Wednesday, March 11, 2015

Going Deep In the Mines for some Gold


It's been a while since anyone has heard me whisper about precious metals. Am I a sad and wounded animal that has crawled back into his cave to lick his wounds? On the contrary, I have been hiding in the darkness, waiting to make my strike.

The time looks very very ripe, very very soon.


I'm hoping it drops even further down so I can back up the truck and load these bad boys up.

Oh, you've been a bad, bad boy.

Part of my inspiration? Taylor Swift. Seems like she knows a thing or two about bad boys. Meow.


Why am I such a disgustingly annoying and insistent gold bug? "Bugger off already, will you?" Well, here's the longer term perspective why I think that it's a very attractive niche sector:


The purple line across is the average price of my entry. Not too good, it could be better, but I think it's pretty all right. At current prices, we're looking at a 74% drawdown from it's peak in 2011. What are we heading to, 99% drawdown?

I believe that prices are capped to the downside and plenty of upside remains, especially if and when the dollar starts to falter. Contrary to popular belief, I think that assets that just dropped in price are much safer buys than assets that recently rose in price.

Of course I am in the red now with unrealized losses, but that's why I invest in gold miners through an unleveraged unit trust. No need to bother about managing my currency, lumpy purchases, navigating exchanges. I just type in an amount and click. And then now I just sit back, kick off my shoes and wait.

My play on gold miners is a very unsexy, unexciting trade that feels like sheer juvenile rebelliousness to be against the herd, so I am sure many of you will not be interested in it.

Why am I still in this investment? *shrugs* All I know is buy low and sell high, and that's all I'm trying to do.

6 comments:

  1. not really sure the best way to leverage on gold investment for mid to long term. can show the way?
    1.Gold Bars
    2.Gold Bullion Coins
    3.Gold Certificates:

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    Replies
    1. Hi Anon,

      I think the word "leverage" has to be carefully used. I'd just share my own thoughts on these.

      For the long term, I would rather own coins compared to bars. (Large) Bars require a large capital outlay, and due to their size, are not as easily transported around. Coins are easy to transport around and are usually fixed weights, so it is divisible. This also means that accumulation can be slowly and over time, rather than a single purchase. As with physical bars, having physical coins means no counter party risks.

      Personally, I do not like the idea of gold certs. If I am not holding it, I have counter party risks. Gold is one of the few investments that have the special unique feature of no counter party risks, and that is what makes it attractive to me. Certs also have a running fee if I am not wrong, like an annual payment of $X. Unless I really don't want to keep the gold with me, and I really trust that my bank will let me withdraw my gold when I turn in my cert, I would rather just get the real physical thing.

      Then again, I see physical gold as a "put" on my purchasing power. It is a form of protection. I am not betting that my physical gold will be worth more or less in the future. I am just ensuring that my purchasing power remains the same.

      For the portion of the precious metals that I own which are purely for speculation and trading for profits, I buy through BullionStar's unsegregated gold programme. I know it's not for everyone, but it works for me because I want to know I have something real backing my outstanding claims. I suppose an ETF would do the trick as well.

      You are right not to mention miners. Miners are purely for trading rather than a long term investment. They are very sensitive to the cycle.

      I hope my sharing helps give you an extra point of view.

      Delete
  2. It looks like a year before the longer term direction is clear. I am interested to see if your face turns red before the year is up from playing gold when just holding usd is giving many a more relaxed mood.

    ReplyDelete
    Replies
    1. Hi SMK,

      Unfortunately, that is part of the cons of being a contrarian, everybody else is doing well except you. Yes, let's see where this goes, I hope my face doesn't turn red too. Lucky this is all unlevered, meaning no margin calls and no financing charges. Emergency funds are already maxed out, warchest is ready to rubble. I think I'll be able to hold onto to this position comfortably for quite a while.

      Delete
    2. Well you have good sense not to pull levers.

      still unit trusts on gold miners have more variables than a pure metal play. And currency risks may not be as downplayed as you think. The good news is that you can only lose a % of your money.

      good luck.

      Delete
  3. Come come , lai lai , time to visit me le! hahahaha , come by my blog @ kgwj.blogspot.sg and you'll know why , i'll a IGPM suckler too ;)

    ReplyDelete

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