How To Protect (Hedge) Your Fortune (Wealth) With Gold & Silver

Courtesy of: Visual Capitalist

While these are all market risks that billionaires are concerned about, it’s worth mentioning that these kinds of events are almost impossible to predict or forecast. Despite the unlikelihood of them occurring, they all have the potential to impact markets – and that’s why billionaire investors are always active in hedging their investments.

Why are billionaires so concerned about their fortunes? After all, don’t they have lots of cash to protect themselves? It’s worth noting that on a relative basis, billionaires often aren’t very liquid at all. In fact, the majority of their net worth is usually tied up in their businesses (such as Jeff Bezos with Amazon) or other long term investments, and the value of these assets and investments fluctuate with the market. That means a big market movement could wipe out millions or billions of dollars in the span of hours. For an extreme example of this, just look at Mark Zuckerberg (the founder of Facebook), who saw his net worth plunge approximately $6 billion in just one day in the wake of his company’s most recent privacy crisis.

About Jeff Bezos – Mini Biography

Jeffrey Preston Bezos is an American technology entrepreneur, investor, and philanthropist, who is best known as the founder, chairman, and chief executive officer of Amazon, the world’s largest online retailer.
Born: January 12, 1964 in Albuquerque, New Mexico.
Height: 5′ 7″
Spouse: MacKenzie Bezos (married in 1993).
Children: 4
Education: Princeton University (1986), Miami Palmetto High School, River Oaks Elementary School.

Why Invest In Silver?

Why Silver ?
• Silver is an industrial metal: unlike gold, silver
is consumed and the number of industrial
uses is multiplying
• Best natural conductor of electricity and
heat, used in electronics, batteries, solar
panels, alloys & coatings, LED & RFID chips,
semi-conductors, photography, antibacterials,
preservatives, medicines
• Silver is a precious metal: like gold, silver is
money and its role as a store of value and
a hedge against monetary inflation is
growing
• Currency debasement is not new –
governments throughout history have
“printed” money; eg. falling silver % in
the Roman Denarius coin.

What Is Goldmoney? Peter Schiff’s Goldmoney MasterCard

Above: What Is Goldmoney? Peter Schiff’s Goldmoney MasterCard.

Goldmoney is a global full reserved gold based financial services company founded by James Turk, Roy Sebag, and Josh Crumb. The company operates under the Network, Wealth, Physical, and Insights subsidiaries which offer full reserve precious metal focused financial services encompassing savings, payments, wealth services, dealing, execution, custody, and research. Goldmoney Inc. was formed as a holding company following the acquisition by publicly listed BitGold Inc. of the Goldmoney business in 2015. The company subsequently changed its name to Goldmoney Inc. The company has over 1,500,000 clients and total customer assets of 1.8 billion representing 34.1 tonnes of gold making it one of the largest privately owned gold reserves in the world.

Top Comments:

I’ve had a Goldmoney account for a couple of years and it works flawlessly. Just be clear that it’s function is to preserve your purchasing power, it’s not a get-rich-quick scheme. Brilliant system.

Can we have a card which stores silver instead of gold?

Great video. Peter Schiff makes a lot of sense with how Goldmoney works. Going to open an account today.

Sorry Peter, but what you are saying is misleading. You cannot use Goldmoney debit card to spend gold. It is prepaid card, you have to sell your gold first to charge the card with fiat currency of your choice and then at the merchant, you spend that currency, not gold. Yes, that is what he said and it is wrong.

Compare these 2 scenarios:
A:
1) buy a hamburger and pay with Goldmoney card
2) hamburger cost 5$ and necessary amount of gold is sold at that moment to pay for it in dollars

B:
1) sell certain amount of gold for fiat currency the Gold money card is issued for (dollars, euros, …) to charge the prepaid card with the currency, lets say you charged your card with 100$
2) week, month, year etc. later, buy a hamburger and pay with Goldmoney card
3) the card is already charged with 100$ and 5$ is subtracted to pay for hamburger

Gold money card is from B scenario. You have to sell gold in advance to charge it with fiat currency. In other words, when you buy the burger, no gold is sold to pay for it.

