Here is an interesting story about the University of Texas Investment Management Co. taking physical delivery of gold. This endowment fund is the second largest following Harvard University. Obviously from reading the article, I get the sense that some very smart people are concerned that there may be difficulty in getting physical gold delivered due to the fact that futures contracts that are traded represent so much more gold than actually exists.
This is consistent with information that Eric Sprott shared back in January about having difficulty getting physical delivery of silver for his hedge fund. It would seem that there just might be a pattern developing here, and it is one that investors in the precious metals would be wise to heed.
No Substitute for Physical
If you really want to own real assets, then there just is no substitute for physical possession. Any paper derivative is simply not worth the paper that it is printed on. That is the big problem with the fiat currencies today and what is driving the price of precious metals to all time highs. Confidence in the paper system has declined. Investors are demanding to hold something tangible in their hands.
That is not to say that money can't be made using paper. Trading in the gold and silver ETFs or mining shares is a great way to move into and out of positions quickly and make some additional cash by trading. However, at the end of the day, you have to realize that you really don't own anything of substance. Just ask the shareholders of any of the recently bankrupt companies what they got out of any bailouts. Then decide for yourself--paper or physical.
Until next time--KEEP IT REAL!
Showing posts with label gold. Show all posts
Showing posts with label gold. Show all posts
Monday, April 18, 2011
Friday, April 8, 2011
Outstanding Week for Gold and Silver
What an amazing week this has been for gold and silver. Gold has hit record highs heading into the weekend and the strength of silver has lifted it solidly above $40 per share to close within pennies of $41. The higher gold gets, the more that talk about bubbles begins to surface. But I found this interesting commentary on the Kitco website which is where I go for all my precious metal related information.
http://www.kitco.com/ind/Holmes/holmes_apr042010.html
I like the information presented that would argue against a bubble especially the comments about the lack of a price spike in terms of standard deviations. These are the types of moves that mean a market is really stretched pretty thin and will likely snap back. We are nowhere near that now. Granted gold could easily settle into the summer since there is a seasonal aspect to gold. But I think that may be less important with investment demand versus social demand.
I also think the comments about the gold as a percentage of total financial assets is a telling graphic as well. There is clearly not the widespread interest that there was in 1980. So until we see that number crossing 2%, we won't, in my opinion, be coming close to bubble territory. Two percent is probably what might even be considered reasonable in terms of asset allocation. There are many investors who have zero allocated to gold.
If you haven't invested in gold or silver, you may want to get some exposure. You could do this quickly and easily with the precious metal ETFs such as GLD or SLV. This is probably what I would do. I would also look at using protective puts to lock in profits as they hit record highs along with the underlying bullion. Also, feel free to learn more about gold by reading books from Amazon such as the one below.
http://www.kitco.com/ind/Holmes/holmes_apr042010.html
I like the information presented that would argue against a bubble especially the comments about the lack of a price spike in terms of standard deviations. These are the types of moves that mean a market is really stretched pretty thin and will likely snap back. We are nowhere near that now. Granted gold could easily settle into the summer since there is a seasonal aspect to gold. But I think that may be less important with investment demand versus social demand.
I also think the comments about the gold as a percentage of total financial assets is a telling graphic as well. There is clearly not the widespread interest that there was in 1980. So until we see that number crossing 2%, we won't, in my opinion, be coming close to bubble territory. Two percent is probably what might even be considered reasonable in terms of asset allocation. There are many investors who have zero allocated to gold.
If you haven't invested in gold or silver, you may want to get some exposure. You could do this quickly and easily with the precious metal ETFs such as GLD or SLV. This is probably what I would do. I would also look at using protective puts to lock in profits as they hit record highs along with the underlying bullion. Also, feel free to learn more about gold by reading books from Amazon such as the one below.
Monday, November 1, 2010
Silver at Decade Highs--Nearing $25 per Ounce
Have you noticed the price of silver lately? It seems to be stealthily increasing and over the past month has markedly outperformed the price of gold. I have especially noticed this because the price of Silver Wheaton stock (symbol SLW) which I own in my retirement account has gone nuts and has outperformed Goldcorp stock (symbol GG) by a wide margin.
To be perfectly honest, I haven't been paying much attention to the silver price and didn't even realize that it was approach the psychologically important $25 per ounce level. I had simply noticed that SLW was increasing dramatically. In fact, I have become worried that the stock has gotten ahead of itself so in the past week I bought some puts to protect my paper profits.
