Fiat currencies and the paper assets denominated in fiat are designed to lose their value over time, but real assets like gold & silver have historically…
In the following video David Morgan (of The Morgan Report) discusses sensible gold bullion investment allocations as we hear from financial experts like David Harquail, Jeffrey Christian, and Nick Barisheff.
We also explicitly cover Jeffrey Christian’s recent 25% Gold Bullion allocation study here which backetests bullion investment allocation performances spanning from 1968 to the year 2016 vs US equities and US bonds respectively. The results would suprise most main stream financial media talking points about bullion allocations.
Why an Allocation to Bullion Currently Makes Sense?
S&P 500 price to earning valuations are currently much higher than they were before the 1987 black monday crash and even at current valuations above the 1929 black tuesday crash level. Perhaps now is the time to take some profits from equities and roll them over into precious commodities.
The following chart, provided by Incrementum’s In Gold We Trust 2018 report, illustrates that the relative valuation of commodities in comparison with equities currently seems low by historic standards.
Compared to the S&P 500, the GSCI Commodity Index is now trading at its lowest level in 50 years and significantly below its long-term median of 4.16.
If we postulate the general tendency of reversion to the mean, we can likely anticipate attractive commodities investment opportunities and better performance for bullion investment allocations to come.
The final chart below echoes the reason why dynastic families always seemingly have a large portion of their wealth allocated to gold bullion.
While fiat currencies (e.g. US dollars) by design lose their value over the long term to real assets.
Conversly physical bullion has historically proven to preserve its wealth over not merely cyclical bull markets, but for millenia and throughout history.
These charts and the facts specifically show that precious commodities like gold, platinum, palladium, and silver bullion remain historcally undervalued vs other asset classes. A great opportunity for value investors to sell things that are overvalued and buy the precious things that are undervalued currently.
About the Author
James Anderson has a BA in finance from Loyola University New Orleans. He has both worked and invested in the physical investment grade bullion markets prior to the 2008 global financial crisis.