Now is the time to invest in gold and silver: 7 tips to increase your wealth

With the most recent breakout in the gold and silver price, we seem to have a confirmation that the correction of more than a year is over. The gold price corrected from over 1,900 US dollar (beginning of September 2011) to 1,515 dollar earlier in 2012. Silver declined from almost 50 US dollar (beginning of May 2011) to around 26 dollar. After a long correction, it seems to be time for a move higher. Who knows, maybe we’ll soon see all-time highs. It seems to be the time to step into gold and silver. This article provides tips for individuals and investors who want to profit from the next ride up, but also protect against the economic turmoil in the world.

Tip 1. People globally are accumulating gold & silver to protect against the debt crisis.

An increasing number of individuals and investors globally are buying gold & silver in the first place to protect their wealth and savings. Even Central banks are accumulating gold on a large scale. What can we learn from this trend? People are protecting their purchasing power against the negative effects of the ongoing global debt crisis. Gold and silver are a safe store of value. With one ounce of gold you will be able to buy the same goods in let’s say 3 years. The paper money you are owning will lose its value over the same period of time.

We are witnessing a severe crisis, caused by excessive amounts of government debts and massive money printing mainly in the Western countries and Japan. The most logic outcome of those practices is inflation, which results in a declining value of paper money.

Tip 2. You too should own gold & silver, it’s very simple.

It became very simple over the past years to own precious metals. There are actually more ways than ever to buy gold & silver. Here are some tips:

  • Ideally you buy gold and silver in the form of 100g bars, 250g bars or 500g bars. Don’t buy large bars, as you will potentially encounter difficulties selling them. Make sure you own the metal; so an unallocated solution from your bank is not an adviced solution. A simple but safe solution is to store the metals in a personal safe, but not at home.
  • Consider buying some gold and silver coins like the South African Kruegerrand, the Australian Kangaroo, the Swiss Vreneli, the Canadian Maple Leaf or the American Eagle. Don’t buy exotic coins as you will have difficulties to find buyers when you want to sell.
  • There are Exchange Traded Funds (ETF’s) you can buy on the stock exchanges. Make sure you only buy the ETF’s that are backed with physical gold and silver, like Sprott Physical Trust or Central Fund of Canada.
  • You can easily buy and store precious metals via online programs. The huge advantage is that the metal is stored in a safe vault, which is usually included in the service. We like Hard Assets Alliance as it is very accessible. For US and Canadian citizens, there is an accessible silver savings program SilverSaver.com. If you prefer Swiss authenticity 100% outside the banking system, then you should consider GlobalGold.ch.

Tip 3. Be sure to own physical gold & silver, avoid paper holdings.

Avoid as much as possible buying paper gold or silver, like the ETF’s GLD and SLV. They became very popular because of their ease of use, but there are some risks associated with the ETF’s. As a general rule of thumb, remember to own your gold and silver outside the banking system. We’re afraid that ETF’s could be knocked down when a systemic financial crisis should occur. If you want an example of what can go wrong with paper gold, then have a look at the recent drama that occurred with MF Global: investors simply lost all their money.

Tip 4. We are in stage 2 of the 3 in the gold bull market, still far away from the top.

Every market goes from undervalued to fairly valued and finally overvalued. These are long term trends which are called “wealth cycles”. The key to be successful in your personal or professional investment life, is to get rid of overvalued assets in order to accumulate undervalued assets.

If you look at the current gold and silver prices, you might think that the metals are overvalued. You could be wrong. Expressed in nominal terms, the prices look high indeed. But if you monitor   following indicators, you’ll get another picture:

  • When taking inflation into account, the gold and silver price are much lower than their peak of 1980.
  • When looking at the personal ownership of gold and silver, you’ll see a ratio of roughly 1:10.000 people in the Western world who own the metal.
  • When comparing the current gold and silver investments with the ones at the top of the previous bull market in 1980, you’ll see a ridiculous low amount of invested assets in precious metals today.
  • We did not see any parabolic move of the gold or silver price. If you look back to 1980,you’ll see what parabolic means.

