In 1999, I concluded that the world would experience a major economic reset. Not just a typical recession, but a full-blown depression with all the requisite social, political and economic devastation. My best guess was that, sometime within a decade, there would first be a crash – a major recession - and that it would not be dealt with properly – that the central banks would provide bailouts and paper over the crash.
This would result in a false recovery, which would eventually lead to a major collapse – one that would take decades to play out, before any solid recovery would ensue.
I would very much have preferred to have been entirely incorrect in this prognosis, but that hasn’t been the case. To date, the events have played out as envisioned.
As to when the major collapse would arrive, there could be no exact certainty, as the central banks could trigger it at a time of their choosing, as they did in the 1929 crash.
But the ideal time to trigger it would be six months prior to the 2020 US presidential election. The election could be used to create as great a distraction as possible.
Although any of a dozen triggers could be used to usher in the crisis, I confess that the idea of a pandemic was not on my radar at all. Yet, a pandemic was ideal. A simple seasonal virus could be blown out of proportion by governments to create a panic – a distraction that would eclipse the consciousness of an economic crisis. Better still, the eventual crisis could be blamed on the pandemic, not on those who caused it.
This distraction has been so successful that many people who would now be looking closely at their wealth insurance portfolios have paid less attention to them than they might have.
But by August, this began to change. Many investors realized that, if there were a time to load up the truck with precious metals, this was that time. Gold rose by 14% and silver rose by 45% in just a few weeks. Both soon corrected, but retrenched at numbers well above the July levels.
For many years, when people have asked me what form they should buy precious metals in, I first ask them, “Is this primarily an investment – something that you expect to appreciate in value, or is it primarily an insurance policy to cover you in troubled economic times?”
If they say that it’s primarily the latter, I suggest that they consider buying metals in the form that would be the most saleable - not now, in relatively quiet times - but in the middle of a crisis, when there is widespread fear and even panic.
So, what might that form be?
Well, a mix of metals, primarily gold and silver would be likely to attract the largest number of buyers in a crisis. To be sure, platinum and palladium can be expected to rise in value in a crisis, but there will be fewer buyers who understand them. They therefore fall more into the investment category, not the insurance policy category.
In a crisis, the ideal is to focus on the largest group of possible buyers so that, should you need to sell all or a portion of your policy, the maximum number of possible buyers is available to you at short notice.
This doesn’t mean that you will choose to sell at short notice, or at a disadvantageous time, but it does mean that, if the coming turmoil changes your personal economic situation, you’ll have the ability to shift gears quickly.
And on any given day, either gold or silver may be the hottest item, so you’d want to be holding both. Silver tends to be the more volatile of the two and is likely to rise more substantially in price, whilst gold is looked upon more as a store of wealth than silver.
We will therefore see some buyers who are looking for both, but many will be seeking only one or the other.
But what form would you buy them in?
Well, silver, having a lower price, tends to be offered in larger weights. As an investment, 100 ounce bars are common and even 1000 ounce bars are available. However, the latter may not be ideal as an insurance policy. Silver at $25 per ounce would price a 1000 ounce bar at $25,000, but silver at $100 per ounce, as might easily occur, makes the bar $100,000. The number of buyers at that price would be fewer. In addition, if you only needed, say, $20,000 at that time to cover your expenses, you couldn’t simply cut off a $20,000 slice from the bar and sell it.
You may be better served by purchasing either 100 ounce bars or coins, or both.
To be sure, coins are the ideal, as they are recognizable by even those who have minimal knowledge of precious metals.
But there are so many to choose from. Would you purchase the ones that were the most attractive to your eye? Certainly Philharmonics and Libertads are very pretty coins.
But again, if your purpose is insurance, you wouldn’t choose what you like to look at; you’d choose what’s most recognizable to buyers – especially those who may be new to precious metals and are desperate to get their hands on them in the midst of a crisis.
Every dealer will have his own personal favourites and a responsible dealer will be likely to recommend those coins that carry a low premium. As an investment, a low premium is very much a primary concern.
But again, you may seek that which is the most recognizable to the greatest number of possible buyers. When we consider this aspect of a purchase, we’re not thinking cool-headed investment logic, we’re thinking panic-buying. This is a different realm entirely.
To get a handle on this, imagine that you’re in a far-flung country somewhere. You don’t know the language and you’re not sure you can trust those around you. You’re thirsty and you come across a restaurant that looks questionable at best. They offer you a glass of water for free, but you worry that it may make you sick. You see bottles of soda in a cooler, but the labels are in foreign languages and, again, you have no idea whether they’re safe.
But then you see bottles labeled “Coke” and “Pepsi.”
You recognize instantly that they represent the greatest likelihood of safety at a time of great uncertainty.
It matters little which you prefer. You’ll take either.
And this may be essentially what we’re headed for in precious metals in the future.
In precious metals, the Coke and Pepsi are American Eagles and Canadian Maple Leafs.
They carry a relatively high premium, but no form of metals is so recognisable to so many people, and they will therefore always have a ready supply of buyers.
It would be wise co consider them for all or a portion of your metals. If you’re economically comfortable enough that you’re unlikely to need to make any sales in the coming years, these will be less necessary, but to the extent that you may wish to make some quick sales at some point, you may wish to stock up on Coke and Pepsi.
Whatever you choose to buy as an insurance policy against a crisis period, at the time of this writing, gold is about $1950 and silver is about $27. This is a “calm before the storm” moment. As each crisis event occurs, the prices will go higher.