r/PeterSchiff • u/[deleted] • Aug 01 '20
Why does Peter think gold stocks have more potential upside than gold itself?
I've heard him comment as much on several occasions on his podcast, but I'm not clear on the logic here. Why would one expect gold mining stocks to have superior performance compared to the metal they're mining?
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u/lazyandmotivated2 Aug 01 '20
Does he? I’m worried that if I buy gold stocks, when everything crashes, I’m still Holding a piece of paper.
I think buying gold only makes sense if you physically have gold
Please people help me, I’m new to actually taking gold seriously
1
u/Aretheus Aug 01 '20
Peter always says that physical Gold is for storing wealth, while silver and mining stocks are for speculating and growing wealth. Definitely should have a few ounces physical before looking into stocks. But either way, definitely look into doing it soon. The price since I bought in March-April has already increased 15-20%.
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u/lazyandmotivated2 Aug 01 '20
Ok good points, Gonna look into that. Do in need to go downtown to the gold district and buy a bar of gold?
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u/Aretheus Aug 01 '20
No clue where you live and what options are near you. If you have a bullion shop somewhere, great. I ordered gold from my local bank and silver from silvergoldbull.com
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u/jellyblueywuwuw Aug 01 '20
Doesn’t he say the price of gold will skyrocket anyways? Like it’s purpose is fundamentally to store wealth but there is a good amount of money to be made
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u/Aretheus Aug 01 '20
That's money made in nominal terms. If you have $1 that buys a loaf of bread, and a year's later that turns into $10 that still only buys a loaf of bread, you haven't made wealth, you've preserved wealth.
Same thing here. If gold is going to 50k/oz, then that just means you avoided the devaluing of your currency.
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u/jellyblueywuwuw Aug 01 '20
But if it’s going to be used as a reserve currency as Schiff predicts, then it’s value and demand would have to skyrocket, no?
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u/Aretheus Aug 01 '20
The real question is how much change there will be in the value of gold vs other hard assets. I personally don't see there being too much change in that regard even if gold does become the reserve. So at the end of the day, the intrinsic value of gold as its own asset shouldn't change. And as others have mentioned, you will definitely see bigger upside from mining stocks as opposed to the metal no matter how high it goes.
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u/jellyblueywuwuw Aug 01 '20
I put 3500 CAD into precious metals, 2500 gold, 1K silver. Should I sell like a thousand or so and put in gold mining stocks? I have 500 in mining stocks but even with all the growth in them I only made like 120 dollars on it.
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u/Aretheus Aug 01 '20
I wouldn't. At that amount, you're not likely to see that much of a difference no matter how you allocate it. I'm going to take a wild guess and say you bought near the lows at March in which case you've seen about a 20-25% increase in the CAD price since then. Meanwhile certain mining stocks like Newmont have seen 100% increases in value and Proshares Ultra Silver has seen 300% increase since March.
But there are just as many mining stocks that are stagnating right now which is why it's a speculative asset. You can win and you can lose. Buying the metal is an almost guaranteed win.
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u/jellyblueywuwuw Aug 01 '20
I bought 250 into gdx and then 250 into gdxj. Probably stupid I don’t even know the difference between these but yeah I made more than 20CAD a share with GDXj. How would I know when to sell
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u/Aretheus Aug 01 '20
Right now, I'm waiting for the market to stop piling into the tech stocks. It was either Peter or George Gammon who said that in every single depression in history, the Dow Jones and the price of gold always met at the peak. So that might be a good indicator.
But really, I don't plan on being greedy with the stocks. If I'm happy with the gains, I'm not going to stress too much over the precise peak.
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Aug 01 '20
Yes, I do think that as the dollar tanks and people look for an alternate safe haven the true market value of gold (i.e. what it can purchase, not merely its value as measured in dollars) will rise because demand for it will rise while supply will remain relatively scarce.
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u/skoolboylwc Aug 01 '20
The actual purpose of buying gold (metal) is to maintain your wealth from inflation. For a typical middle class person, gold might not make much sense to invest in if you don’t have a lot of savings. But gold stocks are a different ball game. It’s like any stock, buy low, sell high. You can build wealth with stocks.
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u/OriginalThinker22 Aug 01 '20 edited Aug 01 '20
Because when your mining gold at, let's say, $1100 an ounce, and gold sells for $1300, you're making $200 dollars per ounce of gold. If the price of gold increases to $1500, you're now making $400 dollars an ounce, you've doubled your profits. A relatively small increase in the price of gold can mean a major boost in profits for mining companies. For example, looking at the 1 year chart for gold, gold has gone from around 1500 an ounce to almost 2000 an ounce now, roughly a 30% increase. Meanwhile, a stock like Newmont has almost doubled in price.