Gold IRA vs Gold ETF - Satori Traders

Gold IRA vs Gold ETF

To address the topic of “Gold IRA vs Gold ETF,” we can focus on the important difference between paper Investments and Investments in tangible goods. With an Investment in a Gold IRA you own physical Gold, while an Investment in a Gold ETF only gives you exposure to the price of Gold on paper. Both Investments have a role to play in a diversified Investment Portfolio but only one of them accomplishes these objectives:

• Diversifies your Portfolio away from paper assets (Stocks, Bonds, Mutual funds, ETFs) and into physical assets (Precious metals)
•  Allows you to invest in assets that have zero counter-party risk

Physical Gold vs Gold ETF It is possible to own physical Gold without opening a Gold IRA account, obviously. Just take some money to your local Coin shop or online dealer and they will gladly sell you some of the yellow metal. Whether we are talking about “Gold IRA vs Gold ETF” or “Physical Gold vs Gold ETF,” we are basically discussing ways for you to invest in physical Gold. There are, however, significant differences to be aware of:

1. The type of money being used to purchase the physical Gold.
2. Where the Gold is stored.
3. Your ability to take possession of the Gold.

Type of money A Gold IRA allows you to invest in physical Gold using your tax-advantaged retirement savings. When you purchase Gold at a Coin shop or online dealer you will use after-tax money from your savings or current income. It’s important to note that a Gold IRA is the only way you can protect your tax-advantaged savings with physical Gold. There are no other Investment vehicles that allow you to put your hard-earned money into physical Gold while also gaining the tax benefits that the IRS allows for retirement savings. It is also possible to invest in Gold ETFs and Gold Trusts using either tax-advantaged money or after-tax money. With a traditional IRA or Roth IRA you can purchase shares in a Gold ETF or Gold Trust and get all of the tax benefits inherent in IRA accounts. With after-tax money you can purchase Gold ETF or Gold Trust shares through a brokerage account like Schwab or Fidelity. Where the Gold is stored The IRS requires that a third-party Custodian stores the assets in an IRA. This is true for traditional IRAs holding paper assets (Stocks, Bonds, Mutual funds, ETFs) and for Gold IRAs holding physical Gold. In both cases, the Custodian securely holds the assets in your name and ensures that all IRS regulations are followed. That means the Precious metals in your Gold IRA account will be stored by a Custodian and you will not have immediate access to the metal. When you retire and start taking distributions from your IRA, you can choose to take possession of the physical Gold or you can sell the Gold and take cash distributions. If your objective is to own physical Gold that you can immediately access, your only option is to purchase the Gold with after-tax money. With a Gold ETF or Gold Trust, the physical Gold is stored with a Custodian designated by the managers of the ETF or Trust. In most cases, you will never be able to take possession of this Gold so where it is stored is not a significant factor to consider. Ability to take possession The IRS requires that a third-party Custodian holds the physical Gold in a Gold IRA account. When you take distributions from the Gold IRA you have two options:

1. Distribute the physical Gold and have the Custodian send it to you.
2. Sell the physical Gold inside the IRA account and then have the Custodian send you cash.

Of relevance to this discussion is the fact that you can take possession of the Gold that you purchase in a Gold IRA account. Doing so, however, requires that you wait until you reach retirement age and start taking distributions (or face the tax consequences of taking early withdrawals). When you invest in a Gold ETF or Gold Trust, it is very unlikely that you will ever take possession of physical Gold. As we will see in the next section, there are two significant hurdles that must be overcome before it is possible to take possession from a Gold ETF or Gold Trust. Recap This table summarizes the differences we just discussed:

Investment	Type of purchase Money	Storage	Ability to take possession
Physical Gold in a Gold IRA	Tax-advantaged	Third-party Custodian	Via distributions
Physical Gold outside of an IRA	After-tax (savings or current income)	Location of your choice	From day 1
Gold ETF or Gold Trust	Tax-advantaged or after-tax	Third-party Custodian	Very unlikely

Is it better to buy physical Gold or Gold ETF Now that we have clarified the different ways of owning physical Gold, let’s focus on the “vs ETF” side of the equation. To start with, it is important to understand some common misconceptions about Gold ETFs and Gold Trusts:

• Although the term “Gold ETF” is commonly used, these Gold-backed Investment vehicles are usually Trusts, not ETFs.
• Gold-backed ETFs and Gold-backed Trusts do not give you a claim on physical Gold. Owning shares in one of these vehicles provides you with a claim on the ETF or Trust, but not the assets of the Trust (i.e., the Gold itself).
• It is not possible for most investors to redeem shares of a Gold-backed ETF or Gold-backed Trust and take possession of physical Gold. There are two reasons for this:

1.  In most of the ETFs and Trusts, (e.g., the SPDR Gold Trust GLD), redemption for physical metal is limited to “authorized participants” (typically, large banks and Investment firms). The Sprott Physical Gold Trust (NYSE Arca: PHYS) is an exception, however, and it does allow ‘mom & pop’ investors to redeem shares for physical.
2. Shares can only be redeemed for physical Gold in large blocks. This table shows the minimum redemption amount for two of the most common Gold-backed Investment vehicles (based on 10/11/2024 closing prices):

Vehicle	NYSE symbol	Minimum redemption amount	Cost to redeem
SDR Gold Trust	GLD	100,000 shares	$24,547,000.00
Sprott Physical Gold Trust	PHYS	Shares equivalent to a good delivery bar (400 troy ounces)	$1,062,800.00

Now we can see why a Gold ETF or Gold Trust only gives you exposure to the price of Gold, not ownership of physical Gold. Because of the restrictive policies for redeeming shares and taking possession of physical metal, it is very unlikely that the typical investor will ever acquire physical Gold by owning shares of a Gold ETF or Gold Trust. If your Investment objective is to benefit from a potential increase in the price of Gold, the Gold ETFs and Gold Trusts will let you accomplish this objective If you want to have ownership of physical Gold, the ETFs and Trusts are not a viable option. Becoming clear on your Investment objectives will let you answer the question, “Is it better to buy physical Gold or Gold ETF?”      Physical Gold vs Gold Mutual fund Gold Mutual funds are another way of gaining exposure to the price of Gold without actually owning physical Gold. These Investment vehicles, however, are even further removed from physical Gold than the Gold ETFs and Gold Trusts. Most of the common Gold Mutual funds hold shares of stock in companies that mine Precious metals. The Mutual funds do not hold physical Gold like the Gold ETFs and Gold Trusts. While the value of Precious metals mining companies tends to increase when the price of Gold increases, this correlation is not guaranteed. There are numerous factors that affect the price of a mining company’s stock so the value of a Gold Mutual fund could remain flat or even decline at the same time that physical Gold is rising in price. Unless it is your only option for investing in the Gold sector, stay away from Gold Mutual funds. If you have a 401(k) account and you are trying to diversify your Portfolio with Precious metals, a Gold Mutual fund may, however, be your only choice. Another 401(k) option may be a Commodity Mutual fund that includes exposure to physical Gold or Gold mining companies. Paper Gold vs Physical Gold ‘Paper Gold’ seems like an odd name for Gold ETFs, Gold Trusts, and Gold Mutual funds, but this moniker emphasizes the non-tangible nature of these Investment vehicles. We’ve already covered this point but it is worth repeating: these Investments give you exposure to the price of Gold but they do not give you ownership of physical Gold. This is important to understand because some of the verbiage used to describe these paper Gold Investments is intentionally misleading. The companies offering these vehicles, and the Financial advisors who recommend them, want you to believe that you are investing in physical Gold. Understand that Financial advisors make money when you buy shares of a Gold ETF or Gold Mutual fund but, in most cases, they do not make money if you place your hard-earned savings into physical Precious metals. Because they are compensated based on their ability to sell paper Investments, it is unlikely these Financial advisors will ever recommend alternative Investments like physical Precious metals or rental Real Estate. Gold IRA pros and cons Pros

• A Gold IRA account is the only way to protect your tax-advantaged retirement savings with physical Precious metals.
• A Gold IRA account allows you to diversify your retirement Portfolio away from traditional Investments (Stocks, Bonds, Mutual funds, ETFs) and into physical Precious metals (Gold, Silver, Platinum, Palladium).
• A Gold IRA account provides all the same tax benefits as a traditional IRA.

• Physical Gold and physical Silver have a well-established history as both circulating Currencies and as stores of value.
• Based on the stagflation-ary conditions of the 1970s, Gold and Silver have the potential to increase in price by 20x when economic conditions become adverse.
• When you withdraw from the Gold IRA you can take distributions in physical metal or in cash.
• Precious metals in a Gold IRA are stored in a secured and insured manner.

Cons

• The IRS requires that a third-party Custodian holds the assets in any IRA account. (The ideal way to own physical Precious metals is to purchase with after-tax money and take direct possession.)
• There are Gold IRA fees related to the secure vaulting and insurance of the Precious metals being held. These fees do not occur in tax-advantaged accounts (IRAs, 401ks) investing in paper Investments like Stocks, Bonds, Mutual funds, and ETFs.
• There are brokerage fees for buying and selling physical Precious metals. This is another fee that does not occur in paper Investments.
• Already-owned Gold cannot be moved into a Gold IRA. Based on IRS regulations, all metal within a Gold IRA account must be purchased within the account.

