Fidelity: Gold a Form of “Financial Insurance”

Release Date: 
Friday, November 14, 2014

Gold and Silver Prices

Gold and silver prices finished the week up, retracing losses from early week trading. “Gold surged over 2 percent on Friday to just shy of $1,200 an ounce, as short covering, fund buying and a sudden weakening of the dollar offset better-than-expected U.S. data that signaled an improvement in the world's top economy that diminished demand for safe-haven metals. Bullion bolted more than $40 midmorning in New York after dropping more than 1 percent in early trade to test the $1,145 level, where strong support was seen twice in the last four sessions, triggering pre-weekend short covering.” (“Gold soars on short-covering, new fund buying as dollar falls,” Reuters, 11/14/14.)

Gold finished the week up $9.20, closing at $1,187.90. Silver prices closed the week at $16.30, up $0.49.

Fidelity: Gold a Form of “Financial Insurance”

Joe Wickwire, research analyst and portfolio manager with Fidelity Investments discussed the benefits of including gold in a portfolio at the London Bullion Market Association Precious Metals Conference this week.

“As many as 40% of mining companies cannot turn a profit with prices below $1250. We can extrapolate therefore that if prices do not rise from where they now languish ($1163) many mining companies will fold. This would lead to a supply crunch and consequent rising prices.

“Mr. Wickwire reviewed the conditions behind the surge in gold price from 2001 - 2008 and concluded that similar dynamics are currently in operation. ‘Today is quite similar - there are negative real interest rates, while countries are using currency as a policy tool to support nominal growth at the expense of real growth. And on top of that, supply from the gold industry is starting to come down.’ He emphasized the importance of owning gold as a form of financial insurance and concluded, ‘It's important to remember that a little gold goes a long way. If you had 5-10% allocation in your portfolio from 2000 to 2010, you wouldn't have suffered a lost decade.’” (“‘Now Is A Good Time’ To Buy Gold - Fidelity Investments,” Gold Seek, 11/13/14.)

Aden Sisters: Keep Your Physical Gold

Noted analysts and publishers of the Aden Forecast, Mary Anne and Pamela Aden, discussed former Federal Reserve Chairman Alan Greenspan concerns about the economy and his views on gold.

“The highlight for the always great New Orleans investment conference last month was Alan Greenspan. He was special. One key moment was when he was asked about gold. He said gold is a good place to put your money these days as its value as a currency sits outside of government policies. When asked where it will be in 5 years, he said ‘higher.’ By how much, he replied ‘measurably.’ This is how major investors need to think about gold investing today. If you are a long term investor, keep your physical holdings.”

“Central banks were big buyers of gold in September. Just as we saw lower demand earlier this year, China, Russia and India stepped up their gold buying…one thing is clear, central banks around the world are making it a point to accumulate gold…We have to say that gold on a big picture basis is saying the same thing Alan Greenspan is suggesting. And it shows why central banks are buying physical gold and wanting to keep it in their home country. Eventually gold is going higher. And if you ask, what will gold be doing two years from now? We’d say, it’s more likely to be on an upward path.” (“Aden Forecast—November 2014,” The Aden Forecast, 11/12/14.)

Silver Demand Rising

The recent correction in silver prices has led to a surge in demand.

“Mom-and-pop investors are loading up on silver despite a price drop that has left the metal at a four-year low…The U.S. Mint said Wednesday it sold out of one ounce American Eagle silver coins, a quintessential small-investor purchase. October saw the Mint’s strongest silver coin sales since January 2013, the last time the Mint sold out of its silver inventory. Individual investors play a bigger role in silver than in other markets, including gold, where hedge funds and other large money managers tend to dominate trading, analysts say. The metal appeals to buyers who distrust financial markets and are looking for protection against future economic turmoil, such as a stock-market crash or runaway inflation.”

