Why I'm Happy to Hold Wealth in Gold and Silver
Commodities / Gold & Silver 2009 Jul 12, 2009 - 05:05 PM GMTBy: DailyWealth
Chris Weber writes: Now that the first half of 2009 is over, I have to say I'm very happy with the way gold, silver, and platinum have done this year. I've been keeping a large portion of my money in the metals for years.
I like the way that the spotlight has now turned away from them, but quietly – when you look back on the year so far – they all have had solid gains. Quiet gains; those are my favorite kind. Gold has had three consecutive rising quarters now. But more important, it has been holding most of the huge gains of the bull market of recent years.
Most other assets that have jumped hugely spike up and then collapse for years: Think real estate and high tech stocks. But gold has been in a great bull market for a decade and, though still in a corrective phase, has still risen solidly for months.
It started the year at $880; at mid-year it is $926.70. That's a rise of 5.3%, or 10.6% annualized (though no one knows how the rest of the year will play out).
Again, to me, this is great action. Quietly, gold has added about one percent per month so far this year. And no one is talking about it. Huge falls have proven temporary, but these are what people focus on. All the while, over time, the price rises. I'd be happy to take a 10% annual rate of return consistently on anything.
And if double-digit annualized returns are what gold is giving when it is "sleeping," what will it do when it awakes?
Silver started the year at $11.33. At mid-year, it was $13.54. Again, maybe many are not satisfied. But do the math and you get a 19.5% return. That's nearly 40% annualized. What's to complain about? And even more so than with gold, the focus of the public is far from silver. You give me an asset that rises by nearly 20% in six months with no one watching it, and I'll be happy.
Finally, platinum climbed 27.5% in the first half of this year, the best of all. However, this one is the most volatile and thinly traded. Still, if the Dow had soared 20-something percent since the first of the year, everyone would be crowing.
And indeed, bullishness has returned on the stock markets. Most everyone now believes things will get great or continue great. But this kind of thinking for markets that have barely moved since 2009 began is misplaced. All that has happened is that they have risen from their March lows.
I expected this... Back in mid-March, when I suggested to my readers that one could buy virtually any stock, I said that a rally would cause great bullishness to return. And so it has. But one has been better off just by sitting in gold and silver and doing nothing else.
Moreover, the stock markets look quite vulnerable. The Dow Transport Index has not confirmed the last high in the Dow Industrials. And both the Dow and most other global stock markets have been doing nothing much for the past few weeks. Moreover, they have been doing it on ever-lower volume. It is possible that the bear market rally has seen its best days.
All this is why I'm happy to continue holding a large position in precious metals. Granted, their performance this year isn't as spectacular as many hoped it would be. But in gold, I own a relentlessly rising asset that benefits from the competitive currency devaluations I discussed last month. In today's world, that lets me sleep soundly every night.
Good investing,
Chris Weber
Daily Wealth Editor's note: Chris Weber is one of the best investors we know, period. He started investing at age 16 and made so much money, he's never had a "real" job in his life. The fact is, he has never been wrong about a major market call. For Chris' top gold & silver recommendations – where he's putting his own money – click here.
The DailyWealth Investment Philosophy: In a nutshell, my investment philosophy is this: Buy things of extraordinary value at a time when nobody else wants them. Then sell when people are willing to pay any price. You see, at DailyWealth, we believe most investors take way too much risk. Our mission is to show you how to avoid risky investments, and how to avoid what the average investor is doing. I believe that you can make a lot of money – and do it safely – by simply doing the opposite of what is most popular.
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