Mason talks about the lack of understanding by the American public when it comes to the question as to why one should own gold and silver in a portfolio. In times of inflation the precious metals are always strong relative performers. He points out that the US is in a quite similar situation as it was in the 1970s in which one should expect an out performance of the metals compared to stocks and bonds. Pointing to the very low percentage of gold ownership, the bearish sentiment and a general lack of interest from institutions, they argue that most of gold’s run might still lie ahead.
They talk about the factors that are driving the bull market in precious metals. Besides the on-going currency debasement in the west both men see China playing a significant role in the future. Not only are the Chinese encouraging their citizens to buy gold bullion, but they are also retaining mine production for their own purposes. Therefore they are affecting both the demand and supply side of the gold market.
Despite current conventional wisdom which sees bonds and cash as the ultimate safety, physical precious metals remain the time proven protectors of liquidity and purchasing power while paper money always fails over time. Since the precious metals markets are very thin it can get hard to source actual physical metal in periods of crisis, which leads to expanding premiums. Therefore one should take advantage of low premiums in times of relative stability and optimistic market sentiment.
This podcast was recorded on April 4 2012.
| (25:02 min) |
Download audio file: Why people should buy gold - Drew Mason and Alasdair Macleod(25:02 min)