Advertise | Bookmark | Contact Us | E-Mail List |  | Update Page | UraniumSeek.com 

Commentary : Gold Review : Markets : News Wire : Quotes : Silver : Stocks - Main Page 

 GoldSeek.com >> News >> Story  Disclaimer 
 
Latest Headlines

Harry Dent’s Gold Prediction Invalidated
By: Przemyslaw Radomski, CFA

SELLING OUT OF PRECIOUS METALS AND BUYING BITCOIN…. Very Bad Idea
By: Steve St. Angelo

The Bitcoin Bubble Explained in 4 Charts
By: Jake Weber

VXX Sends an Awesome Message from Another Galaxy
By: Rick Ackerman

Geopolitical Risk Highest “In Four Decades” – Gold Demand in Germany and Globally to Remain Robust
By: GoldCore

Asian Metals Market Update: November-22-2017
By: Chintan Karnani, Insignia Consultants

Gold Seeker Closing Report: Gold and Silver Gain With Stocks
By: Chris Mullen, Gold Seeker Report

Ira Epstein's Metals Video 11 21 2017
By: Ira Epstein

Bitcoin, Bail Ins And Bullion
By: Mike Maloney

Tactics For The Gold Bull Era
By: Stewart Thomson

 
Search

GoldSeek Web

 
Let's Get Real: Why You Must Own Precious Metals


 -- Published: Friday, 3 March 2017 | Print  | Disqus 

By David Smith

It can be difficult, even for dyed-in-the-wool perma-bulls to hold onto precious metals, let alone buy more. We see the Dow trading above 20,000 (placing this into perspective, is that since 2000, the Dow is up around 65% versus gold's 300%), gold and silver currently languishing below multiple "resistance" points; suspended just above a couple of "support" lines. For long-suffering holders, it feels like the fabled Sword of Damocles dangling over their head, suspended by that proverbial single strand of hair.

If you fit the above description, the following chart should provide good cheer. You'll notice that since 1925, a few years before the Great Depression, up until the current day, financial assets (paper) - bonds, large cap stocks, and derivatives - have never been more overvalued in relation to metals and minerals, than they are now.

Real Assets at all-time lows relative to Financial Assets

Financial (Paper) Assets vs. Real (Metals/Minerals)Assets (Courtesy Sources Listed)

What you must realize, is that if you truly desire to "insure" some of your own financial assets against a major turn of events with the potential to heavily damage their value, then it is imperative to seriously consider a position in the asset class which above all others, tends to move in direct opposition to them.

The "kicker" is that, at such undervalued rates, when - not if- the metals return to the norm, that movement, plus the almost inevitable overshoot, makes it close to a lead pipe cinch that you'll be looking at a big profit on your purchase as well. The metaphorical rubber band stretches just so far, then reverses. And that class has at its apex, gold and silver.

It's not just an article of faith, but rather a proven fact that the more out of favor a category is, the less downside risk and the greater upside appreciation potential there will be. Markets move up on sustained buying - in the earliest stages rising on a so-called "wall of worry" - wherein in spite of all the naysayers' protestations, the price of the item in question continues to move higher. Later as the trend matures, you'll see stronger upward movement with less and less objection from observers ,and more writers agreeing with the move. This signals that "more people are joining the parade", with less watching. Finally, almost everyone is "all-in" with lines around the block as late-comers frantically try to buy what little remains of gold and silver in retail hands - but we are far from that situation today. Sure it's "easy" to buy the Dow above 20,000, and as it rises on reduced volume, large numbers of IRA investors are doing just that. But big money is seldom made this way.

The five categories of a gold miner's ore body

Whether in production, or on a path toward it, a mining company needs to determine via expensive drilling, magnetic testing, laboratory sampling and computer modeling programs, how much gold-bearing ore they have, and how likely what they possess - or think they hold - can be produced at a profit. The most well-known of formal reporting methods is the Canadian resource classification reporting methodology called the (National Instrument) NI 43- 101 Report.

The two categories - and within them, five sub-categories, in order of descending likelihood of being recovered and sold at a profit are: Reserves: Proven and Probable; Resources: Measured, Indicated, and Inferred. A company will not generally undertake to build a mine/mill unless they have identified reserves that should grant them a 7-10 year production life. Resources sound great, but they may or may not ever "pan out". The following chart shows that for the past 7 years, even as exploration expenditures increased, success in locating gold in "unreported discoveries" languished. In the millions of ounces (Moz) "reported category" - the amount has cratered.

