It’s time to get back into the precious metals market. Look at the current headlines of late: Greek default hovering overhead, mystery glitch closes NYSE, Airline company ceases all flights due to computer problems, Chinese stock market crashes 28%, and the U.S. mint just ran out of silver.
So, as we all reel from the salvo of body blows leaping off the TV screen we have to punch the pause button just to catch our breath. In the interim as we hold the button down we all should ponder just where the true financial safe haven is today in this current deluge of overwhelming news. You can’t go to the European Union without risk, Switzerland has shut the door and North America has all but regulated it business to flee to Asia--and yet the Chinese market has been in freefall the last week. So, where do you go with your money?
Right now, I argue it’s gold, and what we need to understand is what a real value it is at these levels and why precious metals create the safe haven mentality as a global currency. Now granted, you could argue the mainline alternatives such as having a lot of cash is a safe place to be. Buying bonds has always been good, and they burn very well also so you have the same options open just like with cash.
Yup, you guessed the next one, that also holds for stock certificates but the only problem is it's an all electronic issue now so you can’t even cook with them. Real estate is good bet except the second the state you reside in goes broke they jack the property taxes up to astronomical heights. No matter how much the local administration has poorly managed things, nothing seems to happen to them--you and I will have our land confiscated if we fall behind on our taxes.
So this leaves us with the precious metals market and the simple fact that gold has always held a value going back to the rulers of ancient Egypt. When you think about it, the stone masons working on the pyramids of Egypt were paid in garlic, onions and gold. So, I like the track record of gold. Going back 4,000 years is a long time to hold a value for anything.
Now let’s take look at what you get when you buy into metals for the long term starting at these levels in history. The current knock on the metals market is they have been in a down trend for the past few years. Silver is at $15 dollars down from $55 and gold at $1,155 down from $1,850 which makes for a gloomy picture as well--unless you look at the larger picture. We are getting very close to the overall production cost of refined precious metals. What this means is you’re very close to being able to purchase a tangible asset at cost. Why is this such an opportunity to an investor?
Here are just some the factors that contribute to a coins and bars premium over the spot price and contribute to making these levels look right for an opportunity. These include costs incurred by the refiner, mint, bullion bank, depository, distributor, wholesaler, shippers, retailer and other parties:
1. Manufacturing costs
2. Fabrication costs
3. Packaging costs
4. Administration costs
5. Security costs
6. Storage costs
8. Sales staff cost
10. Transportation/shipping expenses
11. Profit margin in each step of the supply chain