Gold and Silver: Your Financial Main Battle Tanks / Commodities / Gold and Silver 2021
Armoredvehicle-enabled soldiers and the designers who build them understand that amain battle tank must balance three critical elements in order to"complete the mission."
Thishas been true conceptually since the time of David and Goliath, the ThreeHundred Spartans at Thermopylae, with Alexander the Greats' elite SilverShields, and tank battles in four Israeli wars.
As ananalogy for those who acquire and hold precious metals, it offers a close fitto their own ability to "complete the financial mission" of assetprotection and growth.
First, amain battle tank must have superior firepower, being able to reliably counterand defeat its adversaries on the field of battle.
Second, thearmored vehicle must offer protection for the crew. Otherwise, the battlefieldgets swept clean by "the opposition," and, as casualties mount,survivors' morale plummets, and the battle is lost.
Third, tosurvive multiple engagements, a tank must be highly mobile so as to stay out ofharm's way, reposition to counter the enemy's armor, and dispose of itstactical weaponry.
WhenDavid fought Goliath, he lacked protection (a shield) and "firepower"(a sword or spear). But he was able to override these deficiencies throughsuperior mobility, skill with a slingshot... and tactics.
Yes,well-thought out and executed tactics can sometimes defeat an opponent whooutclasses you in all three respects, but that's not the way to bet, nor, as aninvestor, should you have to.
Properplanning, patience, and execution with precious metals adds a decisive safetyfactor with less correlation to other asset holdings.
Sincethe invention of the modern tank near the end of WWI, the three imperativeslisted above have been manipulated in an attempt to gain a battlefieldadvantage without throwing the trifecta out of reasonable balance.
In WWIIon the Eastern Front against the Russians, consider the German Jagdtiger ("HuntingTiger").
Thismassive beast, the heaviest armored vehicle used by any nation in the war,could defeat all comers. But it was so heavy, it could not cross most bridges,had an underpowered drive train, and was plagued with mechanical problems.
On theother hand, the Russians fielded the T-34. This tank was smaller and underarmored, but was reliable, highly mobile, and could be produced in massivenumbers.
Whenattacking in formation a member of the Tiger tank family, it could sometimesdamage its tracks. The now immobilized giant could be finished off with heavyartillery or explosive charges.
Balancingthese elements is always a struggle for the designer.Placing too much emphasis on any one factor inevitably compromises – or defeats– the mission and those tasked with carrying it out.
Howdoes the main battle tank analogy relate to holding precious metals?
Firepower. Lookback at silver and gold prices since2001. Silver began at about $4.50/ounce. Today, even at the recentreaction low, it's $22.00, plus a healthy premium of $3-$6, spot price.
At thesame time, physical gold cost $270, with a modest premium. Today an ounce willset you back about $1,780, along with a 5% premium.
Afterover a year of sideways action from the August 2020 spike high above $2,000,gold's asset protection profile still eclipses by double that of the morewidely watched S&P 500 measured over the same two decades.
Protection. Silverand gold protect (hedge) your other assets because they effectively limiterosion of their value by inflation.
Thesedays, this factor is even more important for near-cash savings accounts, withtheir tiny interest yield of less than one half of one percent per annum! Andsticking with bullion coins/bars buildssimplicity and minimizes premium cost.
Mobility. Unlikemost any other asset class, precious metals can be turned into cash at amoment's notice.
Indeed,the reason metals' prices so often decline (temporarily) during periodiccrashes like 2008 and early 2020, is that they are easily sold by heavilymargined or over-positioned traders, in order to raise liquidity or limitlosses in other sectors.
Hold-in-handmetal – from liability of loss standpoint – has no one standing between you andthe buyer from whom you redeem it for cash. Evergrande bond and stockholders,eat your hearts out!
Giventhese implications, would you rather enter the battlefield with physical goldand silver -encased in a metaphorical Abrams M-1, Israeli Merkava, or GermanLeopard tank – or "armed" only with a sheet of paper showing you haveunallocated (mixed with others' holdings) metal in an untested storagefacility? Or even worse, in a non-redeemable ETF?
Anddon't just say "Well I'll play it safe by holding stocks or bonds, andhope for the best!" Because the way things are shaping up, it's more thanlikely that soon you may seriously regret doing so.
Soeither ford the stream of indecision now before the "runoff" gets toostrong. Or wait until the inflationary flow is so powerful that you mustattempt to act – even if it turns out to be impossible, and the real value ofyour assets is swept away in the process?
Renownedcommodities trader Dr. Alexander Elder's battlefield quote perfectly sums upthe investor's dilemma, as well as the path to investment survival and success.He says it consists of "battling crowds of hostile people whilepaying for the privilege of entering the battle and leaving it whether dead,wounded, or alive."
Thesedays, whether we like it or not, we're ALL on an investment battlefield.
For theforeseeable future, as the financial system wends its way through unchartedwaters, place the odds measurably in your favor by holding gold and silver –the historic talismans of asset protection.
David Smith is Senior Analystfor TheMorganReport.com and a regular contributor to MoneyMetals.com. For the past 15 years, he hasinvestigated precious metals’ mines and exploration sites in Argentina, Chile,Mexico, Bolivia, China, Canada, and the U.S. He shares his resource sector findingswith readers, the media, and North American investment conference attendees.\
© 2021 David Smith- All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
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