Gold Discovered Chart

Less than a year ago, industry CEOs were talking about world gold production peaking "sometime during the next 10 years." Now we're seeing that Reserves - the most accurate estimate of economically-recoverable gold, have declined 40% since 2011, and stand at levels not much higher than was the case in 2005, when the gold price was moving into the first solid phase of its long-term advance. A recent Bloomberg chart shows that recoverable (newly-discovered) gold has dropped fully 85% since 2006!

Keep in mind that a gold mine is a "wasting asset." Every ounce produced that is not replaced by discovery of another economically-profitable ounce, takes the operation one step closer to the end of its productive life. Looking again at the discovery and expenditure chart demonstrates that as things now stand, the drop in Reserves - ounces most likely to be recovered at a profit - is taking place at warp speed. The much less-reliable Resources category - has also fallen sharply. Indeed, Indicated/Inferred figures themselves often end up being little more than hope and hype. And you can't "take that to the bank."

Xetra Gold EFT Ounces Chart

The European trading venue Xetra (Deutsche Börse AG)

In Europe, one week made a huge difference in gold demand

Recently, during one week, the European trading venue, Xetra Gold ETF (Deutsche Börse AG) saw an inflow in excess of one-half billion dollars, the largest such movement in 5 years! This amount was 10 times more than GLD, the U.S. ETF equivalent registered during that same week. Other European metals' ETFs saw increased activity as well.

In this space a year ago, I discussed Rich Dad Robert Kiyosaki's way of looking at things, using his analogy of a gold coin. Whereas most people see just the front (obverse) and back (reverse), Kiyosaki sees a third side - the edge. Only by looking at an issue from the vantage point of the edge, will you be able to "see both sides of the coin".

Mr. Market alone can predict the future, but viewing the concept of gold and silver ownership from the edge brings great clarity as to what's going on and how you might respond. This year is shaping up to be a replay of 2016, with the metals possibly being even stronger to mining stocks on a relative basis than was the case last year. My perspective from the edge, is that the time to take action and claim your physical precious metals stake is growing short. I can't tell you exactly when "it's too late" is going to be, but whenever that inflection moment comes, the window of opportunity we now have is going to be visible only in the rear view mirror.

David Morgan at The Morgan Report puts it short and sweet. Be Real. Get Real. Buy Real. So "get on the edge." Check out the view... and then do something about it.

David Smith is Senior Analyst for TheMorganReport.com and a regular contributor to MoneyMetals.com. For the past 15 years, he has investigated precious metals’ mines and exploration sites in Argentina, Chile, Mexico, Bolivia, China, Canada, and the U.S. He shares his resource sector findings with readers, the media, and North American investment conference attendees.


| Digg This Article
 -- Published: Friday, 3 March 2017 | E-Mail  | Print  | Source: GoldSeek.com

comments powered by Disqus



 



Increase Text SizeDecrease Text SizeE-mail Link of Current PagePrinter Friendly PageReturn to GoldSeek.com

 news.goldseek.com >> Story

E-mail Page  | Print  | Disclaimer 


© 1995 - 2017



GoldSeek.com Supports Kiva.org

© GoldSeek.com, Gold Seek LLC

The content on this site is protected by U.S. and international copyright laws and is the property of GoldSeek.com and/or the providers of the content under license. By "content" we mean any information, mode of expression, or other materials and services found on GoldSeek.com. This includes editorials, news, our writings, graphics, and any and all other features found on the site. Please contact us for any further information.

Live GoldSeek Visitor Map | Disclaimer

The views contained here may not represent the views of GoldSeek.com, its affiliates or advertisers. GoldSeek.com makes no representation, warranty or guarantee as to the accuracy or completeness of the information (including news, editorials, prices, statistics, analyses and the like) provided through its service. Any copying, reproduction and/or redistribution of any of the documents, data, content or materials contained on or within this website, without the express written consent of GoldSeek.com, is strictly prohibited. In no event shall GoldSeek.com or its affiliates be liable to any person for any decision made or action taken in reliance upon the information provided herein.