Conclusions There are three primary factors to consider when purchasing physical Gold: What type of money are you going to use to purchase physical Precious metals: tax-advantaged or after-tax? How will you hold the Precious metals: securely vaulted with a third-party Custodian or securely stored in a location of your choosing. Do you intend to take possession of the physical Gold? The answers to these questions will determine the Gold Investment that makes the most sense for you. If you have questions about investing in Precious metals, please reach out to me personally. I can't give you financial advice but I'll do my best to answer your questions - just drop me a line at: bryan@satoritraders.com. About Satori Traders Hi, my name is Bryan Post and I love the shiny stuff - Silver and Gold. I've been investing in the Precious metals and mining stocks since 2002 when I realized that Gold is the only real money on the planet. Here on SatoriTraders.com I share everything I've learned about the metals, Financials markets, trading, Technical analysis, and the numerous games that central banks play with fiat currencies. https://satoritraders.com/precious-metals/gold/ira/etf

Fractional Gold - Satori Traders

Fractional Gold - Fractional Silver

Repeat after me,

"One ounce Bullion bars and Coins."

That's what you say when you visit your local Coin Shop or invest in a Gold IRA. If you don't say that, you may end up with serious regrets like this person: Notice in the BBB (Better Business Bureau) complaint above that the customer purchased quarter-ounce and 2-ounce Coins. At least 25 of those Coins were 'Gold Lucky Dragons' which we can reasonably assume are Australian Gold Lunar Dragons. All of these items are special edition Coins that carry a high premium over the spot price of either Gold or Silver. The unfortunate investor made a less-than-optimum decision by following the company's recommendations. Because the investor didn't specify that they wanted 1-ounce Bullion bars or Coins, the company representative allowed (encouraged?) them to make two mistakes:

• Purchase fractional ounce Coins. (The 2-ounce Coins aren't 'fractional ounce', but they fall into the same category because they carry a ridiculously high premium over spot prices.)
• Purchase special edition Coins instead of Bullion bars or Coins.

BBB complaints like this one are not at all uncommon for Gold IRA investors and, unfortunately, it is one of the main reasons that Gold IRAs get a bad reputation. Prices for Gold and Silver can be confusing so let's define the commonly quoted prices for Precious metals:

Spot price

This is the price of Silver or Gold when purchased in bulk for immediate delivery. To buy at the spot price you would have to go directly to a mining company and buy their output, or buy directly from the COMEX (Commodity Exchange, New York) or LBMA (London Bullion Market Association).

Futures price

This is the price of Silver or Gold in ‘good delivery form’ when purchased using a futures contract from the COMEX or LBMA exchange. ‘Good delivery form’ is a 400-ounce bar of Gold or a 1000-ounce bar of Silver. Unless you are buying from a mining company or one of the exchanges, you will pay spot price plus a premium to obtain Silver or Gold bars and Coins. The key to understand is that most investors are always going to pay a premium over the spot price.

Precious metals prices

Let's take a look at some Gold and Silver Coins and compare the markup that each Coin carries:

Gold Coin	Weight	Coin type	Retail price	% over spot
2024 Australia Gold Lunar Dragon	1/10 oz	Special edition	$302.27	20.57
2024 Australia Gold Lunar Dragon	1/4 oz	Special edition	$690.69	10.20
2024 Australia Gold Lunar Dragon	1/2 oz	Special edition	$1,351.39	7.81
2024 Australia Gold Lunar Dragon	1 oz	Special edition	$2,757.79	10.00
2024 Austria Gold Philharmonic	1 oz	Bullion	$2,612.79	4.22
2024 American Gold Eagle	1 oz	Proof	$2882.99	15.00
2024 American Gold Eagle	1 oz	Bullion	$2,647.79	5.62

(Table based on spot price of Gold 08/17/2024: $2506.84)

Notice the difference between the premium on the 1-ounce Bullion Coins versus the fractional ounce and special edition Gold Coins. The 1/10th ounce special edition Coin has a premium that is almost five times higher than the Austrian Philharmonic Bullion Coin. A premium of 4.22% is fairly reasonable. Investors are going to pay at least this level of premium regardless of whether they purchase their Gold at a local Coin shop, an online broker, or a Gold IRA company. US investors may want to pay the slightly higher 5.62% premium in order to purchase American Gold Eagle Coins since they are considered the 'Coin of the realm' (i.e., the Coins minted by their country of residence).

