Individuals look at gold now and see the wonderful returns of 17% annually on average, in the U.S. alone. What about an investor who says, "Hey, I am just going to invest in gold because it will give me a better return than equities"? Is the fact that a bad way to look at it? No, but comprehend that gold does not create wealth. It does not have cash flow, it doesn't have a management team and it doesn't have a price/earnings ratio. It's just a sterile, tangible asset. Gold doesn't even truly create a return. When you speak about returns in gold, you're actually talking about the lost buying power of the dollar. An ounce of gold today buys exactly the same amount of crude oil it did 60 years ago. It didn't increase your wealth. It basically just preserved your purchasing power over that time period. Go here now to http://silverdollar.cc for profitable investing ideas.
Even when the gold price rises, even at 17.7%/year on average over the last 11 years against the U.S. dollar, it's not making wealth. It's taking wealth that already exists and is being held by individuals who own fiat currencies. That wealth is being moved from them to people who own gold. But gold is not a wealth-generating asset. It doesn't grow something. Gold equities are different than gold. Gold equities are investments. Gold bullion is cash. A portfolio has two components. The investment component focuses on danger versus return. The monetary component provides liquidity. When you sell an investment, you have liquidity, whether gold, a national currency or some mix. You hold that liquidity until you're ready to use some of it to create your next investment or to buy goods or services.
But, mining stocks are fundamentally various than gold. A company you invest in has a balance sheet. It features a management team. Acts of God can destroy a mine. There are political risks and other considerations involved in owning mining stocks. Of course, that is also how you actually produce wealth if you choose the right stock, you get a return. It is also accurate that these stocks have exposure to the gold price in the sense that if the gold price goes up, the mining stocks most likely will go up also. But even then, there is no guarantee that the mining stocks will go up.
As I indicated earlier, though, an fascinating thing about markets is the fact that absolutely nothing functions all the time. So while usually speaking, mining stocks rise by a higher percentage in a rising gold price environment, it does not always work that way. For the last 10 years, gold has done very well, but the mining stocks have basically gone nowhere.
We're also bullish on silver and apparently anticipate the silver/gold ratio to return to historic levels. We are very bullish on silver, but not because of that ratio. The ratio is basically just the outward measure used to show how silver is undervalued relative to gold. The underlying fundamentals suggest to me that the silver price is very inexpensive relative to how I sense the supply and demand characteristics.
We have minimal economic growth in Europe and also the U.S., if any, and everyone appears to agree that China's growth is slowing. Using the globe economic climate in slow motion, and silver being an industrial metal, what tends to make you so bullish on this commodity? What underlying fundamentals will drive the silver price up? It's a great substitute for gold. Fifty-one ounces of silver do the same thing as one ounce of gold. Silver is really a monetary asset that preserves and protects purchasing power. It's the combination of the monetary and industrial demands that creates so much volatility in silver relative to gold. With gold, you have only the monetary demand. Economists call that demand inelastic, because individuals wish to own gold regardless of the price. With silver, the demand is very elastic, meaning it's very sensitive to modifications in price.
First of all, we hope people comprehend more clearly that gold is money, and that they view it from that perspective in order to properly assess whether it makes sense in their portfolios. Secondly, we hope people understand that despite the reality that the gold price has risen, it is essential to distinguish between price and value they're different issues. The gold price has risen because the dollar is being debased, but gold remains very undervalued and it's well worth it for you to continue to accumulate it. Function it into your family budget, and each and every month or two, buy more gold and silver, if you are so inclined. That leads to the third point. Don't try to trade gold; save it. When you are performing that, you're saving sound cash, and that is a great thing. Buy gold and buy silver these days for your future. Learn more at http://silver-
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