Your PM Portfolio Check-UP


by Andy Schectman, Miles Franklin:

When I look at the precious metals markets all I see are the numerous anomalies that are screaming value and opportunity.  The constant machinations of the bullion banks manipulating the markets and holding back Mother Nature has created distortions in the market place that present a real opportunity.  Let me explain.

Look at the ratio of platinum to gold and it quickly becomes easy to see a real opportunity in trading gold for platinum. History tells us that it is a true anomaly to see platinum trading below a 1 to 1 ratio to gold for any extended period.  Markets always correct to the mean.  This is no different than a major league ball player hitting 400 the first month of the season only to end the year with a 250 batting average.

I look at the ration (ratio) of silver to gold and see an even greater distortion and opportunity. Hold a ruler or a piece of paper at the 70 mark on the graph and you will easily see that whenever the ratio is greater than 70 ounces of silver (to) 1 ounce of gold we are in rarefied air and can expect silver to gain relative (strength) (compared) to gold.

I look at the positioning of the most sophisticated, well funded and well informed traders on the globe.  According to Ted Butler, over the last four years, JP Morgan has amassed over 600 million ounces of silver in their house account.  They have accumulated all of this physical silver while simultaneously driving down the paper pricewhich has allowed them to acquire the largest physical position of silver the world has ever seen.

Even within the marketplace I see distortions and anomalies, in this case with numismatic gold coins and to a lesser extent junk silver bags.  The premiums on numismatic gold coins, as a percentage above gold spot, is the absolute lowest it’s been in 28 years.  My top choice is the Pre-1933 United States gold numismatic coins.  But ever since 2008 the premiums have been far too high for me recommend them over the better value of gold bullion.  In 2008, with gold at $1,000 per ounce, we were bidding 60{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} over melt value for MS62 $20 Liberties.  Today, with the current low premiums, these coins are selling at record low prices relative to spot. Demand for vintage gold coins is cyclical and we are currently in the valley of value.

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