Gold Q&A: Answers to our Subscribers' Most Pressing Questions

• Can silver really be considered as insurance?

  October 12, 2012, 12:00 PM

  I realize all of the arguments one could make in favor of silver. Still, I can't see gold going to $800; I can see silver going to $15 though; so does it really belong in the 'insurance' category?

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• Where do you see a good entry point for the insurance part of my silver portfolio?

  October 12, 2012, 12:00 PM

  Maybe I am still too focused on the Hunt brothers, but assuming you can convince me to use silver as insurance, where do you see a good entry point? (I know that's a tough one)

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• What are your thoughts on platinum as insurance?

  October 12, 2012, 12:00 PM

  What are your thoughts on holding physical platinum as insurance? Or holding it at all, long term? Is it a good form of diversification?

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• Can I use mining stocks as “leveraged gold?”

  October 12, 2012, 12:00 PM

  I have some thoughts for your comments: First, I think many of us are holding much of our 'investment' capital in various retirement vehicles. As you point out, getting in or out of long term investments is an infrequent occurrence, but still, selling or acquiring physical metal in these vehicles is pretty involved and also takes some time. Additionally, I have always looked at mining stocks as a sort of 'leveraged gold', the place where the real money can be made, precisely because these stocks either under- or over-perform.

  Therefore, the idea is to be aware of what they are doing presently and adjust investment moves accordingly. In short, try to use a lot of money and a few very well supported moves to make a profit, rather than accomplish the same results through many, many trades with much smaller amounts of capital each time.

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• Did you design your sample precious metals portfolios with any particular rate of return in mind?

  October 12, 2012, 12:00 PM

  I have just gone through your essay on portfolio structuring. Did you have some idea in mind as to a rate of return these portfolios were designed to achieve? Or was your idea to try to balance risk/reward and let the return find its own level? I am not at all criticizing your approach here, but I would like to better understand the reasoning behind it.

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• Do you really have to give us various gold and silver signals?

  October 12, 2012, 12:00 PM

  I can appreciate your thoughts about creating trades based on various signals. However I, for one, have no interest in trying to integrate signals from a single source, i.e. Sunshine Profits. When I read a summary update or a market alert, which of course contains your analysis and conclusions, I don't then want to have to review other Sunshine indicators to see what they say. I expect you will do that as part of your analysis, because, after all, who is better qualified? Just like with the various charts and graphs, we don't just want to read you say 'buy' or 'sell' without reviewing the data, but, in the end, we do want the 'buy or sell' opinion. There is no shortage of free data (and opinion, for that matter) all over the Internet. It is the skillful integration and analysis of this data that is valuable.

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• Where is the effect of inflation coming into the gold market?

  October 5, 2012, 12:00 PM

  I am writing to get some perspective on why the price of gold is rising. Many commentators say that QE has contributed to the fear of inflation so many are running to gold. Yet QE has not produced inflation since the Federal Reserve is just buying financial notes and requiring the banks to hold more in reserves.

  Where is the effect of inflation coming into the gold market? Is it China? Is it the fear of a financial Armageddon? Is it the euro and Europeans who are dealing with a recession which has gotten out of hand? Why is the price of gold just going up when the price of oil is tame and under control? What am I missing? Why have you not written about the German banks that will collapse under the weight of European sovereign nations defaulting on their obligations? Every commentator says that the German government should help the southern European countries but who will help the German banks? I realize that the only voice of sanity is coming from your articles, arguing that the sky is not falling. Thank you.

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• What will be the role of China in the precious metals market?

  August 17, 2012, 12:00 PM

  With hedge funds and others very negative on gold, it seems that gold and silver have had many buyers at certain levels and it is no secret that the primary suspects for those buyers are far eastern entities. Somewhat like “Hail Mary” saves on important S&P levels in the last few minutes before the market closes.

  The 800 pound gorilla has been planning an active role in precious metals and all metals trading for a long time. They bought the LME (even though it's a lousy business based on returns) to control more of the metals trades, establish warehouses in China for the LME, etc. They have planned the Shanghai gold exchange for a long time and will open it at the end of August, apparently. With China it's all about becoming a major player in this area and also about saving face. It would not gain new customers, nor would it look good for the idea and their timing if leveraged investors were handed large losses right off the bat. They need new tonnage to support any physical deliveries through the exchange. A fraudulent scheme in China recently attracted $60 billion or over 1,000 tons worth of gold futures (that's how much was lost!) so there is a lot of demand out there. For this reason it is highly unlikely the Chinese will allow gold to crash, or (perhaps) in the event of a major world market crash, to perform much worse than other investments. Something like the 'Chinese put' under the price of gold.

  Perhaps a fast trip down. Western vaults would be emptied pretty quickly at low bargain levels. This is not technical, but fundamental.

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