We are at the point where increasing amounts of debt and money printing are required to fuel the stock market. It is in bubble territory and approaching the overvaluation level although we are not yet in the super-bubble area of 2000 so there is room for this bubble to grow yet bigger. Even if stock markets become more overvalued, however, they are now at levels that represent unacceptable risk.
Although stocks and bonds represent high risk, few investors look for other opportunities. This is why most investors have missed the best-performing asset class in this century, which is precious metals.
Most investors don’t look at gold as an investment. Gold is regarded as a volatile commodity and does not appear in the average investment portfolio. Less than 0.5% of world financial assets are invested in gold today. This extremely low level of gold investment shows that few people understand gold, and even fewer look at the performance of gold. Most investors don’t have a clue how gold performed in the 2000s. If they did, they would realize that they have missed the best investment in the last 16 years by a large margin.
Stocks will lose 95% against gold; China’s insatiable demand for gold will continue as it also will in Russia, Turkey and India; institutional demand for gold will treble; and fundamental and technical factors all point to higher gold in 2017.
$1,250 gold and $17 silver is a bargain compared to what we will see in the next few years. That being said, however, the most important reason for holding physical gold and silver is not the potential capital appreciation, but as a hedge against a bankrupt financial system.
The comments above are an edited and abridged synopsis by bmgbullion.com of an article by Egon von Greyerz
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