Silver Coin	Weight	Coin type	Retail price	% over spot
2024 Australia Silver Lunar Dragon	1/10 oz	Special edition	$23.86	64.55
2024 Australia Silver Lunar Dragon	1 oz	Special edition	$39.64	36.68
2024 Australia Silver Lunar Dragon	2 oz	Special edition	$89.38	54.10
2024 American Silver Eagle	1 oz	Proof	$94.99	227.55
2024 American Silver Eagle	1 oz	Bullion	$37.73	30.10
Silver Round - PAMP Buffalo	1 oz	Bullion	$34.03	17.34

Silver Bar	Weight	Bar type	Retail price	% over spot
Royal Canadian Mint	10 oz	Bullion	$357.30	23.20
Royal Canadian Mint	100 oz	Bullion	$3,223.00	11.13

(Tables based on spot price of Silver 08/17/2024: $29.00)

Gold Coins below are from a private broker (add 1% to 3.5% commission depending on size of order). They are categorized as Numismatics but they are well-circulated Coins which have no collector value.

Gold Coin	Weight	Coin type	Retail price	% over spot
British Sovereign	0.2354 oz	Numismatic	$587.00	0.0
French 20 Francs	0.1867 oz	Numismatic	$467.00	0.4
Dutch 10 Guilder	0.1947 oz	Numismatic	$485.00	0.0

(Tables based on spot price of Gold 08/17/2024: $2506.84)

Silver bars and Coins below are from a private broker (add 1% to 3.5% commission depending on size of order).

Silver product	Type	Weight	Category	Retail price	% over spot
US 90%	Coin ($1000 bag)	715 oz	Junk	$21,067.00	1.6
US 40% Half Dollar	Coin (2 x $500 bag)	295 oz	Junk	$8555.00	0.0
Generic	Round	1 oz	Bullion	$29.35	1.2
Generic	Bar	10 oz	Bullion	$291.00	0.4
Generic	Bar	100 oz	Bullion	$2945.00	1.6

(Tables based on spot price of Silver 08/17/2024: $29.00)

Obviously, premiums on Silver are higher than premiums on Gold regardless of the type of Silver being purchased. This is because the Silver market is operating at a deficit (demand overwhelming supply) and has been since 2021. While the 11.13% premium on a 100-ounce bar seems high, investors are going to pay a premium around this level regardless of where they purchase Silver (unless dealing with a private broker). Look at the premiums on the 1/2 ounce (64.55%) and 2 ounce (54.10%) special edition Silver Coins, however. This level of premium is simply obscene. Why any knowledgeable investor would pay these premiums is hard to fathom. Perhaps it makes sense to purchase one of these over-priced Coins as a collector item or gift, but investing in a quantity of them is absurd. The investor in the BBB complaint above 'invested' in 612 of these Coins!

Proof Coins

Proof Coins are certainly beautiful, but they are not a good Investment. They are intended primarily for Coin Collectors who want to appreciate them as pieces of art. Proof Coin production begins with a highly-polished Coin blank and the blank is struck at least twice using a highly-polished die. Because the Coin blank is struck multiple times, each strike uses less pressure. The result is a Coin that has deeper relief and much finer detail. These fancy Coins are often sold in special boxes along with a certificate of authenticity. While Coin collectors may appreciate the box and the certificate, these additions do absolutely nothing to increase the Investment value of the Coin. Unfortunately, these high-priced Coins are eligible for Gold IRA accounts so unknowledgeable investors sometimes get duped into buying them. Unscrupulous salespeople tell these uneducated investors that the proof Coins have higher demand from investors, which is untrue.

Premiums vary based on supply and demand

Like most products in a Free market economy, the premium levels on Gold and Silver fluctuate based on Supply and demand. When supply is constrained or investor demand overwhelms available supply, premium levels rise. This condition occurred in 2021 and 2022, and premiums on Silver products were absolutely crazy. Investors were paying almost 100% premium to purchase Silver American Eagle Coins which were hard-to-find at the time. They were also waiting six weeks or more to take possession of their purchases. Occasionally, premiums can be surprisingly low if supply overwhelms demand. This situation usually occurs in Gold and Silver Coins that investors aren’t very interested in. For example, right now (August, 2024) there is an online Bullion dealer selling 40% Silver Coins and 20 Franc French Gold Coins for less than 1% over the spot price of the metals the Coins contain. When you are purchasing Precious metals, always ask your dealer for the products with lowest premium over spot price. If you don’t ask, they probably won’t tell you about deals like the 40% Silver Coins or French Gold Francs.