We are currently in the second stage of the bull market. When we enter the third and final stage, a hype will occur and everybody will rush to own gold and silver. Clearly “smart money” is already profiting from the current undervaluation of gold and silver; as usual, they are ahead of the herd. Are you too?

Tip 5. Be prepared to see serious price moves, mainly in silver … it’s normal.

In general, all commodity markets tend to move sharply. Gold and especially silver follow the same principle. It’s quite common to see the silver price move 3% or more on a particular day. As the long term bull market in gold & silver continues, the volatility intensifies as well. So we can expect an even more intense price action. Be prepared and do not panic, it’s a characteristic of the bull market.

The “heart fainted” investor will preferably need to focus on gold. If you are not afraid of volatility and you have an iron stomach, then you could go for silver. You’ll have potentially higher profits. But be sure to time your purchase.

Tip 6. Timing your purchase is crucial, never chase prices higher.

One of the key decisions is to determine when to do your purchase. It’s a decisions you should base on the long term charts. The “golden” rule is to buy the dips (they always come) and avoid buying at the peaks. Have a look at the gold chart of the past 10 years (chart courtesy Goldchartsrus.com).

The price is moving almost perfectly in a range of higher highs and higher lows. Don’t chase prices higher; just wait to buy the dips. Don’t be afraid of waiting a bit if prices are near an intermediate peak. You should welcome decreasing prices for the buying opportunity you get.

Tip 7. The previous century was for gold, this one is for silver.

During the past decade both gold and silver performed very well in nominal terms. When looking at the gold/silver ratio, most precious metals experts agree that the silver price will increase sharper than gold. One of the reasons is that the historical  gold/silver ratio is approximately 16/1. The ratio tends to move to that average on a longer term basis. Currently it’s almost 60. Do you see the opportunity?

Another way to estimate the potential of a silver investment, is to look at the supply side. Silver is expected to encounter severe shortages because of the combination of its increasing industrial usage and increasing  investment demand. You would be surprised to learn how much industries are using silver as a raw material in manufacturing products. Silver is all around you: your laptop, mobile phone, jewels, light switch, your car, mirrors, solar panels, batteries, electrical products like TV or washing machine, etc.

 

Want to read more about the above topics? We have a full article per tip.

 


 

Beginners’ Guide – All Articles

 

INTRODUCTION TO THE WORLDS OF GOLD & SILVER

What’s This Financial Crisis About and What’s The Link With Gold & Silver?

Physical Gold: antidote against the ongoing global debt crisis

7 key benefits of owning gold and silver

7 Ways to Invest in Gold  and  7 Ways to Become a Silver Investor

Is Silver a Safe Investment  and  Are Silver Coins a Good Investment

Buying Silver is a Volatile Investment  and  The Value of Silver

Why To Buy Gold Bars as a Gold Investment

Understanding Gold Coin Prices

Understanding Gold Price Per Ounce

 

7 TIPS TO INCREASE YOUR WEALTH WITH GOLD & SILVER

Introduction: Now is the time to invest in gold and silver – 7 tips to increase your wealth

Tip 1: Gold and silver is for everyone – You too should own it

Tip 2: Be sure to have physical gold & silver

Tip 3: We are in stage 2 in the long term gold & silver bull market

Tip 4: Be prepared to see sudden price drops

Tip 5: Timing when buying is crucial

Tip 6: This is the century of silver

Tip 7: Gold & Silver stocks can have high yields

 

IS NOW THE TIME TO BE BUYING GOLD & SILVER?

7 facts proving we are in a long term powerful uptrend in Gold and Silver

Is This the Best Time to Be Buying Gold and Silver?

Gold Investments in 2012

 

THE BEST GOLD & SILVER INFOGRAPHICS

Is gold a bubble? Look at this Infographic for the answer.

Own physical Gold? This infographic explores Vaulted Gold as one of your options.

Infographic: all you need to know about Gold in the world