Tag Archives: why buy gold

Why Buy Platinum and Palladium – part 2

why-buy-platinum

We continue looking deeper at platinum and palladium in this follow up article on why buy platinum and palladium – part 2.

The worldwide demand for platinum jewelry rose in 2012, as a result of increased demand from India and China – predominantly a consequence of lower prices. Jewelry plays an important role for platinum as it stands for 30% of total demand.

Investment demand for platinum is also increasing. Although it only makes up 6% of total demand the number is growing – last year by 6.5%.

Lower platinum prices are now creating problems for miners – similar to the situation for many gold mining companies. Most platinum miners have a production cost that is above the current price of platinum. This is a serious problem for supply – one which will force prices higher eventually.

So the case for declining platinum supply is strong, whereas the demand side will continue to be stable or even grow going forward. These are both convincing reasons for rising platinum prices going forward.

When it comes to palladium the case is much the same as with platinum. In 2012 the production deficit was at its highest since 2001, totaling 915,000 ounces.

More specifically, the current demand and supply factors for palladium are:

Supply is dwindling. Russia is the second largest palladium producer in the world and their stockpile is close to depleted. Disruption factors such as strikes and power outages in the world’s largest producer of palladium, South Africa, is also causing supply issues. Recycling levels are furthermore falling.

The demand side for palladium is strong, especially that coming from the auto industry – where autocatalytic converters saw an increase by 7% in 2012. Palladium can actually be substituted for platinum when it comes to emission control systems for gas powered motors. These are favored in India and China. In China there has furthermore quite recently been a mandate for catalytic systems for all cars in the country, which should ensure continuous demand.

The investment demand for palladium is also growing. There is still not a wide spread use of palladium in jewelry but this could change quickly.

As is evident in the list of reasons above, platinum and palladium both have similar drivers. The supply disruptions have led to deficits in both metals. These deficits won’t be corrected overnight, as the metals can’t be produced at will. The current imbalances coupled with low interest rates and central bank stimulus point to higher platinum and palladium prices going forward.

This is the base case scenario. Should supply become extremely constrained due to major problems with production in South Africa, which very well could happen, prices could skyrocket.

If there are further corrections in gold and silver it would be a good opportunity to buy platinum and palladium as a supplement to your gold and silver bullion holdings. In any case though, both platinum and palladium offers some attractive potential today.

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10 Reasons For Buying Gold

10-reasons-for-buying-gold

The timeless reasons for owning gold – the reasons behind gold’s universal role as real money – haven’t changed. In this article we’re taking a look at 10 reasons for buying gold.

Gold is still the best way of storing value over the long run. Therefore, your mindset shouldn’t change with short-term price fluctuations in the “paper” market. If you don’t already own gold today, you should consider buying physical gold bullion.

I hope you enjoyed this brief article about 10 reasons for buying gold

Don’t confuse physical gold with paper gold. Gold bullion is very different from buying and holding securities with exposure to gold. The paper market for gold is fraught with both counterparty risk and speculation, which makes it unsuitable as a long-term store of value.

The reason gold bullion is so special is that it’s durable, divisible, consistent, convenient, and have value in and of itself. These are characteristic that makes it unique.

Here is a list of 10 reasons for buying gold.

1. Gold is money

Gold is universal money – a tangible store of value and protection.

2. Gold preserves value over the long run

Gold has served as a way of preserving and protecting wealth throughout history. No fiat currency has ever stood the test of time – all of them have eventually returned to their intrinsic value, which is zero.

3. Gold acts as a crisis hedge

During periods of turmoil gold tends to increase sharply in value. It’s during these times that you will be especially glad that you hold gold.

4. Gold protects value during periods of higher inflation

Gold is a hedge against significant price increases in asset prices as well as the cost of living, because its price tends to rise when inflation increases dramatically.

5. Deflation

We haven’t seen a global deflation since the Great Depression of the 1930’s. This was a time when the gold price performed strongly. We have seen periods of significant uncertainty and deleveraging though, especially in the wake of the financial crisis of 2008. During this time gold performed very well in comparison with for example stocks.

6. Limited supply

Unlike paper money that can be printed on demand the supply of gold doesn’t change much.

It’s of course difficult to know for sure, but according to some estimates the total amount of gold ever to have been mined is about 165,000 metric tons. The annual supply of newly mined gold is about 2,500 metric tons.

The story with fiat currencies is different. Just between 2002-2012 the monetary base in the U.S. increased fourfold…

7. No counterparty risk

Gold is the only financial asset that at the same time isn’t someone else’s corresponding liability. When you buy a paper gold security or a futures contract you will always have a counterparty risk. The same applies to both bonds and stocks.

8. Gold is anonymous

You can buy and hold physical gold privately and anonymously.

