The Crash Of 2020: The Precious Metal Inflation Trade


I’ve been writing hysterically about gold and bitcoin and ether and how they are going to go to the moon. Well here we are, lift-off has occurred.

Anyone who has read my columns on Forbes over these nearly 20 years will know, I like a diversified portfolio of medium risk. Sadly those days are over. There are simply few places to be diversified in. Bonds? They are historically high and not a free market. If they revert to anywhere near normality holders will be wiped out. Historically, bond wipe-outs are kind of “de rigueur” for people who lend to governments if you read up on a few hundred years of bond history. So be warned. Cash? Well if we don’t get a fat chunk of inflation that might be the place, but with an explosion of U.S. money supply and a drop in output, how is inflation not coming? Equities? Again in a rigged market the downside of a market entering into a biblical depression is hardly a happy place to lay money to work.

As such, the obvious places are havens and they are precious metals and bitcoin. Mr Market agrees and is sling-shotting them on the start of a vertical move that I can’t see the end of. It’s not my style to see giant bubble moves for things I am investing in; I am a Benjamin Graham 30% target, kind of investor, not a 10,000% Apple cultster, but once again here we are, I have to adjust.

Three thousand dollar gold, $30,000 bitcoin, $50-$100 silver—none of this is ridiculous to me. Will it happen? I am left in a position where I can say, I won’t say it cannot. When you look at anything you take as a constant, the Covid crisis has “rekt” it. The economic ramifications are so deep, nothing is off the table for sure, except perhaps normality.

But so what to buy or sell for now to make some money? The darkest hour is before the dawn, the light is at the end of the tunnel, this too shall pass… Yes, well, is there a put option on that? What we need is a bit of “have our cake and eat it.”

We want something that will jump if the idiot optimists are incredible lucky and get it right and the V recovery is real. We also need this investment to be something that will explode when the coming inflation knocks the wheels off this clown car of an economy. Then we need something the market hasn’t already jumped on. Wouldn’t that be lovely.

Well here it is! Platinum:

Platinum is low because it is an industrial metal and the world is not sticking it up its exhaust pipe as much as it was. Fewer catalytic converters and you have a big drop of demand for platinum. As we have a large drop in activity in general, an industrial metal like platinum is going to lag. But it’s a precious metal with lots of precious metal inflation hedge allure baked in. Silver is cool for the “hoi polloi,” gold is for the rich and platinum is for the connoisseur. As silver and gold grind up the price cliff face, platinum will be on the agenda soon and it will follow and probably catch up. What is more, there is hardly any of it.

Yearly gold production 3,000 tonnes, silver production 21,000 tonnes, platinum 200 tonnes. Two hundred tonnes, my eyeballs did a Roger Rabbit when I saw that fact.

You can buy mine shares, if you don’t mind most of them being in spicy countries. You can buy ETFs, futures, options and physicals. And I have and I will.

My days of wide diversification are numbered and I’m not happy, but when crises occur you have to adapt. So be it.

——

Clem Chambers is the CEO of private investors website ADVFN.com and author of 101 Ways to Pick Stock Market Winners and Trading Cryptocurrencies: A Beginner’s Guide.

Chambers won Journalist of the Year in the Business Market Commentary category in the State Street UK Institutional Press Awards in 2018.

This article was originally published on Forbes
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