With investors from all walks of life focusing on bitcoin and cryptocurrencies, the universal safe-haven assets of gold, silver and precious metals have taken a backseat. This dynamic comes as no surprise. While cryptocurrencies have shot to unprecedented records, gold prices have largely moved sideways. Silver prices have fared even worse, dropping negative for the year until a recent, reactionary rally.
But how long can the precious metals complex remain mired in this disappointing consolidation? Since crashing down from its 2011 peak, alternative-investment proponents have called for and anticipated a dramatic comeback in both gold prices and silver prices. Unfortunately, neither event has yet to occur. Besides a short-lived resurgence in 2016, the precious metals markets never sparked any positive momentum.
Will 2018 finally be the year that gold prices and other safe-haven assets regain their mojo? It’s possible. But at this point in the game, I think most investors are better served playing the markets that move today, and re-examining the precious metals tomorrow.
Don’t get me wrong – I think it’s extraordinarily wise to have a portion of your investment portfolio stored away in physical bullion. This is the ultimate form of wealth, as has been the case since virtually the advent of humankind. I don’t believe that any technology will change that.
However, I don’t recommend sticking to an incorrect investment thesis for the matter of pride or some other emotion. The inherent problem with betting on gold prices or silver prices is that these are relatively limited volume markets. Furthermore, the biggest financial institutions in the world control the underlying bullion supply. As such, it’s easy for bankers to manipulate their valuations.
You cannot say that about cryptocurrencies. I’ve argued multiple times that the blockchain represents truly free markets – they’re open, transparent, and accessible to anyone with an internet connection. It’s not technically perfect, but it’s as close to perfection as you’re going to get.
What we get with cryptocurrencies, therefore, is true price discovery based on a global consensus. With gold prices or silver prices, that consensus comes in the form of the handful of elite banks that control the supply and the exchanges.
Because of this cruel dynamic, I see precious metals having a last chance in 2018 to finally make good on their potential. If not, we could be in for a long bear market.
But here’s why I’m not getting too worked up about it: the blockchain and cryptocurrencies are still in their nascent stages. Tremendous profits are very much available for agile investors willing to take some risks. With the accelerated platform that cryptos provide, we have a chance to make robust gains, and then convert some of the profits into hard assets.
By the time this transition occurs, gold prices may be offered at a steep discount. Better yet, the precious metals may finally be ready to get the ball rolling.