May 20, 2015
En route to Denver
While I was in Mexico for our Global Offshore and Investment Summit in Cancun last month, I was approached by Forbes Mexico for an interview on some of the key trends in the global economy as well as internationalization strategies for investors.
You can read the full article here in Spanish, and below I’m reprinting one of the questions on precious metals.
This is understandably a topic that seems to be on many people’s minds these days.
They have seen the writing on the wall—the unsustainability of the current paper money system—but don’t know what will happen next.
Thus, the question of when and how much one should invest in gold and silver is one of the questions I’m asked most frequently.
No one can predict exactly what will rise up after the collapse of the current monetary system, but here is my take on how you can do your best to prepare yourself no matter what happens—
Tell us your thoughts on gold and silver. Is it important for investors to have them in their portfolio? If so, why?
I don’t think that gold is a good fit for a portfolio. When we think about a portfolio, a portfolio is what we hope to achieve an investment return on. But gold is not an investment.
The idea behind gold is that it is a form of savings, albeit a very long-term savings.
It’s a form of savings that can’t be conjured out of thin air by central bankers’ quantitative easing program. Or printed by a government’s printing press.
And it’s consistently shown to maintain its purchasing power over time.
Thus gold is an anti-currency. It’s a kind of asset that you own because you don’t have confidence in the paper currency issued by governments and central bankers.
So with that in mind, the idea of trading in your paper currency for gold, hoping to trade it back for more paper currency at a later date misses the point entirely.
That said—I think that everybody should consider owning precious metals. Again, not as an investment or speculation, but as a form of savings that exists outside of the conventional system.
Sometimes people buy gold and silver and then they fret over the daily fluctuations in the price. They lay awake at night worrying about whether gold is going to go below a thousand dollar or below whatever level.
I think this is a sign that you probably have too much gold. If you’re worried about it, then you’re probably over exposed.
If you have an app on your phone telling you the gold price and you’re constantly looking at it, then that’s your instinct telling you to lighten up.
Rule number one is to be comfortable with your exposure. That means having a gold position that you are comfortable with, that you can lock away and not even think about how the price is moving.
Then you can go on to sleep well, knowing that you have some real savings that can stand the test of time.
