Before You Invest In Gold & Silver ETFs & Mining Stocks – Watch This

by birtanpublished on August 16, 2020

This video is really about the performance of all of the other avenues to invest in precious metals that are not precious metals the derivatives the stocks and leveraged funds and send ETFs and so on and so this is the Philadelphia gold

Mining index divided by the price of gold and what it shows you is the performance all through the late 80s and 90s just sort of chopping sideways and then the big bull market in precious metals starts and the stocks and these

Are some of the major stocks in the United States they're mostly hedged where they do they sell future production and lock in a price today and so that takes away from some of their future profits and so they may not have

A spectacular performance but if you look at the loss the way you read this you know you've got let's say 0.24 right here let's say you invest there instead of buying gold you bought these stocks that are in this index

Well 0.12 is half that so that means gold perform twice as well as the stocks and point zero six is half that so gold has you know roughly I'm picking a I'm just making the math easy to do by picking these numbers but we've been in

This range of 0.04 to 0.08% X by four by four hundred percent since in in this entire bull market then we have the hu I is the smaller gold bugs index this is smaller stocks and mostly unhedged stocks and there's some silver producers

In here and this one doesn't go back quite as far as the hu as far as far as the XA you goes the Philadelphia mining index but what you see here this was the beginning the gold started moving in 1999 and then made a double

Bottom in 2001 and from that double bottom there was this huge leverage that you got in stocks that went on for three years from the end of 2000 at the end of 2003 roughly and I was lucky enough to invest in a whole bunch of stocks in

April of 2003 right about here and I caught that last leg up where gold where where the stocks were actually outperforming gold and some of it was spectacular and then the stocks started stopped outperforming gold and I was

Wondering what was going on because when you buy a stock you're introducing a bunch of risk you're not just introducing leverage but you're introducing risk and the risk is you can have a mine collapse you can have an EPA

Shutdown you can have if it's in a your the mine you've invested in is in a country that nationalizes the gold mines you lose the whole investment the company can go bankrupt for a whole host of reasons and the precious metals

Themselves don't have any of that risk but I mean you look at the performance here and you're talking you know about from 0.6 down to 0.125 0.155 these are huge losses compared to what the physical metals that don't have any risk

Offer and so back in this area I decided to do a study on it and I don't have a chart handy but here's one from Ronnie Stouffer lay and this is from incremental AG these are some good guys will probably do a follow-up on the

Interviews series that we did a little while back but they've come out with their latest gold yearbook and chart book and so I recommend taking a look at their findings and their analysis of this and what they're showing is that

Right now the stocks are very undervalued compared to the mean but one of the things I also get out of this and one of the things I really got out of it was I did a study on I took the Barons gold mining index was just the only

Index that goes back to the beginning of when it goes way back to 1940 on this chart and it was the only index that goes back far enough to where he could compare the previous bull market in precious metals in the seventy 70s

Remember that during all of this time here gold was 35 bucks an ounce it wasn't moving this is just the stocks and what I find amazing is you had this big bull market from 1961 to about 1967 in the stocks compared to gold and gold

Was still at bet gold was starting to diverge on the fur on the open market the free market gold would go above the official central bank price of $35 an ounce and then every once in a while during this period of it there was

Something called the London gold pool they dumped a bunch of gold on the market to smash it down but in the bull market of the nineteen from 1971 to 1980 dramatically outperformed the stocks gold went from 35 to 873 dollars an

Ounce during this period of time and the stocks in the Barron's gold mining index did not keep up with gold and it's if you look at the levels here this is probably something like this is a logarithmic chart so that's probably

About four or five so and then this went slightly under so you might have gold outperforming the stocks during this bull market by a factor of four or five or six hundred percent and when I did a study on it that was about here

And somewhere in here but gold at this point has outperformed the stocks since 1971 by about eight hundred percent so when the stocks are outperforming gold they can offer tremendous leverage and you can make some really big gains but

If you're going to do that get some professional advice you know contact the guys that increment him Dave Morgan is a friend of mine of the Morgan report comm for silver there's a bunch of them out there but find somebody that studies

This all the time and sign up for their newsletter get some advice Robert Kiyosaki used to say investing is a team sport so here's GDX which is another gold miners index and you can see it's

Dramatic plunge since the this is this only goes back to 2006 if this could go back to the year 2000 you would see a much more dramatic plunge than this this is the GD XJ which is the juniors so juniors are much more volatile and when

You and if if they win they win big if they lose they lose big but when you look at the ratios here they're way way down now this is an ETF this is just GLD so here you're supposedly investing in gold this is the biggest gold ETF that

There is exchange-traded fund so it's a trust you're buying a share in a trust that is supposedly backed by gold and that's what their prospectus says that it's all backed by gold except this is the loss in value of that trust that's

Supposedly backed by a gold from its inception until today and this is a monthly chart to get rid of some of the noise because if you do daily there's a lot of fluctuations now if it was truly backed 100% by gold it wouldn't have

