My latest blog for Motley Fool Canada was posted today: click on The New Case for Gold.
That headline also happens to be the title of a new book by global currency guru James Rickards. You can find the book here.
What does Rickards mean by the NEW case for gold? When I say gold here, by extension I mean silver and other precious metals, preferably in bullion or coin format, not “paper” or electronic substitutes.
Rickards does go beyond the familiar arguments of gold as a combined inflation/deflation hedge, and does so in a 21st century context. He breaks new ground by referring to gold’s role in cyberfinancial warfare, its importance in economic sanctions in nations like Iran, and gold’s future as a competitor to the world money system known as SDRs: the Special Drawing Rights issued by the International Monetary Fund.
HIs main thesis is that G-Day is rapidly approaching: an ominous day when all the investors with mere paper or electronic claims on bullion actually attempt to procure the actual physical underlying metal. Like a run on the bank, the claims would far exceed the actual amount of the available metal. If and when that occurs, he believes the price of the metal would soar to over US$10,000 per ounce, in which case even a 10% insurance position would nicely cover losses in other asset classes should such a global monetary collapse actually occur.
The Real Crash
The Motley Fool blog also looks at another “bear” book that is similarly bullish on gold: the updated 2016 edition of Peter Schiff’s The Real Crash: How to Save Yourself and Your Country.
That country is of course Schiff’s homeland, the United States. And as I point out in the Fool blog, Schiff is convinced the US dollar is on the decline and that Uncle Sam is all but bankrupt.
A lot of the book, in fact most of it, is political commentary and proffers recommendations that investors can ignore: they can skip right to the final chapter, titled Investing for the Crash. There Schiff asserts that what investors thought was safe is no longer safe: chiefly the US dollar and US treasuries.
He splits his recommendations into three equal chunks: foreign (not US) quality dividend-paying stocks (mostly from Europe), cash and foreign bonds; and yes, gold and gold mining stocks. He likes both physical gold (his firm offers it) as well as a portfolio of senior gold miners and mid-tier and junior producers. Those who don’t want to do do the research can use diversified mutual funds, which Schiff’s firm also sells.
As I note in the original blog, I’ve always felt a 10% strategic position in the precious metals asset class can help investors sleep better at night as a form of insurance against the kind of economic armageddon Rickards and Schiff suggest may be coming. I don’t know about that but the 10% recommendation is used by various financial pundits, including Mad Money’s Jim Cramer.
It’s a bit like having fire insurance on your house. You sure don’t want it to happen but if it does, you may be glad you were prudent enough to get the coverage.