I guess you could say I come from a family of preppers of more pioneer-like proportions.

During any time of potential impending crisis, my mother has always prepared our household for agricultural self-sustenance.

Sometimes I would come home and see bags of grains, flour, beans, and sugar.

Sometimes I would come home and see a cow, sheep, goats, pigs, alpacas, and chickens in addition to other farm animals outside of the kitchen window.

Sometimes I would come home to see canning jars filled with shelf-stable foods covering the wall from floor to ceiling.

Sometimes I would come home and see my mother teaching herself how to weave baskets, make soap, hook rugs, knit socks, and so on.

Growing up, every meal was as homemade and as homegrown as it could get. It was fantastic.

And don’t get me wrong, it’s by no means comparable to the outlandish people you see on television. My mom is a badass.

All of this was merely our security blanket. It was our backup plan. It was a way of insuring our lifestyle for if and when the you-know-what hits the fan.

Being prepared is a responsible lifestyle to adopt and live by.

With all of this boisterous talk oozing through the news media pertaining to the border wall, the travel “ban” on several predominately Muslim countries, violent protests in practically every part of the country, unclear relations with Putin, and ISIS lurking around every corner of the globe, it would appear as if the delicate fabric of our country is about to unravel.

The news media does nothing to soothe anxieties, either; if anything, they goad us deeper into fear and panic.

So maybe the apocalypse isn’t exactly knocking at the door this very moment, but wishing to protect your financial assets right now amongst the division and unrest in our country is by no means a foolish idea, either.

During times of uncertainty, many seek security in hedge investing precious metals.

This could ultimately guarantee the economic condition of your future if the worst should happen.

Hedging

It can be difficult for people who aren’t already deeply indoctrinated into the investing culture to decode the language to a vernacular that suits the typical individual. It appears elusive and exclusive.

That’s why I’ve broken the concept of hedge investing down into simplified morsels of information.

Hedging is essentially insurance.

It’s designed not to increase your profits, but to protect you from any substantial losses from any negative event.

It’s not complete prevention, either. Instead, hedging lessens the impact felt by the negative event.

To hedge, one investment is protected by making another. Invest in two securities that have a negative correlation. So if one goes down, the other one goes up.

According to Investopedia, with these instruments, you can develop trading strategies where a loss in one investment is offset by a gain in a derivative.

Again, the goal is not to make money, but to protect from losses.

Investing in Precious Metals

Historically, precious metals have always held their value.

Focus on the User stated this, an important statement to keep in mind:

Unlike paper money which only has a value because the US government says it has value, precious metals by themselves have value… The reality is that the US dollar and other Fiat currencies are basically blank pieces of paper. The only writing on them that gives them value is that there is a guarantee by a government that that piece of paper has value. Once people lose trust in the government backing up that paper, that piece of paper goes back to being a worthless piece of paper. The same cannot be said with precious metals like silver coins.

Some turn towards precious metal investing when the future value of the U.S. dollar becomes jeopardized.

In most instances, this is done to hedge against inflation because these metals are a store of value, meaning they maintain their value without depreciating.

The most popular metals invested by far are gold and silver followed by others such as platinum, copper, iridium, and palladium. But we’re mainly going to concentrate on gold and silver.

Purchasing the physical asset or purchasing futures contracts for the metal or for shares in publicly traded mining companies are all different ways of buying into precious metals.

Gold

Historical records show that gold is a proven hedge against inflation and hyperinflation.

Let’s look back to the German Weimar hyperinflation between January 1919 and November 1923, courtesy of GoldSilver.com.

Before the hyperinflation, gold traded for 180 Weimar marks (currency). By November of 1923, gold was trading for a staggering 87 trillion marks. Over that five-year period, the gold price increased 1.8 times faster than the inflation rate. Even the wealthiest people were rendered penniless in a matter of hours, except for those who had already invested in gold.

Investopedia reports that during this time, “the average price level increased by a factor of 20 billion, and doubling every 28 hours.”

But gold’s value did exactly what it was supposed to do: it soared.

More recently, President Trump has pulled the U.S. out of the Trans-Pacific Partnership trade agreement. Despite political views on the matter, Europeans worry that this move will be a detriment to their economies.

In the midst of their worry, they bought gold.

In just one week, the gold ETF in Europe saw over half a billion dollars pour in. That’s the biggest weekly inflow in over five years.

It’s congruent. When fear spikes, investors run to gold. We should expect to see the same trend here when the time comes.

Gold started off this week how it ended the last, states Fawad Razaqzada for FOREX.com: higher.

Gold share prices have been at new highs repeatedly without any further fundamental support, Razaqzada continues to say.

Unfortunately for the dollar, it was its fifth week of losing. The Dollar Index fell below 100. Even the Federal Reserve has been recently tightening its monetary policies, which does not bode well for stocks. This could mean an imminent correction for the U.S. stock markets, which would drive the price of gold up even further.

Michael Hartnett, chief investment strategist at Bank of America Merrill Lynch, states that trend of rising interest rates and rising gold prices signals impending market volatility. Both the 1973–74 bear market and the 1987 market crash were preceded by three quarters of rising yields and rising gold.

However, most analysts are hesitant to turn bearish yet, as it is impossible to determine when an impending crash will happen.

While gold prices have risen to $1,230 per ounce in five out of six weeks, they are still down from the $1,275.40 price as seen on Election Day.

200-day predictions place gold on the continual rise, pricing around $1,263 per ounce.

It is still too early for any immediate damage to occur. On the other hand, analysts are simultaneously agreeing about one thing: it is time to prepare.

Silver

Silver’s price is often viewed as more volatile than gold’s because of its many industrial uses, as well as its use as a store of value. However, silver’s value is mainly determined by its industrial usage over others.

Since silver is more readily available and accessible than gold for its cheaper purchase price, investing in silver to hedge is just as sound of an option as gold.

Its key strength lies in its accessibility. Since it is significantly cheaper than gold, some consider silver the more useful safe haven because of its multifaceted demand.

Peter Arendas of Seeking Alpha states that silver confirmed its reputation of moving in the same direction as gold, only it completely surpassed the more popular yellow metal.

When allocating capital to the precious metals market, Andrew Hecht of Seeking Alpha personally chooses the gold and silver metals over their related stocks in the mining sphere.

He says risk and exposure to volatility is limited when investing in the metals over their mining counterparts.

This year, the price of silver jumped by 10.2%, whereas gold only increased 5.2%.

Silver started out this week higher also. It has broken its own key resistance around $17.20 per ounce.

200-day predictions place silver around $18.15 per ounce in the near future.

Which to Choose?

Ultimately, I can’t tell you definitively which precious metal will become the most successful hedge.

All that can be done are thorough assessments of the current trends and predictions about the future.

It is important to perform your own research and draw your own conclusions before investing.

There’s nothing hidden in the information I’ve laid out before you; the trends speak for themselves.

I leave the choice to you.

Until next time,

Jennifer Clark
Pro Trader Today