Silver is typically more volatile than gold so when the price of these precious metals begins to decline, I would expect silver to decline much more rapidly. I don't know when that will occur but wanted to be able to protect myself with puts. I also plan on allowing many of the calls that I have sold on SLW to be called out. This will decrease my exposure to the silver price since I think it might be getting a little high in the short term. Longer term I would expect that the fundamentals would argue for a higher silver and gold price. But I want to take some profits now and buy back in again later.
I did this very effectively with Akamai stock (AKAM) using the collars that I trade. I had purchased AKAM at various prices over the summer and had a net basis of $40 per share. As it ran up, I decided to take the opportunity to purchase some $50 puts for October and lock in those profits. As it turns out, AKAM was well below $50 per share so my puts were exercised allowing me $10 profit per share. Then, I bought back the stock at two different price points below $50, namely $46 and $48.82. The end result is that I now have the same number of shares that I owned before along with some extra cash. I own puts on the stock and have sold some covered calls creating a collar.
My current basis in AKAM is $47.94 with the opportunity to be called out in 3 weeks at an average price of $50.25. That would make for a one month profit of 4.8% should AKAM rise just a little farther to $52.50. If not, I will sell some December calls to lower my basis some more.
The point is that I am doing the same thing with my SLW stock. By owning the stock, I gain exposure to the silver price but have the flexibility of easily managing options to take advantage of the price swings and lock in profit using puts and collars. My current basis in SLW is $24.15 per share overall with an average call strike price of $27.31 provided SLW is above $29 per share 3 weeks from now. If not, I will sell calls on the shares I have left although I would expect some to get called out.
Anyway, this is just one example of using stocks to gain exposure to real assets. I suspect real assets and the companies that deal in them will be a profitable investment for the next several years. Until next time--KEEP IT REAL!
To be perfectly honest, I haven't been paying much attention to the silver price and didn't even realize that it was approach the psychologically important $25 per ounce level. I had simply noticed that SLW was increasing dramatically. In fact, I have become worried that the stock has gotten ahead of itself so in the past week I bought some puts to protect my paper profits.
Silver is typically more volatile than gold so when the price of these precious metals begins to decline, I would expect silver to decline much more rapidly. I don't know when that will occur but wanted to be able to protect myself with puts. I also plan on allowing many of the calls that I have sold on SLW to be called out. This will decrease my exposure to the silver price since I think it might be getting a little high in the short term. Longer term I would expect that the fundamentals would argue for a higher silver and gold price. But I want to take some profits now and buy back in again later.
I did this very effectively with Akamai stock (AKAM) using the collars that I trade. I had purchased AKAM at various prices over the summer and had a net basis of $40 per share. As it ran up, I decided to take the opportunity to purchase some $50 puts for October and lock in those profits. As it turns out, AKAM was well below $50 per share so my puts were exercised allowing me $10 profit per share. Then, I bought back the stock at two different price points below $50, namely $46 and $48.82. The end result is that I now have the same number of shares that I owned before along with some extra cash. I own puts on the stock and have sold some covered calls creating a collar.
My current basis in AKAM is $47.94 with the opportunity to be called out in 3 weeks at an average price of $50.25. That would make for a one month profit of 4.8% should AKAM rise just a little farther to $52.50. If not, I will sell some December calls to lower my basis some more.
The point is that I am doing the same thing with my SLW stock. By owning the stock, I gain exposure to the silver price but have the flexibility of easily managing options to take advantage of the price swings and lock in profit using puts and collars. My current basis in SLW is $24.15 per share overall with an average call strike price of $27.31 provided SLW is above $29 per share 3 weeks from now. If not, I will sell calls on the shares I have left although I would expect some to get called out.
Anyway, this is just one example of using stocks to gain exposure to real assets. I suspect real assets and the companies that deal in them will be a profitable investment for the next several years. Until next time--KEEP IT REAL!
Monday, June 21, 2010
Buying Gold at Record Prices
I then took that same individual and had them purchase the S&P 500 index using $1000 each January. So two investors each spending $1000 each year from 1980 through 2010. You might think that the investor buying stocks would have made a killing compared to someone buying gold. I certainly thought that they might do better.
But in reality the difference was only about 2% total in favor of stocks. I was really surprised given that gold was in a terrible bear market and stocks had the greatest bull run in history.
I mentioned this on another blog in the comments (did not spam with a link) and was criticized for not including dividends of the S&P 500. It is a legitimate concern for sure but one that is not correct. For if you include dividends (which are currently 2%), you need to include inflation as well and figure out the reduced purchasing power of the dollar.