Well duh, the hamburger is priced in dollars. You would be basically be asking GoldMoney to evaluate your Gold in real time every time you made a purchase. The long-term purpose is for retailers to accept gold in itself as a form of payment. This is the point Peter is speaking to. At that point, there would be no conversion and the scenario you are hoping for wouldn’t be necessary. As a consumer, I don’t want each and every purchase to be dictated by the fluctuations of the value of gold based on the dominance of fiat currency. I would never know how many dollars that hamburger actually cost because you could have bought it at a point where the market value of Gold was low and 5 minutes after buying the burger the prices spiked. That burger would have then cost you much more than the anticipated price.

“You would be basically be asking GoldMoney to evaluate your Gold in real time every time you made a purchase.”

Sorry to break the news for you, but that is how it works when your card is issued in euros and you buy something in dollars. So why would I expect anything less.

So many Bitcoin vs Gold arguments, why not own both? Throw in some Equities, Bonds and Currencies as well.

I feel like i just watched a 20 minute commercial for this dudes gold selling company.

Why do Goldmoney accept cryptocurrency? That’s crazy. It show that even they trust it.

Risks Of Gold Ownership & Risks Of Silver Ownership

Above: Risks Of Gold & Silver Ownership.

Top Comments:

There is a broader risk to gold ownership and that is loss of emotional control. You touched on it when you discussed buying in at the highs and selling below the buy point, which is related to emotion; however, it runs far deeper than that. Gold is a very emotional metal because it tends to attract very passionate people. Almost every emotion a person has can be amplified by the addition of gold.

Gold just sits there doing nothing? Yup, I think tthats the point. for me anyway. sure it wont reproduce on its own, but it wont vanish just because a new company comes out with a better usless gadgit either. Sure i have other money that does cute tricks but i love my lazy old gold the best :)

I’d much rather have assets in gold and silver than the paper fiat currency we have now. I feel we are on the edge of another financial meltdown and if your money is tied up in stocks and bonds, you can kiss it goodbye when the crap hits the fan. I would consider food storage as wise investment…..we always have to eat, right?

I never look at gold in cash terms.. I look at gold in what it will buy
People say gold doesn’t earn a dividend or income but that depends on what you call an income/dividend..
You put $10000 in a savings account and you buy $10000 in gold
In 20 years time you look at your savings.. your cash has made 40% interest (20×2%) but lost 80% through inflation (2% interest -6% inflation = -4%x 20)
Your gold hasn’t done anything but it will buy the same as it bought 20 years ago.. Which 10k has lost most value?

wrong … stock market you can easily have 5-10% on interest by year. but what happens when the stock market crashes, i think its best to invest in both. yep diversification is the key .. I bought gold and I bought stock market … now I’m happy for my gold.

Never let the future disturb you. You will meet it, if you have to, with the same weapons of reason which today arm you against the present. 

Totally agree! Gold & silver has been an enduring currency for thousands of years. Like you say it doesn’t earn dividends like an investment but then it doesn’t lose money like an investment. It just sits there silently day after day riding along with it’s value fluctuating on the precious metals market with paper currency. So you bought 1 oz. of gold at $1000. Over the next 20 years or so inflation (like death) is a certainty & $1000 doesn’t have the same buying power it did as in the past but is only worth $600! You can’t buy that 1 oz of gold anymore for $1000. That 1oz. of gold you bought 20 years ago now has a market value of $1400. It is also possible for that 1oz. to rally up in value in a short time because of market volatility. For sure gold does not have the liquidity of cash which can be used to buy anthing at any given time but it’s value will always rise in time because of inflation. Remember…diversification is an important hedge in any investment.

Forget Gold Miners: The Best Stocks To Invest In Gold

In modern times, investors looking for a way to profit from gold and other precious metals can choose from a very unique and different group of gold stocks: royalty and streaming companies.

In exchange for up-front payments to the gold mining companies, royalty and streaming companies get rights to gold, silver, and other precious metals at present prices or receive a percentage of mineral production from a mine. This makes companies like Royal Gold (NASDAQ:RGLD), Franco-Nevada (NYSE:FNV), and Wheaton Precious Metals (NYSE:WPM) less subject to the significant capital costs of sustaining operations at a mine, or the varying price of the metal.

Gold miners are certainly worth considering if you are interested in gaining exposure to gold and silver, but gold royalty and streaming companies offer much more compelling investment opportunities because of their higher dividends, excellent free cash flow generation, and high profit margins. In addition, between Royal Gold, Franco-Nevada, and Wheaton Precious Metals, investors have several choices that give them varying degrees of exposure to gold, silver, and other precious metals.