Silver supply deficit

The table below shows Silver supply and demand numbers published by the Silver Institute. Rising industrial demand for Silver is causing a deficit condition in the marketplace. Silver is being supplied from above-ground stockpiles in order to satisfy demand. This deficit condition explains why premiums are higher on Silver bars and Coins in comparison to the premiums on Gold products.

	2020	2021	2022	2023	2024
Supply (million troy oz)	957.4	1,004.3	1,015.4	1,010.7	1,003.8
Demand (million troy oz)	926.8	1,099.6	1,278.9	1,195.0	1,219.1
Deficit (million troy oz)	30.6	95.3	263.5	184.3	215.3

Do fractional ounce bars and Coins ever make sense?

IRA accounts If you are investing your hard-earned money in a Gold IRA account stick with the suggestions above. Purchase one ounce Gold Bullion bars and Coins and 10 or 100-ounce Silver Bullion bars. Do not purchase special edition Coins, proof Coins, fractional ounce Coins, or 2-ounce Coins. Refer to the tables above and compare premiums if this concept isn’t clear. Also keep in mind that the Precious metals in your IRA account are going to be stored with a third-party, IRS-approved Custodian until you start taking distributions from the IRA. Unless you take distributions in the form of metal instead of cash, you will never see or touch these bars and Coins. If you aren’t going to take possession of them, what difference does it make what size they are or what they look like? Purchases made with after tax money If you are purchasing Precious metals with after tax money you have more options and, in some cases, you may decide that fractional ounce Coins make sense. For example, the 20 Franc Gold Coins mentioned above contain 0.1867 ounces of Gold. Clearly that is a fractional ounce Coin but you may be able to purchase it for a premium of only 1% instead of the premium of 4% or more for the other Gold Coins listed above. Here’s another saying to keep in mind:

“Gold is Gold.”

“Now what the heck does that mean?”, you might ask. The saying relates to the fact that all Gold Coins and bars are made of the same material – Gold. It doesn’t matter whether the Gold is a shiny, brand new American Gold Eagle Coin or a beat-up African Gold Krugerrand from the scratch-and-dent bin - at the end of the day, they are all just Gold. Unless you want to have pretty Coins to show your family and friends, or perhaps to give as gifts, the form of the Gold doesn’t really matter. (As an aside, telling people that you are investing in Precious metals is probably not a wise strategy.) If your objective is to protect your hard-earned money by diversifying into Precious metals, always purchase the most amount of metal you can get for the least amount of money. In other words, always try to minimize the level of premium you are paying for your Gold and Silver purchases. Future expectations Your expectations for the future may influence whether a purchase of fractional ounce Coins makes sense. For example, do you think Gold is ultimately going to $74,000 per ounce like Jim Sinclair predicted over 10 years ago? If so, walk through this thought exercise with me. With Gold at $74,000 and a Gold to Silver ratio of 16 to 1 (the historic ratio for several hundred years), we arrive at $4625 per ounce of Silver. I know these prices seem ridiculous, but using them in this example will help me make my point. Imagine that you want to sell a little bit of your Precious metals Investment in that price environment. If you take a 1-ounce Gold Coin to your local Coin shop or pawn shop it is very unlikely that you will get $74,000 in cash. Instead, they are going to give you a check for that amount, and the check can only be processed through the banking system. The same argument applies to 10-ounce and 100-ounce Silver bars. Selling a 10-ounce bar will get you a check for $46,250 and with a 100-ounce bar, you will be walking out of the Coin shop with a check for $462,500. If you invested in Precious metals to escape the banking system and protect your Wealth, you just got forced back into the banking system. What if we end up in a barter economy? Hopefully that never comes to pass, but let’s continue with our example of $74,000 Gold and $4625 Silver. Gold isn’t really practical in a barter economy because its value is too high. Instead of being useful for day-to-day living, it becomes an asset that is only useful for large purchases like a house or farmstead. In contrast, let’s say you have some 10^th-ounce Gold Coins and some junk Silver dimes. Each of those Gold Coins is worth $7,400 and the Silver dimes are worth $330 apiece.

Wrapup

It's easy enough to avoid overpaying for the Precious metals you purchase. Simply remember this phrase:

"One ounce Bullion bars and Coins."