It turns out that the dividends and inflation cancel each other out and doing a simple calculation as I described is in fact legitimate, and the results are valid. When I added in dividends and then adjusted for inflation, the results were incredibly close. The bottom line is that gold does produce income but protects purchasing power. Stocks produce income to make up for the loss of purchasing power.
It really didn't matter if you invested in gold or stocks, you still ended up in the same place with the same wealth at the end of 31 years. The key was investing on a consistent basis and buying whether the price was high or low. So don't be afraid to start investing in gold now. Or don't be afraid to invest in stocks now. Just keep a long term perspective.
Until next time--KEEP IT REAL!
Friday, April 9, 2010
Gold Breaking Out of Trading Range
Have you been paying attention to the price of gold lately? It appears to be breaking out of a trading range and has pushed past resistance at $1135 per ounce. As I write this, spot gold is trading over $1157. The latest push has been ascribed to uncertainty surrounding the financial situation of Greece.
I find this interesting since the last time investors were concerned about the financial crisis, the dollar was allegedly the beneficiary of the uncertainty. I find it hard to believe that this could be the sole reason. While it may be part of the equation, I think that many investors are setting up for the inflation trade.
I, for one, have felt that the Fed will be late in raising interest rates just as they were late in lowering them and raising them the time before. It would be almost guaranteed that they will do little before November elections. You can bet the political pressure is enormous. For this reason, I see inflation as a potentially huge concern in the next several years. Just look at what the price of oil has done lately also, and you will see that the concern is unlikely limited to the Greek situation.
Have you benefitted from the gold trade? I have seen my holdings in Goldcorp go up in the last several weeks although not as much as I would have expected. My Silver Wheaton stock has done very well over the past week since the price of silver is also doing well. You should definitely consider investing in a little gold and silver since I see several more years (maybe up to 10) left in this commodity super cycle.
Until next time--Keep it real!
I find this interesting since the last time investors were concerned about the financial crisis, the dollar was allegedly the beneficiary of the uncertainty. I find it hard to believe that this could be the sole reason. While it may be part of the equation, I think that many investors are setting up for the inflation trade.
I, for one, have felt that the Fed will be late in raising interest rates just as they were late in lowering them and raising them the time before. It would be almost guaranteed that they will do little before November elections. You can bet the political pressure is enormous. For this reason, I see inflation as a potentially huge concern in the next several years. Just look at what the price of oil has done lately also, and you will see that the concern is unlikely limited to the Greek situation.
Have you benefitted from the gold trade? I have seen my holdings in Goldcorp go up in the last several weeks although not as much as I would have expected. My Silver Wheaton stock has done very well over the past week since the price of silver is also doing well. You should definitely consider investing in a little gold and silver since I see several more years (maybe up to 10) left in this commodity super cycle.
Until next time--Keep it real!
Tuesday, October 6, 2009
Gold At Record High
Have you been following gold recently? It surpassed the previous record set in March 2008, hitting an intra-day high of $1045 per ounce. The purpose of this blog is to discuss real assets such as gold which will maintain their purchasing power over the longer term. Gold is mainly up because the dollar is down. This means that it takes more dollars to purchase things on the world market.
It will take more dollars to purchase a barrel of oil. It will take more dollars to purchase that foreign automobile. The dollar is worth less today than yesterday and now has less purchasing power. Did your salary go up? Did you make more today than yesterday? You can bet with oil going up that a gallon of gas will cost more in the next day or so if not on your way home from work.
Why is it that gasoline can spike up by 30 and 40 cents per gallon overnight but never fall more than a few cents at a time? That certainly irritates me. Maybe I just ought to own a gas station or at least stock in an oil company. That way when the cost of oil goes up, I will be sad because I will pay more at the pump, but happy because my investments are worth more.
Another good reason to own real assets! So, the question is: Are you sad because the dollar is down? Or happy since gold is up? I'm happy today.
Until next time--Keep it REAL!
It will take more dollars to purchase a barrel of oil. It will take more dollars to purchase that foreign automobile. The dollar is worth less today than yesterday and now has less purchasing power. Did your salary go up? Did you make more today than yesterday? You can bet with oil going up that a gallon of gas will cost more in the next day or so if not on your way home from work.
Why is it that gasoline can spike up by 30 and 40 cents per gallon overnight but never fall more than a few cents at a time? That certainly irritates me. Maybe I just ought to own a gas station or at least stock in an oil company. That way when the cost of oil goes up, I will be sad because I will pay more at the pump, but happy because my investments are worth more.
Another good reason to own real assets! So, the question is: Are you sad because the dollar is down? Or happy since gold is up? I'm happy today.
Until next time--Keep it REAL!
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