Gold Investment Philosophy

Do you like to drift in the ocean of ignorance? Do you like to change the course with the smallest tide and wind? We don’t. We prefer to firmly sail towards the sunshine of profits. In the modern world of constant flow of information and fake news, it’s not an easy task.

To not get lost in the thicket of half-truths, slogans and false beliefs, you need an experienced guide, you need a sun lighting up the way. We also do not wander alone.. We use our investment philosophy as our compass. When other analysts panic and constantly change their minds amid upcoming news, we are faithful to our investment core beliefs and philosophy. What is our approach to the precious metals investing?

Gold is Currency, not Commodity

First of all, we treat gold as a currency. It might seem strange, as it is a yellow metal no longer used as money. What we mean is that gold cannot be modeled as typical commodity. Gold is not consumed and its stock-to-flow ratio is enormous. Hence, the price of gold is not shaped by the factors analysts typically examine in the commodity markets. The mining supply, the average production costs, the jewelry demand, the demand from technology or central banks – all these factors are practically irrelevant in the formation of gold prices. These are facts. The annual production of gold is traded in a few days in the London exchange. It’s simply too minuscule to influence the price.

Gold is Driven by Macroeconomic Forces and Global Risks

Gold is currency. So its price is driven by factors important for the foreign exchange market. In the long run, the most important drivers are the real interest rates and the U.S. dollar. The risk aversion is also important – people buy gold as a safe-haven asset when they lose confidence in the global economy in general, and in the greenback in particular – although it is difficult to measure it. It sounds simple, but in reality many factors affect the level of interest rates or the strength of the greenback. And all these variables are interconnected, not to mention that their impact on the gold market may vary over time.

This is why we do not focus merely on one factor, but always thoroughly analyze the broad macroeconomic picture. For example, we carefully examine the monetary policy, the stock market, the fiscal policy, the economic growth, the strength of the labor market, the inflationary pressure, etc. We also look at possible global risks, although the impact of the geopolitical factors on the gold market is usually temporary and limited.

Gold Investing Is Pricing, Not Value Game

Gold is neither a cash generating asset nor a commodity. It means that gold cannot be valued like assets which generate cash flows or even as commodities which value can be at least estimated looking at the balance of demand and supply. It has no intrinsic value, but only a relative one (currencies cannot be valued, but they can be priced against other currencies). Hence, the gold investing is more like the pricing game, not the value game. There are no cash flows, while industrial use is minuscule – so, we cannot determine the intrinsic value of gold, but we can try to guess the future price direction, which is affected by the market sentiment.

We are not saying that fundamentals don’t matter for the precious metals market. After all, the shifts in the market sentiment are not ‘deus ex machina’. People do not formulate their opinions in void, but based on the observation of the changes in objective reality and fundamental drivers. What we are saying is that gold market fundamentals are substantially different than in the generating cash assets or commodity markets. As gold is currency (or anti-fiat currency), the influence of these factors on gold prices occurs via investor’s perceptions and moods.

Technical Analysis Is Fundamental

The nature of gold – currency which is a safe haven or an insurance against tail risk – makes it crystal clear that the analysis of sentiment and tools that serve this purpose – technical analysis, cycles, self-similar patterns and so on – are perfectly justified from the fundamental point of view. This is why we provide our subscribers with not only monthly Market Overview reports, but also daily Gold & Silver Trading Alerts with clear buy and sell signals. You see, the exchange rate fluctuations and the movements in the gold prices are not purely random: they depend on many macroeconomic factors, but the market sentiment is also very important.

Understanding the Enemy…

without understanding yourself is only half of a victory. Making great predictions for gold will not be of much help if one messes up the money management and applies long-term signals to short-term price swings or vice-versa. We strive to help you in that regard as well. Besides emphasizing the dangers of overinvesting, we put great effort in putting all the signals into proper perspective, starting with laying out the foundations for building a precious metals portfolio, discussing details and then featuring the insurance, investment, and trading portions of the portfolio separately in each daily Gold & Silver Trading Alert.

Mining Stocks

There are multiple ways to select mining stocks and there are even more ways to mislead investors by hiding behind hundreds of geological results or focus on the part of the financial statement that currently makes a given company look good. And – while we don’t want to point to specific analysts – this is what some people sell as their “analyses”. Or even worse, they promote the companies instead of analyzing them just because the mining company pays them. We don’t want to dismiss the classic fundamental analysis entirely, but over the years, we realized that sometimes it’s simply best to focus on… what works. We established (objective!) algorithms (analogous for gold and silver) that select miners that are likely to provide the biggest bang for the buck and we reviewed their performance over the years.

Others may spend a year to analyze 11 companies (it takes a month to truly analyze a company from the fundamental point of view), miss out on most of companies while luring you with detailed description of each company that over the years may or may not provide greater returns than the mining stocks ETF. We won’t – we’ll save your time by providing the up-to-date ranking on a daily basis that has nothing to do with any subjective interpretation or any “arrangement” with the mining stock company.

No Shortcuts – Just Care, Research, and Experience

Many the so-called experts, who are really just gold promoters in disguise, don’t really understand the nature of gold. We do. We do not offer shortcuts. We offer our greatest care, results of hard work and more than a decade of experience. It’s a very complex and demanding market. But we spent years of doing in-depth independent research on the precious metals market, and we really understand its true drivers. The pundits look through the rear view mirror. We look through the windshield. Through all the information noise, we see a clear path towards sunny profits. Come with us!

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