And if you are investing in Silver, focus on 10-ounce and 100-ounce bars, if possible. With just this little bit of knowledge you will be able to avoid these serious (and common) mistakes:

• Purchasing fractional or 2-ounce Coins
• Purchasing special edition or proof Coins

If you have questions about investing in Precious metals, please ask them before parting with your hard-earned money. You can reach us via the contact form, an email, or the phone. We would rather spend a little time with you than read your complaint on the BBB website. About Satori Traders Hi, my name is Bryan Post and I love the shiny stuff - Silver and Gold. I've been investing in the Precious metals and mining stocks since 2002 when I realized that Gold is the only real money on the planet. Here on SatoriTraders.com I share everything I've learned about the metals, Financials markets, trading, Technical analysis, and the numerous games that central banks play with fiat currencies. https://satoritraders.com/precious-metals/gold/ira/fractional

Investing in Platinum - Is Platinum a good Investment - Satori Traders

Investing in Platinum - Is Platinum a good Investment

In today’s video presentation I take an in-depth look at the price charts of Platinum in monthly, weekly, and daily time frames. I also compare investing in Platinum against the other Precious metals: Palladium, Silver, and Gold. The presentation started with some of my random thoughts about Platinum:

• Platinum vs Silver vs White Gold – From the perspective of picking jewelry, this is a common comparison. Palladium is also used for jewelry although, perhaps, it is not as common as the other three metals.
• Platinum vs Palladium vs Silver – From the perspective of picking a white Precious metal for Investment purposes, these are the common choices. Rhodium also falls into this category but it is not a common choice for investors.
• IRS allows 4 Precious metals in tax-advantaged retirement accounts like Gold IRAs: Gold, Silver, Platinum, Palladium.
• The average person is unable to differentiate between the three white Investment metals: Platinum, Palladium, and Silver. If they were holding Coin blanks (i.e., unstamped Coins) of each metal, they would be unable to differentiate between the three metals, much less identify which one was which.
• These are the spot prices for the three metals on 09/26/2024: Silver $32, Platinum $996, Palladium $1053. Given that most people could not tell one Precious metal from another, how are Platinum and Palladium worth 30 times as much as Silver? This price differential makes me question why anyone would choose the expensive metals over Silver.
• Potential for price gains – When the price of Gold rises, Silver has a tendency to outperform Gold on a percentage basis. All of the Precious metals are going to follow the price of Gold higher, but it is likely that Silver will gain the most. Why?

• Let’s assume that Gold will remain the most expensive of the four Precious metals we are discussing and that Gold’s price is fixed at its current level.
• In that scenario, Platinum and Palladium can only increase in price by 2.6x while Silver can increase by 81x. Another way of expressing this idea is that Silver has more room to run as it chases Gold higher.

• History of Platinum and Palladium as monetary mediums – These Precious metals have essentially no history as circulating Currencies. For a brief period of seventeen years (1828 to 1845), Russia issued Platinum Coins for usage as Currency. These Coins were removed from circulation for two reasons:

• Platinum is hard to work with in comparison to Silver and Gold which are more malleable and ductile than Platinum.
• Platinum resembles less expensive metals like Silver. In other words, people were confused by the Platinum Coins because they looked like Silver Coins. Note that this historic fact supports my premise that people are unable to differentiate between the expensive white Precious metals (Platinum, Palladium) and Silver.

Industrial uses

• Platinum & Palladium – The primary use case for these white Precious metals is as catalysts in the catalytic converters for gasoline powered automobiles.

• Catalytic converters account for about 43% of industrial demand. Notice that the trend towards electric vehicles could result in a dramatic reduction in demand for these metals because electric vehicles don’t use catalytic converters.
• After catalysts, the next greatest demand for Platinum and Palladium is Jewelry at around 17%.
• Additional uses for these metals: Jewelry, dental, electronics, pollution control.
• Note that with the exception of automotive catalysts, there are other metals that can be substituted for Platinum and Palladium in most use cases.

• Silver

• Electric solder – Because of Silver’s high electrical conductivity it is widely used as solder in electronic circuitry. One of the side-effects of this usage is that a little bit of Silver is thrown away when the electronic device reaches end of life because the Silver cannot be recovered in an economically viable manner.

• A few drops of Silver being thrown away may seem trivial, but consider this: 130 million smart phones are thrown away ever year and each of those phones contains some amount of Silver.
• Because Silver is thrown away instead of being recycled, the amount of above-ground Silver is continually decreasing. In fact, the global Silver market has been operating in a deficit for the past three years. The shortage of metal is coming from the stockpiles of Silver mined in the past.
• In contrast to Silver, most of the Gold that has ever been mined remains above-ground because the value of Gold makes it economically viable to recover.

