just $99 a year rather than $299.  Your subscription will be autorenewed in a year at $99, though you can cancel at any time.

Triple Guarantee

Enroll in Pi.  Get the 130 page basic training, a 46 stock market value report, access to all the updates I have sent in the past five years right away, plus numerous updates over the next year. 

#1:  I guarantee you’ll learn ideas about investing that are unique and can reduce stress as they help you enhance your profits through slow, worry free, easy diversified investing.

#2: I guarantee to send you monthly updates that are based on a study of every share in 46 stock markets around the world.  These updates will show the values, the earnings of all these markets and categorize each market as Top Value (buy), Neutral Value (hold) or Poor Value (sell)

#3:  If you are not totally happy, simply let me know. I guarantee you can cancel your subscription within 60 days and I’ll refund your subscription fee in full, no questions asked.:

You have nothing to lose except the fear.   You gain the ultimate form of financial security as you reduce risk and increase profit potential.

When you subscribe to Pi, you immediately receive a 120 page basic training course that teaches the Pi Strategy.   You learn all the Pi strategies, what they are, how to use them and what each can do for you, your lifestyle and investing.

You also begin receiving regular emailed Pifiolio updates and online access to all the Pifolio updates of the last five years so you can back track if you desire.  Each update examines the current activity in a Pifolio, how it is changing, why and how the changes might help your investing or not.

Subscribe to a Pi annual subscription for $174.50 and receive all the above.

Your subscription will be charged $99 a year from now, but you can cancel at any time.

Gary

 

(1) Asset Strategy International

Phone: (800) 831-0007 – email: infoasi@assetstrategies.com