Bitcoin In A Disaster Scenario – Cash & Gold Are King During Hurricanes

Above: Bitcoin In A Disaster Scenario – Cash & Gold Are King During Hurricanes.

The devastating hurricane strike of Puerto Rico proves that Bitcoin’s value in the area affected collapses to ZERO when the power grid goes down. Unlike gold and silver, your ability to access your bitcoins can vanish in an instant. Food, water, and gasoline are what matters during an emergency. If you need electricity for bitcoin, then during an emergency or disaster it will have little to no value. The same with people with credit cards or people that write good old fashioned checks.

The Gold Silver Ratio

What Is the Gold-to-Silver Ratio, and Does It Matter?
If you’re a precious metals investor, you should understand the importance and limitations of this ratio.

For investors, there are no shortage of investment opportunities to choose from. There are thousands of different stocks, countless mutual funds, and a seemingly endless number of corporate and government bonds to consider investing in. However, one of the more popular investment opportunities since the beginning of 2016 has been precious metals.

The popularity of precious metals grows
According to the World Gold Council, gold demand wound up increasing by 92.9 tons in 2016 to 4,309 tons. Interestingly, a number of key drivers, such as jewelry demand, central bank demand, and technology-based demand, were down year-over-year. However, electronic-traded fund (ETF) inflows reached nearly 532 tons last year, which was the second highest level on record, and is indicative of investors’ growing desire to own a piece of the yellow metal. The more cash that flows into precious-metal ETFs, the more physical metals those ETFs are required to buy.

Similar strength was seen in the silver market, with estimates from the Silver Institute in November calling for record demand for the metal. Much like gold, silver saw a drop off in physical demand for jewelry and industrial purposes, but a pretty rapid rise in ETF-based demand.

Perhaps the biggest (and never-ending) debate among precious-metal investors is what metal, gold or silver, is best suited for your investment portfolio. One of the most commonly turned to ratios to help answer this question is the gold-to-silver ratio.



What is the gold-to-silver ratio?
Put simply, the gold-to-silver ratio describes how many ounces of silver it would take to equal one ounce of gold. In the 1800s, the gold-to-silver ratio was right around 15-to-1, implying that the physical price per ounce for gold was 15 times higher than that of silver. While volatile during the 20th century, the gold-to-silver ratio averaged 47-to-1. As of the Feb. 13, 2017 close for both precious metals ($1,224.70 an ounce for gold and $17.80 an ounce for silver), the gold-to-silver ratio has ballooned to 68.8-to-1.

Some investors use the gold-to-silver ratio to determine which metal looks poised to outperform the other. If the gold-to-silver ratio has fallen below its 20th century average, gold would presumably be the metal investors would want to buy. Conversely, if the gold-to-silver ratio has jumped above its average throughout the 20th century, silver could be the more attractive option.

It’s also worth noting that silver has a tendency to be more volatile than gold because of its lower daily trading volume. In simpler terms, when precious metals are outperforming, silver has a tendency to overshoot its yellow counterpart to the upside. When precious metals are stuck in a bear market trend, silver has a tendency to tarnish much faster than gold.

Does this ratio matter?
Now for the important question: does the gold-to-silver ratio really matter?

To some degree, having such an extensive history on how the prices of gold and silver relate to one another can be useful for investors. Today’s ratio of nearly 69-to-1 would certainly suggest that silver could be the more attractive investment opportunity if (key word here) precious metal prices are heading higher.

However, I think it’s important to recognize that the gold-to-silver ratio isn’t a primary investment factor or a catalyst by itself. It’s a secondary factor to consider long after you’ve examined the real catalysts driving gold and silver prices.



So what really matters?

For starters, it’s important to pay attention to the Federal Reserve’s stance on monetary policy, as well as interest rates. Arguably the biggest driver (both higher and lower) for precious metals is opportunity cost, or the act of passing up a near-guaranteed return in one asset for the opportunity to generate a larger return with another asset. If interest rates remain low, as they’ve been for the better part of eight years, investors who choose to buy interest-bearing assets (such as bonds or CDs) may lose real money to the inflation rate. On the flipside, if interest rates rise, then investors may swap out of precious metals and into interest-bearing assets since they can net a higher guaranteed return, pushing the prices of gold and silver lower.

Supply and demand are also important drivers for precious metals. In recent years, gold and silver mining companies have reduced their capital expenditures and, in the process, tempered supply side growth. At the same time, ETF and investment demand for gold and silver has increased, causing prices for gold and silver to move higher.

