Gold & Silver Investment


"The core position should be in precious metals, perhaps 50:50 gold and silver."

In today's uncertain world a diversified precious metals' investment portfolio is a logical approach to the dangers of future devaluation of the U.S. dollar and inflation from aggressive policies to counter the impact of the recession.

In the late 1970s the world faced similar challenges, and the best performing asset classes were cash, oil and gold and silver. In the Great Depression of the 1930s only gold came out on top, and then silver followed.

The core position should be in precious metals, perhaps 50:50 gold and silver. This can be held either as an exchange-traded fund or through Perth Mint certificates or as physical metal.

However, greater leverage to the gold price can be obtained through gold and silver stocks, but at the risk of greater fluctuations in value with the vagaries of stock markets, and higher downside leverage as well.

As a gold bull market progresses, therefore, the greater returns should be obtained in equities. There is also a rotation from the larger market caps to smaller stocks as risk appetite increases in a bull market.

One of the many reasons to think the present gold bull market is far from exhausted is that this rotation has barely started.

It might be due to take off relatively soon as the long sideways consolidation of the March 2008 high in the gold price should soon be over.

That would mean positioning now in major gold stocks could pay very high returns over the next year or two, and the bombed-out junior stocks have even greater upside from currently depressed levels.

You can always wait to buy but acquiring large positions in the more popular juniors might then be impossible, except at much higher prices.

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