I hear the same question from different clients and advisors every week, “When is it a good time to buy gold and silver?”
Because of the unusual uptick in advisors asking me this question, I thought I should shed some light on the topic. I usually start my response by saying that I know I am biased, but I am also the first one to practice what I preach.
The reality is, we are in un-charted waters with our government and with debt levels. There are so many events that could catapult gold and silver prices higher at any moment and I’ve mentioned only a few of them previously — North Korea, stock market pullbacks, recessions — the list goes on.
One thing I constantly feel the need to preach is, “it’s not about the returns, it’s all about wealth insurance.” It is imperative that 10% of assets are placed into physical gold and silver. If gold and silver rise up in price, that historically means the other 90% of dollar-based assets are declining. So why would we want gold and silver to rise? Just like you do not want claim life insurance, auto insurance, or health insurance, because that usually means a life-changing event has occurred. The same principle applies to gold or silver and wealth.
Now, I do not need to remind you where gold’s and silver’s values should be. Just a few weeks ago, I shared a screenshot from the www.usdebtclock.org website which shows silver over $700 per ounce and gold over $5,000.
So, when is a good time to buy gold and silver? The short answer is: right now. Setting all biases aside, let me indulge you a little further. I could share multiple historical charts showing the average returns per month, etc., but I will save you the time and boredom. This time of the year it all comes down to how companies have structured themselves that makes November and December the best months to purchase gold and silver by far. That doesn’t mean the other months are bad, but let’s be honest, everyone tries to get a deal from time-to-time, even if we are looking at gold and silver as a 3-10 year hold.
What most don’t know is that many gold and silver retail companies are structured in a way that there are tax implications for carrying over inventory. In order to prevent a double taxation on that inventory, they fire-sale all their assets. Other companies that structure themselves differently — like National Gold Consultants, which was re-structured to be more resilient in time of high demand — can carry over inventory without certain tax implications.
In summary, the end of the year can save you and your clients up to 5-7% on coin premiums alone. However, as soon as the clock strikes midnight on the January 1, those same companies that held the fire sales (to other wholesale companies like NGC) become major buyers to replenish inventory, causing a large spike in premiums and inventory shortages.
Remember, it’s not about the gains on gold and silver when we are talking about wealth insurance. Gains do tend to happen over time, but that just means other assets like our USD is losing purchasing power. The large market pullback in 2008-2010 saw our gold and silver rise 490%, so be careful what you wish for. However, if you were like me and the hundreds of our agents throughout the country who placed 10% of client assets into gold and silver, you were able to kick your feet up on the desk knowing your clients didn’t lose.
The second longest bull market rally is still underway. Can things continue to move up? Honestly, I hope they do as I have a lot of my money in stocks and real estate. But history does tell us a recession occurs every eight years, so we are ripe and overdue for one. Consider taking some winners off of the table or cashing out of the savings account to help protect and insure the lofty gains. My feet are up on the desk because I know my clients’ and my portfolios are protected. Are yours?