Prescribe Precious Metals to Your Portfolio

Physician's Money Digest, May 2006, Volume 13, Issue 5

If you didn't invest in gold or silver this pastJanuary, you missed 31% and 36% respectivegains. Gold went from $420 to $550 per ounce,and silver went from $6.63 to $9.01 per ounce. I'mnot talking about paper certificates; I'm talkingabout tangible assets. There's nothing like feelingthe heft of gold coins or bars. You can fit about $2million worth of gold in one shoebox. But you maynot be able to lift it, because it will weigh more than200 pounds.

Why Precious Metals?

Gold and silver have been the mediums for commercialtrade for thousands of years. Commoditiesbased on weight and purity, precious metals aremoney in the purest form. Gold and silver have representedpower to everyone from the time of JuliusCaesar to today, and wars have been fought becauseof it. Central reserve banks own gold because it isinflation-proof, maintains its relative buying power,and acts as a foundation for paper currency.

In times of economic uncertainty and social upheaval,precious metals tend to outperform all otherinvestments. At other times, they simply maintaintheir buying power relative to the US dollar. In 1964,$1600 could buy you a new car or 50 ounces ofgold. While 1600 greenbacks today will buy youfour new tires, those 50 ounces of gold will still buyyou a nice new car.

Outlook for Investing

Although metals have risen nicely, there still is greatpotential for a price explosion. Gold is quoted in USdollars. When the value of the dollar is low, more dollarsare needed to purchase one ounce of gold, whichshould drive gold higher. Consider the following.China is planning on diversifying its $800-billionreserve. Rumors are circulating that some of thatmoney will go into precious metals, gold in particular.There are roughly 7 million ounces of gold availablethat represent a market value of approximately $4 billion.Could China absorb the market? Certainly. Willthey buy foreign currencies as well? Definitely. Willthat drive the value of the US dollar down? Probably.

Rare, numismatic gold coins offer the benefits ofowning gold, but one step further. Not only is it atangible commodity, but it is extremely limited inavailability. The alternative investment market isalive and well and fueled by individuals who rememberthe basic economic theory of supply vs demand.Many investors have profited handsomely by investingin rare coins. The key to successful numismaticinvesting is knowledge: Know what to buy, why tobuy it, and when to buy it.

Rather than looking at what is in your portfolio,look at what might be missing. Any long-term portfoliowill benefit by including gold and silver. If youallocate 15% to precious metals and rare coins, yourportfolio will be a lot healthier in the long run.

Joe Hylas has been a professional precious metals and rare coindealer since 1978. Prior to founding Omega Precious Metals in1995, he was head precious metals trader of Deak-PerreraInternational, the largest retail gold dealer in the world. He servedon the Board of Directors for the Industry Council for TangibleAssets for 6 years. For more information, call Omega Precious Metals at 800-474-6960 or visit www.allcoins.us.