Hold Gold Equities For Now
Buy Physical Precious Metals
Gold seems to have a heartbeat. Spot prices have settled over $1,270 an ounce for the past two trading sessions. But for the next week or so, I think it's wise to remain cautious, particularly in gold stocks.
Major mining companies will announce their third-quarter financials next week. Earnings will likely be partially offset by rising oil prices for some, but it's likely that miners will report very positive third-quarter earnings (and likely record production levels) on stronger metal prices.
This should provide an immediate boost in gold stocks. However, traders will quickly take into account gold's pullback below $1,300 an ounce, which kicked off the fourth quarter. I expect all this to result in a generally horizontal pattern for gold stocks over the next week or two.
Going forward, however, gold miners are still in a good position — even if gold stays below $1,300 for the rest of the year and fourth quarter earnings drop.
And that's simply because fourth-quarter earnings will be overshadowed by annual earnings, which will be released at the same time and will likely show multi-year revenue highs for many gold miners. Headlines will read, “Barrick Reports Boost in Annual Earnings” instead of “Barrick Reports Drop in Quarterly Earnings.”
But for now I want to stay out of trading gold stocks and focus on owning physical precious metals.
I have been a constant buyer of physical precious metals again for the past year. I make a minimum of two small purchases a month, depending on current prices. Here's what I'm buying now and why I'm buying it...
American Gold Eagles
In terms of gold bullion, American Gold Eagles are the market standard. The most common and best priced is the standard one-troy-ounce AGE.
Gold Eagles are also available in fractional sizes of 1/2 ounce, 1/4 ounce, and 1/10 ounce. And although the fractional AGEs command a higher premium than their one-ounce siblings, these are what I'm currently buying.
I think it can be argued that the absolute most important factor to a physical precious metal investment is liquidity. And liquidity is my reasoning for buying fractional AGEs right now. The fact is, it is simply much easier to sell fractional AGEs than one-ounce coins due to their lower values.
Right now, I'd say that 1/4-ounce AGEs have the best balance of premium and liquidity.
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10-Ounce Silver Bars
The most liquid silver bullion is no doubt American Silver Eagles. However, the premium for Silver Eagles is (and has been for a long time) a bit too high. I do own many tubes of Silver Eagles. But the bulk of my physical silver holdings (by weight) is in silver bars.
Silver bars are typically the most affordable way to buy silver. Most silver bars are produced by private mints. These include Sunshine Mint, Republic Metals, Silver Towne, Johnson Matthey, A-Mark, and many others. Among the most notable national mint to produce silver bars is the Royal Canadian Mint. The RCM produces a 10-ounce and 100-ounce silver bar.
Personally, I have been purchasing a mix of privately minted and RCM 10-ounce bars. 100-ounce silver bars carry a lower premium. But again considering liquidity, the 10-ounce bar size is ideal.
American Platinum Eagles
As I've mentioned to you before, physical platinum is a metal that I believe should be owned only secondary to gold and/or silver. However, with platinum prices below $950 an ounce, I am a relatively strong buyer of platinum right now.
But when it comes to physical platinum, investment options are very limited. There are only a few mints in the world that produce a platinum product, and the U.S. Mint is one of them... for now at least.
The U.S. Mint is actually required by law to produce a gold and silver bullion coin. But there is no such legal requirement for platinum bullion. So the Mint only produces its American Platinum Eagles when it sees satisfactory market conditions.
For 2016, the U.S. just recently rebooted the American Platinum Eagle series. These are the most affordable coins to purchase right now and what I'm personally buying.
However, I want to again give a warning about the liquidity of platinum in general... The absolute first thing you should do before buying platinum is think about who you're going to sell it to when it comes time to divest. Platinum is very easy to buy. But it's not so easy to sell.
In short, I think precious metal investors are best staying out of equities for the time being. Use this time to continue adding to your physical precious metal holdings.
Until next time,
Energy and Capital
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