Categories: Precious Metals
Topics: Gold Stocks

Disadvantages of Owning Gold & The Fastest Way To Gold Wealth

Owning physical gold is, in many ways, a double-edged sword.

Sure, it’s a sound, time-tested wealth preservation strategy as the yellow metal tends to increase in value during times of economic and geopolitical uncertainty.  

And, no doubt, we have plenty of that going on these days both here at home and abroad (Putin and Kim Jong Un joining forces, plus China, immediately come to mind). 

Holding true to form, the yellow metal has been flexing its muscles of late, rising from roughly US$1,650 an ounce to currently well above US$1,900 in just the last twelve or so months.For me personally, as a longtime holder of physical gold — primarily gold coins — it gives me a sense of security knowing that a percentage of my wealth is held in an asset that holds up well during uncertain times and, additionally, is immune to the erosive nature of fiat currencies. 

Yet, for all intents and purposes, I mostly think of my physical gold holdings as an “heirloom asset” that I’ll eventually hand down to my son for his enjoyment and for his future fiscal prosperity.  

And that brings us to the disadvantages of owning physical gold. 

One — unlike stocks and bonds — you have to store physical gold. 

And that doesn’t mean sticking your gold bars and/or coins in a sock drawer or digging a hole in the backyard. It typically means investing in a home safe or securing a safe deposit box at your local bank. 

And there are issues there as well. Safes, obviously, can be broken into or stolen altogether. And the FDIC does not insure the contents of safe deposit boxes in the same way they would a bank deposit. 

Additionally, in most cases, you can only access your safe deposit box during regular banking hours. 

Two, gold is a relatively illiquid asset... meaning it can be difficult to sell quickly and easily. That can become an issue if you need to access your investment in a hurry such as in the event of a medical emergency.

The market for gold is also quite small compared to other asset classes such as stocks or bonds. That means there are fewer buyers and sellers, which can make it a challenge to find a buyer who is willing to pay the price you are asking at any given time.

Three, gold doesn’t earn interest.

For example, in today’s high interest rate environment, there are a number of ways to transform one’s cash holdings into a worthwhile and predictable interest-yielding instrument such as a bond or certificate of deposit. 

Conversely, gold just sits there earning zilch... nada!

And that brings us to the final disadvantage of owning gold, which is price volatility.

Gold is a highly cyclical asset — driven primarily by sentiment as opposed to supply and demand — which means its price tends to follow a pattern of unpredictable booms and busts. 

We mentioned gold’s strength during times of heightened uncertainty. Yet, that sort of bastion of stability can turn on a dime as outlooks become rosier, which can lead to a precipitous decline in the price of the yellow metal. 

Put plainly, investors who buy gold at the wrong time can experience sudden losses with little recourse other than to hold, oftentimes for years, for the next bullish cycle.

Nevertheless, maintaining a small percentage of your wealth in physical gold does make sense with the caveat of it being a double-edged sword, as discussed. I, for example, am quite comfortable with my physical gold holdings. Yet, at the same time, I know I’m not going to get rich off of it. 

So how DO you acquire immense wealth with gold?

For speculators who are willing to take on some additional risk, investing in the small-cap gold sector is where the truly spectacular gains can occur. These are the intrepid boots-on-the-ground explorers/developers that find and bring the yellow metal to the surface for the rest of the world to enjoy. 

Taking on that elevated risk factor brings with it the potential for lightning-fast gains that can easily outstrip gold’s price performance by a factor of multiples. 

In fact, when a small-cap gold miner makes a discovery of significance or announces a key permitting decision, the gains can literally go through the roof no matter what part of the gold cycle you’re currently in. 

As one might expect, however, the small-cap gold sector is ripe with pitfalls and traps… so it helps having an expert — like our own Gerardo Del Real of Junior Resource Monthly — separating the few contenders from the myriad of pretenders. 

A wise sage once said, “A gold mine is a hole in the ground with a liar standing on top!”

Thankfully, that adage is rooted in the now-distant past, and the sector has since been cleaned up a lot through NI 43-101 rules and regulations, which govern the Standards of Disclosure for Mineral Projects. 

Yet still, you really cannot overstate the importance of having a seasoned gold expert like Gerardo on your side!

With all that being said, there’s one particular small-cap gold miner Mr. Del Real has been keeping a keen eye on for a number of years that, FINALLY, FINALLY is on the cusp of something potentially huge.

It’s a timing thing… and if he’s correct in his assessment (which he usually is!), those who follow his lead could be looking at very substantial gains that could materialize in near-overnight fashion. 

It’s a company that’s been working diligently, yet quietly behind the scenes advancing its flagship US-based gold project, which also hosts a rare element the US Department of Defense is very interested in procuring.

In fact, the DoD just awarded the company millions of dollars for access to this critical element along with tens of millions more to advance construction readiness and permitting of the project.   

And that’s not even taking into account the immense treasure trove of gold that sits just below surface.

We’re talking about one of the largest and highest-grade open pit gold deposits in the entire United States. And yet, due to the long quiet period I just mentioned, very few investors are paying attention at the moment. The “most critical” moment, I might add! 

And while ALL mining projects cause some level of disturbance to the surrounding landscape, this particular project is considered a superfund brownfield site with a primary ESG mandate of reopening a key salmon migration route that has been closed off for far too long. 

That level of strong ESG commitment and focus is something you don’t often see in the mining world… although it certainly should be.  

Again, the timing on this one is absolutely paramount. Stay tuned… we’ll be bringing you the full story very, very soon. 

Mike Fagan
Editor, Daily Profit Cycle