Module 8 of 8: How Much and What Type of Gold is Right For You?
“The Gold Survival Guide eCourse: Why Gold is your must have insurance and 9 ways to profit from it”
Today we summarise what we have told you in earlier modules and consider some of the implications. We cover the amount of gold that you need to own and which of the different methods of owning gold is likely to be right for you.
Module 8 of 8: How Much and What Type of Gold is Right For You?
We are in the early stages of the what will be the biggest historical change for mankind. History shows that every fiat currency has eventually reverted to its true inherent value – ZERO.
As we’ve already explained, this is the only time in history when every currency in the world has been backed by a single currency (the US Dollar) which in turn is backed by nothing.
Even if you’re struggling with the concepts that we’ve shared with you, we are in a period in history where gold is a must have in your portfolio. We could not put it any more simply than this …
Today, if you have any paper money – you need to have gold.
This solid foundation should be in the form of physical gold, and a portion in your own possession.
The reason for owning gold? It has been used as a store of value for five thousand years and will always be worth something in the future. Gold is real money and cannot be produced out of thin air.
Some investors think ETF’s (buying physical gold in the form of shares) are as safe as gold in one’s possession, but you must remember that there is counter party risk when buying ETF’s. Do they actually have the physical gold they say they do?
So, if you want to protect your family’s wealth you should hold a minimum 10% in gold insurance. Your 10% gold insurance will offset all other declining asset classes, thereby ensuring both your and your family’s financial survival.
However, our view is that you could currently have a higher percentage of gold in your portfolio – as much as 30-40% in gold (and silver) or gold equivalent investments. You should by now have an understanding that while the current times pose a real threat to all holders of fiat currency, there is also tremendous opportunity if you are positioned correctly.
As Warren Buffet says “Diversification is a protection against ignorance.” And as we say “Knowledge is the key to protection and profits”. So armed with the right knowledge about how gold is likely to fare in the future, a large position in gold related investments will not only protect – but also likely reward – you handsomely.
In fact we would go even further. As the ongoing monetary crisis progresses, you may even want to consider moving more of your remaining cash assets into physical gold and other gold assets. Gold bullion should be seen in the same way we have been (incorrectly!) taught to view a savings account – the safest place to store your money in the long run.
Learn more on this topic: What Percentage of Gold and Silver Should Be in My Portfolio?
You Should View Your Gold Bullion Holdings as Cash.
So don’t confuse risk with volatility. While the gold price may vary greatly month to month or even day to day when measured in fiat currency terms (volatility), this does not mean it is inherently risky (i.e. that it will be reduced in value).
The real risk is fiat currency, which as you now know, is reduced in value year after year – by design!
In our opinion, in the current environment, your core physical gold holdings are a long term investment and should not be something that you are trading in and out of, chiefly because of the volatility we just mentioned.
The gold price varies greatly during the course of the year and these moves can happen very fast, so there is a fair amount of risk in trying to time your entry.
You may also choose to diversify your overall gold holdings into for example gold mining shares, futures options etc. This depends upon your risk appetite but more importantly – also your knowledge.
With greater knowledge you may see the value in trading futures and options to leverage the volatility within today’s markets. But, given that these strategies use leverage and margin, it is a sound maxim to only use money for these activities that you can afford to lose. Restrict these to a small percentage of your gold portfolio.
Cash positive, gold producing gold mines that are located within democratic parts of the world like Canada and Australia are a good option. One must remember that all shares carry some degree of risk, so spread this type of investment among 4-6 gold producing mines.
Junior gold mines obviously carry a greater risk and you should conduct plenty of due diligence when venturing within the junior gold share category. Junior gold miners that are producing carry less risk than exploration companies that have no revenue.
Exploration companies are the riskiest of all, as they burn a lot of cash trying to locate profitable mineral deposits, and should only represent a tiny fraction of your overall investment strategy.
Remember five important factors when considering buying gold mining companies:
=> The company should have a strong cash-flow and even have cash or gold on hand.
=> The company should be generating good income by producing gold out of the earth. One must also look at the cost of removing the gold out of the earth (i.e. cash costs per ounce).
=> The quantity of proven or measured reserves in the ground. This is gold under the ground that has a 90% chance of recovery. Indicated and inferred reserves relates to a lower probability of extracting the metal out of the ground.
=> Little or no hedging. Hedging is a disastrous strategy for gold mining companies in a rising gold market. Some
smaller gold mines, however have to engage in some hedging in order to raise capital.
=> Low debt levels
We would recommend no more than 50% of your overall gold holdings should be in gold mining companies given that they are of a higher risk than physical gold. 50% is in fact probably far too much for most people unless you are very knowledgable.
Learn more: Gold Mining Shares vs Physical Gold Bullion – Which to Buy?
Regardless of how good a gold mining company is, it still carries counter-party risk. However, shares in mining companies are a leveraged play on the price of gold and in the long run should provide a greater return. So in our opinion they do have a place in your gold portfolio. But just make sure you first and foremost have a good solid foundation of actual physical gold bullion.
If you wish to expand your knowledge with regard to investing in Gold mining stocks we would recommend subscribing to some investment newsletters. There are a number of proven investment newsletter writers who specialise in Gold Mining Stocks and this is a great option to expand your insight.
In Conclusion…
Hopefully by now we have succeeded in convincing you that managing your finances in the way the mainstream does is a recipe for disaster. We cannot be sure on the time-frame for events to unfold. We may yet be many months or even years away from the biggest moves.
However, history does tell us that there is potential for changes virtually overnight.
Do you recall Module 2 and the US government repricing of gold and the US dollar devaluation in the 1930’s depression? You need to be positioned early to ensure your protection.
The only risk today is continuing with a head in the sand approach, instead of taking action and personal responsibility for your finances. But will you? We certainly hope so and we wish you every success.
As always please email us with any questions you may have whatsoever about the contents of this eCourse. We are not faceless marketers and we really will respond. Also feel free to let us know of any further information or gold related topics you might like to hear about. Email us at: info@goldsurvivalguide.co.nz
Remember knowledge is the key to protection and profits!
David Deutsch and Glenn Thomas
Founders
Gold Survival Guide
P.S. To assist you with taking action, we’re offering a FREE 15 minute Q&A session to answer any more specific questions you may have on any aspects of the eCourse.
(Note: This is not specific investment advice, only you can decide what to do, but rather a means to fill in any areas about which you would like further information). Book your session here today.
Disclaimer: We are not certified investment advisers and you should not construe what we write as personal investment advice but rather information of a general nature and as a basis for you to conduct further research.