Finally, fear and uncertainty are important catalysts that tend to drive investors into gold and silver. The more uncertain growth prospects are in the U.S., and the less confident consumers are with the U.S. economy, the more liable gold and silver prices are to head higher. Remember, the U.S. is a consumption-driven nation, so any weakness in retail sales figures or GDP growth can suggest that gold and/or silver may be a safe-haven investment.

Long story short, feel free to add the gold-to-silver ratio to your arsenal of tools to analyze precious metals and metal-mining companies, but make sure your investment thesis doesn’t primarily revolve around the gold-to-silver ratio.

Silver’s use as an industrial metal can harm its price during economic slowdowns, it’s secondary use as a monetary metal can benefit it’s price during periods of decreasing faith in government. Silver is significantly more abundant than gold in the earth’s crust, this makes it easy to find new supply and silver mines will come on line to drive the price back down if there is a sudden burst of demand. This could provide silver a period of a year or two where it outperforms gold. This can be measured using the gold/silver ratio. When the gold/silver ratio drops below 40, I HIGHLY SUGGEST selling everything related to precious metals, as that number has historically indicated a massive public rush into the metals, which results in the prices reaching a long-term peak in value.

Given the above facts, I feel it is better to own gold in periods of economic weakness and silver in periods of growth. Silver is more appropriate to use as a speculative vehicle, while gold is more appropriate as a means of saving and protecting wealth. If you’ve ever tried selling a few thousand ounces of silver, it’s a hassle! Selling the equivalent value in gold is quite easy. The same argument applies to hiding/storing large amounts of gold and silver.

The current gold/silver ratio is around 72. This means it is definitely appropriate to accumulate silver and silver related investments at this time as a means to speculate in the financial markets. As the number declines (from around 70-50), it indicates the public is becoming interested in the monetary metals. As interest peaks (let’s say, around 30-40), one must be prepared to sell their speculative positions. Gold will decline less than silver when the peak has been reached, suggesting one should cut all speculative positions in silver and gold related assets and potentially hold just a small core position in physical gold.

In summary, gold and silver related investments are both a good buy at this time. Gold will have less volatility due to the large above ground stockpiles. Silver will likely outperform gold at some point, but when it does, you must sell, because the outperformance is a temporary phenomenon and will not continue indefinitely. Both investments have strong fundamentals supporting them. Understanding the underlying drivers for the price of gold and silver helps us to allocate our investments appropriately at different times in the investment cycle. The current gold/silver ratio above 70 indicates a healthy allocation towards silver related investments is appropriate at this point in the cycle.

Gold/Silver Ratio is near an extreme. This ratio demonstrates a lack of investor interest in the monetary metals when the ratio is above 70. It demonstrates a mania to participate in the monetary metals when the ratio is below 35. Each time the gold/silver ratio has gone above 75, it has been an acceptable time to buy silver, gold, or silver and gold stocks. Each time the ratio went below 35, it has been an excellent opportunity to sell precious metals and their related investments.

Thanks for the quality analysis! We sell bullion for physical ownership, and field questions every day with regard to which metal makes the most sense. We tend to lean toward heavier silver currently with the ratio still at 75:1. Interesting point that when the ratio is closest, prices are the highest due to last minute entry of the small investors into the silver market. But we have a long way to go to get there and silver seems to be a relative bargain, even with the gains this week.
If you feel holdings should be trimmed significantly when the ratio drops under 40, presumably because of a spike in price, where would you suggest the small investor put his proceeds? It makes sense that the Dollar would be a poor choice, and stocks may be riskier at that point as well. It seems to me staying put and riding out the storm might be a better choice; at least the metal isn’t going anywhere.

I’m pleased you enjoyed my article. Regarding your question about what to do when the ratio drops below
40, buying the dollar would
Have been a wonderful decision last time. Next time,
I will have to see prices
Of assets around the world to make a decision, ill post a new article at that time.
I realize many gold and silver investors abhor the dollar, however, there are many times when the dollar has been the appropriate place to park cash. I sold a lot of my gold and silver related investments last time the ratio went below 40 and purchased real estate in the Detroit metro area (there had been an approximately 70% crash in the housing
Market). This created a dollar cash flow from rentals. These
Properties have since 2-3x in value while gold and silver have declined significantly.
We’re back at the time
To sell real estate and buy gold and silver. Best regards.