You Must Own Gold Today
Editor's note: Gold may be entering the early stages of one of the biggest bull markets we'll ever see.
That's why we recently sat down for an exclusive interview with Bill Shaw, senior analyst of Stansberry Gold & Silver Investor.
In today's Masters Series – the first half of a two-part series – Bill explains why everyone should own gold... how much of your portfolio to allocate to the metal today... and why owning a "one click" fund just doesn't cut it...
You Must Own Gold Today
An interview with Bill Shaw, senior analyst, Stansberry Gold & Silver Investor
Sam Latter: Bill, let's start off with a basic question... Why should all investors own some gold today?
Bill Shaw: There are a number of reasons why everyone – young or old – should own gold.
Gold is very durable. Almost all of the gold ever mined is still in existence today. It's portable. It's consistent – the gold mined in Canada is the same as gold mined in Australia. It's also rare... All of the gold that has ever been mined could fit under the Eiffel Tower. It's not consumed, meaning virtually all of the gold ever mined still exists in the form of bullion, bars, coins, and jewelry. It never tarnishes. You could bury a bar in your backyard today, and 100 years from now it would still shine... Of course, we don't recommend doing that.
But the biggest reason to own gold is that it's the ultimate form of "real money." It has been used as a currency for thousands of years. It can't be created out of thin air like government-printed fiat currencies. That makes it a safe way to store wealth.
Gold's value remains consistent – even if its price in terms of U.S. dollars moves around. Gold is a kind of financial scale. The amount of gold in existence increases by less than 1% a year.
Most experts I know who buy physical gold have no intention of ever selling it. They store it somewhere safe in case of an emergency and hope they never need to use it.
Sam: And gold is universally accepted. Every major culture in the world uses it as a private form of money and savings.
Bill: Exactly. Gold can't default on its debts, unlike corporations, or what could happen with some of the governments around the world.
And it's portable. You could easily put a few hundred thousand dollars' worth into a briefcase. In a crisis scenario, having a significant amount of money in gold will be a lot easier to handle than trying to manage the same value in silver. A pound of gold is worth about $20,000. You'd need about 75 pounds of silver to walk around with $20,000.
Finally, gold is the ultimate non-correlated asset. When other asset classes are falling, gold prices typically rise.
Again, think of gold more as insurance rather than an investment. It doesn't pay any interest or dividends. It's simply a way to store your wealth and hedge against chaos and inflation. And it can help your portfolio stay afloat during a big market correction. During periods of market turmoil, it's much better to have a portion of your net worth stored in precious metals rather than being 100% invested in stocks and bonds.
Those are just a handful of the reasons why gold should be a part of everyone's portfolio, young or old, regardless of your financial situation.
Sam: So approximately what percentage of someone's overall portfolio do you recommend dedicating to physical gold?
Bill: Depending on your overall risk tolerance, you should dedicate somewhere between 10%-15% of your total portfolio to gold and gold stocks.
We just discussed the advantages to owning physical gold. But you should certainly invest a portion of your portfolio into gold stocks, too. Gold stocks are a form of insurance for your portfolio. They're a leveraged bet on gold prices.
They're a "lottery ticket" of sorts. When gold prices go up, these companies' balance sheets boom, and so do their share prices. It's a leveraged bet on gold. And if you invest in the right gold stocks during a gold bull market... watch out.
Sam: Is there a good "one click" way to buy gold stocks?
Bill: We think there are better ways to invest in the sector than focusing on just one gold fund. For example, you could buy something like the VanEck Vectors Gold Miners Fund (GDX) for a simple way to gain exposure to gold-mining stocks. But exchange-traded funds (ETFs) like that have two major drawbacks.
Because an ETF is a basket of stocks, you'll own some great companies and some poor companies. The stocks in ETFs like GDX fall under a simple set of parameters. They aren't thoroughly vetted. And when you buy an ETF like GDX, you aren't getting exposure to the physical metal.
We prefer to diversify across several precious metals investments, including physical gold, major gold producers, junior explorers, and collectible coins.
That strategy has been a winner for us... outperforming the ETF "basket approach" by about three times.
In the 2016 annual Report Card, Porter noted that our Stansberry Gold & Silver Investor portfolio was up 12.5% from April through that December. If you had simply purchased GDX instead, you would have only made about 4%. That's an outstanding outperformance, especially when you consider that a large chunk of our portfolio is dedicated to investing in the metal itself, which went down in value over that period.
Sam: Does that mean explorers aren't the best way to invest in gold stocks?
Bill: There's nothing wrong with having some gold explorers in your portfolio. But we recommend spreading your exposure around the sector.
This approach also helps keep you from buying too much... We see this a lot, especially during a bull market. Folks who are new to buying precious metals become enamored after seeing some big returns... greed sets in... and they go "all-in." Soon, they have way too much of their portfolio in gold. When gold prices pull back – which they eventually do, even in a bull market – these people get clobbered.
In the Stansberry Gold & Silver Investor portfolio, we recommend a combination of physical gold, major gold producers, royalty companies, companies that hold prized precious metal deposits but aren't developing a mine, and a handful of smaller producers.
We recommend putting a smaller portion of our portfolio into gold explorers. These are the volatile companies that can really boom or bust. When one of these companies makes a successful discovery, its stock can soar by hundreds of percent.
Sam: Do you have any favorite gold stocks today?
Bill: Earlier this week, we made a brand-new recommendation to Stansberry Gold & Silver Investor subscribers.
It's an intriguing company. Mining mogul Ross Beaty and resource legend Rick Rule both recently singled out the CEO as someone they're keeping their eye on.
The company's business model is one of our favorites. Rather than betting it all on a single mine, the way this company is structured, it has a diversified portfolio of more than 160 projects. And it just made a big splash with a recent acquisition, which we estimate could return nearly two-and-a-half times what the company paid for it.
Out of fairness to subscribers, I can't give away the name here. But we believe it could be a double in waiting.
Editor's note: Since 1999, gold and silver miners have dominated the Stansberry Research Hall of Fame, including our best recommendation of all time – Seabridge Gold (SA), which soared 995%.
Recently, Bill discovered a tiny exploration company that could be the next Seabridge. It's sitting on a gold deposit worth an estimated $5.5 billion. Bill flew 1,243 miles to see it with his own eyes... And he shared his findings – along with a few pictures he snapped during his trip – in a recent presentation, which you can view right here.