“[S]mall investors tend to take the long view on precious metals, treating them as portfolio insurance against unexpected swings in stocks and bonds, said James Steel, a precious-metals analyst with HSBC in New York.” (“Small Investors See Silver Lining,” Wall Street Journal, 11/11/14.)

Jim Grant: Loose Monetary Policy May Destroy World’s Currencies

Financial journalist and author Jim Grant told The Blaze this week he believes the current monetary policy will ultimately lead to the collapse of currencies throughout the world.

“Free-marketers have been derided by Keynesians and other monetarists for predictions of impending doom due to the policies of the Federal Reserve. But if what one of the most erudite and outspoken leaders of the free-market chorus, Jim Grant, says is true, it might be he and his fellow capitalists who get the last (terrifying) laugh...Grant explained why the prognostications of those concerned about the collapse of the dollar have to date proven wrong, but he still expects to see the ‘final destruction or near destruction’ of currencies throughout the world.

“Grant attributes the lack of massive price inflation in spite of money printing in the U.S., and around the world to three primary factors: (i) ‘re-channeling of redundant dollars into financial assets and real estate,’ as opposed to other assets (ii) ‘worldwide competition for labor,’ which consequently keeps the prices of goods down and (iii) the fact that the dollars that the Federal Reserve has created ‘have…been cooped up in the financial system rather than circulating in the economy because the banking system has been impaired, and the regulators have seen to it that loans are not so freely forthcoming as they might have been otherwise.’”

“‘There will come a time I think where there will be so much as to frighten even the complacent people on Wall Street, and there will finally be this inflation that has been so long in coming…But I do believe the end of all this is the final destruction or near destruction of these currencies.’” (“Why a leading financial analyst believes we will see the ‘final destruction’ of the dollar” The Blaze, 11/12/14.)

Approach Year-End Planning with Confidence

As you prepare for end of year tax and retirement planning, consider whether your portfolio includes a recognized safe haven asset such as physical gold or silver. If not, learn how easy it is to add physical gold or silver to a self-directed IRA from Goldline, your trusted precious metals dealer for more than half a century.

Goldline has made it even easier to add gold and silver with its exclusive Express IRA® program. Goldline's Express IRA® program allows you to order your precious metals as soon as the self-directed IRA is opened. Further, your qualifying purchase of Goldline's limited production bullion coins comes with unprecedented price protection with Goldline's Price Shield℠. If the selling price of your coins decreases on the selected anniversary of your qualifying purchase, Goldline will automatically re-price the coins and make up the difference in additional exclusive bullion coins.

Plus, if you make a qualifying purchase in November, Goldline will offset your IRA fees for two full years with FREE, limited production bullion coins delivered directly to you.*

*Value of bullion coins based upon the current ask value

Goldline provides a wrap-up of the week's precious metals news along with important commentary on the American Advisor Week in Review audio program. Listen to the show below:

*Federal IRA tax laws are complex and may change from year to year. Goldline believes it is appropriate to have 5%-20% of retirement portfolio allocated to precious metals. Other individuals and institutions may recommend different percentages. As with any investment, you should consult your tax advisor before making a decision regarding precious metals IRA investments.

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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

You should review Goldine's Account Agreement along with our risk disclosure booklet, Coin Facts for Investors and Collectors to Consider ®, prior to making your purchase. Goldline has a spread or price difference between our selling price, called the "ask", and our buy-back price, called the "bid". That spread varies depending on coin or bar you acquire. Spreads on 1 oz bullion coins, 90% silver dimes and quarters, and one ounce and larger bullion bars are 13%. All other coins have a spread of 28%. There is also a 1% liquidation fee when you sell your coins back to Goldline. The market must go up enough to overcome this spread before an actual profit is achieved. Precious metals and rare coins can increase or decrease in value. Past performance does not guarantee future results. Coins are a long-term, three- to five-year, preferably five- to ten-year investment. We believe precious metals are suitable for 5% to 20% of the average investment portfolio though others may recommend a different percentage.

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