These daily or monthly fluctuations this would just be a line with a straight line with their management fees slowly coming out of this and it would be descending those are mostly management fees but the very fact that this bounces

Up and down in this is a monthly chart on a daily it's all over the place and that means that they're using futures and options or something like that to try and achieve a replication of the gold price for some

Of the you know I don't know how much of it is not actually backed but I do know that it's not I can state unequivocally that that it is not 100% backed because you can short GLD when you short a share of stock what you're doing is you borrow

Shares from the broker and the broker doesn't actually have a bunch of shares they they just take them out of somebody's account basically because they've got a lot of people with shares so you borrow shares and then you sell

Them to somebody else and now you're short and if the price goes down you buy them back at a lower price and return them so you're selling high and buying low instead of buying low and selling high that you achieve the same there's

Profit there to be made however you own them somebody else borrows them and sells short to somebody else and now two people on the same ounces so it's impossible if you can short sell something it's impossible that all of

The shares are fully backed by gold but this fluctuation shows that there's something else going on there than just being a bunch of gold yeah you know in a pile in some vault somewhere this is SLV divided by the price of

Silver so it's the you know if if one share was worth one ounce of silver well now it's worth 0.89 one ounces of silver and if you had bought just silver it would still be one ounce this is and now we're getting into the leveraged

Funds so this is velocity shares three times long so this is supposed to give you triple the performance of whatever gold or silver do and if gold goes up one percent this goes up three percent if it drops one percent this drops three

Percent however if you do the math of just starting with a certain amount and you go if silver goes up one percent and this goes up plus three and then back down 1% this goes minus three and you just replicate this day after day

After day you'll see that the math adds up into this constant loss there's this constant drag now what I noticed was that the 2015 bottom in silver that this fund was still way below it and it's supposed to be triple the performance of

Silver and then when I went and looked at silver this is just silver it's significantly above its 2015 high so I asked my researcher chart maker Alan Hibbert to do some charts on it study it and I wanted them to index that low back

In December of 2015 and so what we've done here is this is the triple silver triple leveraged fund for silver and then this is just the price of silver and we've put them at 100 he ran in December of 2015 at that low and what

You're measuring is the percentage change and so if you had put $100 into silver and $100 into US LV where you're supposed to get three times the performance of silver you'd have a hundred and twenty-seven dollars right

Now of so of silver if you bought silver if you bought the fund you're sitting on a loss of four dollars that's and this is supposed to be you know it's it's supposed to be a triple leveraged fund so this is supposed to be up at 181

Dollars is where the fund is supposed to be but it's down at 66 if you look at just the difference here between this and silver two times 66 is 132 and this is just a breath away from that in other words silver offered you almost double

The performance of this triple long leveraged fund that's supposed to give you triple the performance of silver in other words this lost about 50% like you know if you go into the store and you're in the checkout line and you buy a candy

Bar and it's a buck and you come back a year later and you buy the same candy bar that weighs the same number of ounces and it's got the same ingredients and the that candy bar is two dollars did the candy bar change or was it the

Dollar that changed is the dollar worth 50% less measured in candy bars or is the candy bar worth 108 did it cost 100% more measured in dollars you know you've got you've got to look at things from both angles so

This is an enormous loss for a fund that's supposed to give you triple the leverage if you go back to the funds inception and you put a hundred bucks in it at its inception now this was in 2011 so this is just after silver put in its

High of 48 dollars so it's down in the mid 30s somewhere and if you bought $100 worth of silver back then you'd be sitting on 49 dollars worth of silver today you know there's timing involved I've just been buying since 2003 on

Silver 2002 on gold I do a regular accumulation of it and I don't really sell I just accumulate until other things are telling me it's time to sell but if you bought that triple leveraged fund you'd be sitting on $1.00 right now

You spend a hundred and you're sitting on one so it has lost 99% of its value now in their prospectus which most people don't read it says that it's not meant as a long-term investment vehicle

You really shouldn't hold it for more than a day so this is if you're a day trader jumping in and out of things then go ahead and buy this thing and there's also an inverse fund where if silver goes down 1% it'll go up 3% and vice

Versa so if you're trading back and forth you can trade back and forth between these types of leveraged funds and you can get somewhere except most people that I know that trade end up losing I just I'm doing a long term

Accumulation and when I get to the right point I will be locking in profits but I don't believe we're there yet basically the story here the moral of the story I'm just sticking with the real thing this is a chart of gold and look at this

Beautiful very symmetrical bowl pattern that we've got going on here and we're near a double top you know we're doing a little bit of pullback today as I'm making this video I've been hoping for a little bit more of a

Pullback and because I want to take a little bit larger position but the moral of the story is this doesn't contain risk and if you look at some of the modern storage options you'll see that some companies there's their storage is

So inexpensive that you can add up all of those storage fees and it doesn't come to anything near what you're going to be paying in management fees and so on for some of those ETFs I want to thank you very much for watching we'll

See you next time

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