• Solar panels – A typical solar panel contains about 3/4ths of an ounce of Silver. Global demand for solar panels in 2022 resulted in 140 million ounces of the white Precious metal being consumed. Solar panels can last for 20 to 30 years but they are thrown away at their end of life. Like smart phones, there isn’t enough Silver in a solar panel to make the recovery of the metal economically viable. Note that the demand for solar panels has increased since 2022 and is expected to increase dramatically going forward.
• EVs – Current generation electric vehicles contain roughly one to two ounces of Silver. Future generations are expected to use far more Silver as the Precious metal is incorporated into the batteries. For example, Samsung recently announced a high-performance EV battery which is expected to use about 1000 grams of Silver (30 troy ounces) per vehicle.
• Medical – Silver is a natural antibacterial and antiviral. These properties make it ideal for wound care, prosthetic devices, surgical appliances, and catheters.
• Consumer products – Because of its antibacterial / antiviral properties, Silver is used as a coating in consumer appliances like washers, dryers, and refrigerators where germs might otherwise proliferate.
• High-performance batteries

• Silver oxide button batteries are widely used in watches, hearing aids, medical devices, and precision instruments. These batteries are desirable because they have a high energy-to-weight ratio and stable power output as they discharge (i.e., the power level doesn’t fluctuate).
• Silver zinc batteries are used in military and space applications where high energy-to-weight, stable power output, and the ability to withstand numerous charge/discharge cycles are important properties.
• Silver zinc batteries are the reason that every Tomahawk missile contains 40 pounds (500 troy ounces) of Silver.

• Protection from small arms fire – Silver is ductile which means it bends upon impact instead of remaining rigid. This property makes it ideal for use as a shield in military aircraft that could be subject to small arms fire.

• EMI/RFI shielding – Silver is one of several materials used in electromagnetic and radio frequency shielding for sensitive military electronics and stealth coatings.

• Gold – Gold is used in dentistry, aerospace, and electronics. Because of its cost, other metals are used when possible and most of the Gold used in industrial applications is ultimately recovered and recycled.

I was asked to perform an update on the price performance of Platinum but this video presentation ended up being more of an explanation of why Silver is a better Investment than the other white Precious metals. Watch the video for in-depth analysis of the Platinum price charts. https://satoritraders.com/blog/investing-in-platinum-is-platinum-a-good-investment/

Gold miners ETFs – Are they outperforming the broad market? - Satori Traders

 

Gold miners ETFs – Are they outperforming the broad market?

Gold miners ETFs – Are they outperforming the broad market?

In today’s video presentation I had two objectives:

1.    Determine if the Gold mining stocks are outperforming the overall Stock market.

2.     Determine if there is a better proxy for Gold mining stocks than GDXJ.

Before looking at the price charts I shared some random thoughts:

1.    Warren Buffett’s company, Berkshire Hathaway, has been selling a significant amount of its stock holdings including Apple and Bank of America. Some analysts are speculating that he is selling NYSE: BAC stock because the bank is believed to be short 800 million ounces of Silver via COMEX futures contracts. Given what appears to be a major rally in the price of Gold and the price of Silver, Bank of America’s short position could cause the bank to suffer significant losses. At $32 US Dollars per ounce, it would cost BAC $25.6 billion to cover these contracts. This amount is equivalent to about one full year’s profit for the bank.

2.     The current rally in the price of Gold is occurring for several reasons:

a.    Because of interest rate cuts by the Fed and other countries. On top of the recent 50 bps cut, the markets are pricing in additional 50 bps cuts at each of the next FOMC meetings. If this occurs, it will be an extremely aggressive pace for taking rates lower (i.e., 150 bps in three FOMC meetings).

b.   The geopolitical situation in the World is heating up rapidly, with hotspots in at least three locations. Heightened geopolitical tension tends to drive the price of Gold higher like we saw in January 2020 when Iranian general Qasem Soleimani was assassinated.

c.    China is attempting to stimulate their economy with interest cuts and other monetary measures. Markets analysts are describing these moves as a ‘monetary bazooka.’ Of particular interest is that, for the first time ever, China is publicly intervening in the country’s Stock markets and making money available for institutional investors to buy stocks.

 

3.    Gold price gains that occur for geopolitical reasons tend to fade away when tensions decline. If peace were to break out around the World, the price of Gold might decline. I also pointed out that pigs may learn to fly.

4.    Big money moves into the large cap Gold mining stocks first. Momentum and speculators then take the mid cap and small cap miners higher. At some point money starts to move into the junior Gold mining stocks where the percentage gains can be impressive.

