Pay attention to precious metals

Pay attention to precious metals 

“If you don’t own gold…there is no sensible reason other than you don’t know history or you don’t know the economics of it…“

Ray Dalio, Founder of Bridgewater

https://www.zerohedge.com/news/2015-05-14/ray-dalio-if-you-dont-own-gold-you-either-dont-know-history-or-economics

In Dalio’s opinion, and my own, a precious metals strategy is essential in any optimal portfolio.

Examples of different strategies and their histories are given below.

Let’s just look at gold. The long term investment potential is significant and the recent pick up in momentum has only just brought it off historical lows.

It has outperformed the S&P 500 by more than 25% over 11 months since the beginning of October last year.

https://www.tradingview.com/symbols/spread/AMEX%3AGLD%2FAMEX%3ASPY/

It has recently made new all time highs in Euros.

https://www.tradingview.com/symbols/XAUEUR/?exchange=FOREXCOM

Short term, a correction would not be a surprise, but take a look at how far it could still go. The ratio to the S&P 500 has historically been far more than 10 times higher! The data shows  that for real long term diversification, gold has been an essential strategic asset.

https://twitter.com/JanGold_/status/1168091859354361856

While it’s well known that gold has a deep financial history going back thousands of years, it is not widely understood why it is still a key asset class today, or how to make appropriate strategy. It is often left completely out in many recommended allocations.

Gold is now reacting to a compelling set of long term circumstances as discussed in February this year.

1. Record levels of central bank gold buying.

https://old-site.chris-belchamber.com/from-risk-to-instability-gold-allocation-review/

2. Record levels of low and negative interest rates, which have failed to boost either Europe or Japan for decades.

https://www.bloomberg.com/opinion/articles/2019-09-03/negative-interest-rates-threaten-the-financial-system

3. No sign the global cycle has finished its downtrend. Central Bank Failures and Recession Risks.

https://www.businesscycle.com/ecri-news-events/news-details/economic-cycle-research-ecri-lakshman-achuthan-business-cycle-notes-interview-update-outlook-china-us-central-bank-failures-recession-risks

Now momentum has returned, and precious metals are outperforming other asset classes this may be a good time to review you precious metals strategy.

Here are some examples of how precious metals can be included in either passive or active portfolio strategy, with long term backtests shown for historical and educational purposes:

https://gestaltu.com/2012/08/permanent-portfolio-shakedown-part-1.html/

http://Investment Management: Why You Need A Complete Rethink. Part 4 – Active Asset Management. Further Steps To RVAR Improvement.