9. Gold is portable

Gold bullion is very portable, liquid and easy to store. You can transport significant amounts on your own person.

10. Diversification

In a world that is getting increasingly globalized, assets tend to correlate more and more, meaning they move in tandem. Gold on the other hand has historically displayed negative correlation with other asset classes.

10-reasons-for-buying-gold-bullion

So ignore the “gold bull” comments from some people. Adding physical gold to an investment portfolio consisting of stocks and bonds is just common sense. Research show that returns often come from a sensible asset allocation strategy, rather than trying to cherry-pick the best investments.

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Why Buy Gold and Silver Bullion Today

There is a wide range of factors that contribute to the rise in interest for precious metals. Find out why buy gold and silver bullion today.

Below are six of the key reasons (not in any particular order):

1. Negative real interest rates

negative_real_interest_rates

Interest rates in the developed world are close to zero with inflation rates running increasingly higher. This means that you virtually aren’t sacrificing any yield by owning precious metals. The opportunity cost is highly favorable. As there, usually, is a storage cost associated with gold and silver the general viewpoint is the higher the yield on government “risk-free” securities the less attractive metals will become. Precious metals don’t pay a yield, which is why people tend to want to buy and own them when they are facing negative or low real interest rates.

With U.S. rates poised to stay low to AT LEAST 2015 the chances of interest rates rising is slim.

2. The ownership of precious metals is low

gold_global_financial_assets

Institutional ownership as a percentage of global financial assets is low. Many pension funds have only a very limited exposure to gold.

gold_institutional_ownership

For individuals the situation is similar. In most of Europe and the U.S. you are swamped with advertising for “cash for gold”. People are encouraged to sell their gold at low prices. There is very little information about actually owning precious metals. Tell your friends that you think about buying a silver bar and they will look at you strangely.

3. The monetization of debt 

Us_debt_vs_gold

This is what many like to call the collapse of the fiat monetary system.

Many western and developed nation’s currencies will eventually not be worth the paper they are printed on due to the explosion of money printing. As currencies become increasingly worthless people will turn to precious metals as a means of wealth protection. Just like it has been throughout history gold is still money. Probably the only “currency” where you have no counterparty risk. Why will the fiat monetary system collapse? Well, at the rate the Fed, BOJ, ECB etc are printing money there really is only one direction we are heading in.

US_dollar_purchasing_power

For the U.S. specifically it will lead to the demise of the dollar as the worlds reserve currency. It is beyond the scope of this ebook to fully discuss this but suffice to say is that some international transactions already are settled in other currencies than the dollar. Also, some central banks in the world such as China and Russia are already discussing the possibility of replacing the dollar with a basket of currencies. We will probably also see some currencies being backed by gold in the future.

4. Central bank buying 

central_bank_buying_gold

After decades of selling gold central banks around the world are now net buyers again. Some, like China and Russia are aggressively buying gold.

5. Promotion of gold ownership 

Even though this might seem to contradict point 2 above, many countries around the world such as China actively promote private ownership of gold. I suspect we will see an awakening in western countries within the near future. Unlike Europe and the U.S., Asian and Middle Eastern economics have gone through wars, booms and busts more recently than us, and their populations are more educated about how to preserve wealth in a time of crisis. There is also a cultural relation to gold in many countries such as for example India.

6. There is a limited amount of precious metals 

limited_amount_of_gold

Just as the headline says, there is a limited amount of gold and silver produced every year so precious metals are scarce. All of the gold ever produced in the world would according to some calculations fit into three Olympic size swimming pools. Platinum is even more scarce than gold.Finally, precious metals are the ultimate insurance policy against inflation. As more and more citizens realize the irresponsible and reckless way U.S. and European governments are handling monetary and fiscal policies, they will increasingly turn to precious metals. This will make it more difficult to buy these assets going forward.

During periods of turmoil increased transaction costs is exactly what happens. We saw evidence of this during the financial crisis 2007-2008. At that time, gold buyers were forced to pay between a 9%-15% premium over the spot price to buy coins. And coins were hard to come by.

Shipping delays of 30-60 days were the norm and lags of up to four months were not uncommon. There were days when suppliers simply advised dealers not to sell, because no one could promise when, or even if, orders would be filled.

With all of this in mind it becomes clear that owning and having exposure to precious metals makes sense. It also makes sense to build a position gradually, at a time when you really don’t NEED to do it because it will be much more difficult when everyone else wants to build positions. To finding the cheapest silver bullion have a look at the suggestions blow.

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Please click below to access the best bullion distributors

BullionStar.com Singapore – cheapest bullion

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Singapore cheapest bullion: https://www.bullionstar.com/ and BullionStar review

Liberty Silver Estonia – cheapest bullion

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Estonia cheapest bullion: https://www.libertysilver.ee/en/ and Liberty Silver Estonia review

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