Investing in Gold and Silver

Fears about the China / US Trade War linger and global central banks continue to lower interest rates and devalue their currencies in an effort to keep the economic expansion going and forestall a recession.  Indeed, devaluing currency has become a powerful tool for China, sending shock waves through the US stock market recently when the Chinese yuan was pegged at just below 7 to the dollar, the lowest it has been in a decade (see chart below).  This makes Chinese goods cheaper and helps neutralize the effects of tariffs that have been added by the US government to Chinese imports (with more scheduled to come), and thereby helping ensure no quick resolution to the trade war. 

Gold and silver have had a good run lately (see chart below) as a result of these market uncertainties.  For these and many other reasons, stocks and bonds have been very volatile in recent trading sessions and investors are nervous about the future.  These are the times that hard assets such as gold and silver come into demand. 

Some believe that the actual rate of inflation is much higher than what the government officially reports (see chart below), but even if that isn't true we all know that a dollar just doesn't buy as much as it used to and that's inflation, plan and simple.  The second chart below shows the decline in the value of the dollar since 1987 - now worth about 40% less!  Gold and silver are great hedges against inflation and dollar depreciation (so is Bitcoin, but that's another post)!  Store of value and "safe haven" as well as near term upside are the key themes for investing in gold and silver currently, but gold and silver also have their place as a long term portfolio holding.

Courtesy of ShadowStats.com

Courtesy of ShadowStats.com
There are many ways to invest in gold and silver.  Perhaps the easiest is to buy shares in ETF's such as the SPDR Gold Shares ETF (GLD) or the iShares Silver Trust ETF (SLV).  GLD is up 15.3% over the past 3 months and 6.36% the past month.  SLV is up 14.65% over the past 3 months and 11.35% over the past month.  It wasn't too long ago that silver doubled in value from about $15 per ounce to $30 per ounce, before dropping back down, so silver can be especially volatile.  Shares in these ETF's are backed by actual physical stored gold and silver.  Since these funds are actively traded, they are easy to buy and sell, much easier than buying the physical metal and having to store it yourself.  I do think it's important to have some physical gold and silver in your portfolio as a long term holding, preferably stored in a bank safe deposit box.  If you are interested in more upside, you can also invest in gold mining companies, either directly or through ETF's.  For example, the largest such fund is Van Eck Gold Miner's ETF (GDX), with a year to date return of about 39%.  This fund tracks all the largest gold mining companies included in the AMEX Gold Miner's Index.  It also pays a small dividend.  
I hope you find this post useful as you chart your investing course and Build a Financial Fortress this year.
Check out my book on investing in gold and silver here (only $0.99 on Kindle and free with a Kindle Unlimited trial).  To see all my books on investing and leadership, click here.
Disclaimers:  I use affiliate links where I get paid a small amount if you buy the service or product. This helps support my blog.  I am also long on SLV, GLD and GDX.