“Jr Miner” ETFs

I finished up my random thoughts by pointing out that the “junior” Gold miners ETFs do not hold junior Gold mining stocks. In most cases, these ETFs hold stocks of mining companies with market caps well above $1 billion.

I’ve been giving this fact some thought recently because I have received criticism for using GDXJ as my proxy for the 2,000 mining stocks that exist in the Precious metals sector.

Obviously, no one analyst can monitor 2,000 individual stocks, much less perform in-depth Technical analysis on their price charts – there simply isn’t enough time in the day. Because of this time constraint, it is necessary to pick a proxy (or a few proxies) that represent the entire sector.

The criticism I received was based on the idea that GDXJ doesn’t represent the broad mining stock sector because the ETF only holds junior mining stocks. My response to this criticism is the exact point I am making: none of the Gold miners ETFs hold junior mining stocks so it does not matter which ETF is chosen as a proxy for the sector.

Let’s define junior miners so we have context for this discussion.

In my analysis of the mining stock sector I use this simple definition: A junior mining stock has a market cap well under $1 billion US Dollars and produces less than 300,000 troy ounces of Gold (or Gold equivalent) per year.

As I demonstrate in the video, the Gold miners ETFs hold stocks of mining companies with market caps starting around $1 billion USD and higher. There are a few exceptions to this generalization but, as I show in the video, the weighting on these junior mining stocks is so low that they provide zero impact on the overall performance of the ETFs.

I believe there are several reasons that explain why the “junior” Gold miners ETFs do not hold actual junior Gold mining stocks:

Volatility

The junior mining stocks are very volatile. They can easily move 7% or more on any given day – and this movement can be in either direction. If a junior miner publishes particularly exciting news, their price may jump 15% or more.

Obviously, this kind of volatility is not desirable from the Wall Street perspective of attracting investors with money.

Too many stocks to pick from

Let’s say you and I want to start a junior Gold miners ETF. Which mining stocks are we going to pick? There are 2,000 to choose from and most of these companies will never produce any Gold or Silver. In fact, most of them will ultimately fail or fade away into irrelevance (i.e., they will be ignored by investors and their price will dwindle towards zero).

In this environment we have to start picking junior miners based on some criteria. In other words, we have to become stock-pickers and hope we are correct. At that point, are we actually creating an ETF or have we become money managers with a Portfolio of high-risk junior mining stocks?

Risk of failure / delisting

As I stated above, most of the 2,000 mining stocks will never produce any Gold or Silver. Many will fail outright – many more will fade into irrelevance. There are numerous examples of junior mining companies that traded at $2.50 or $3.50 per share in recent years and today they are literally penny stocks.

As a company’s stock declines in price it runs the risk of being delisted by the exchange(s) where it trades. The delisting may occur because the stock’s price falls below a certain threshold, or because the company can no longer afford to comply with the regulatory requirements of remaining listed (i.e., filing required reports, performing audits, etc.).

One of the ETFs examined in today’s video is holding the stock of a company that was delisted on July 1^st, 2024. In this particular case, the company chose to be delisted because of the cost of maintaining their listing.

 

Technical analysis of the price charts

These are the charts I covered today. Watch the video for details.

Pay particular attention to the discussion of HUI vs SPX and the 3 Fans technique applied to the monthly chart of GDXJ. These charts answer the question, “Are the mining stocksoutperforming the broad Stock market?”

Gold - daily

Silver - daily

HUI vs SPX

NYSE Arca: HUI – Gold Bugs Index – weekly & monthly

NYSE Arca: GDX – VanEck Gold Miners ETF

NYSE Arca: GDXJ – VanEck Junior Gold Miners ETF – weekly & monthly

          Monthly – 3 Fans technique

NYSE Arca: SGDM – Sprott Gold Miners ETF – weekly

NYSE Arca: SGDJ – Sprott Junior Gold Miners ETF – weekly

NYSE Arca: GOAU – US Global GO Gold and Precious Metal Miners ETF – weekly

NYSE Arca: GOEX – Global X Gold Explorers ETF – daily

          GOEX components by market cap

NASDAQ: AUMI – Themes Gold Miners ETF – daily

TSX-V: WRLG – West Red Lake Gold Mines Ltd – daily

OTC: WRLGF – West Red Lake Gold Mines Ltd – daily

TSX-V: SIG – Sitka Gold Corp. – daily

NYSE: IAG – Iamgold Corp – weekly

NASDAQ: RGLD – Royal Gold, Inc. – monthly

NYSE: WPM – Wheaton Precious Metals Corp. – monthly & quarterly

 

Wrapup – did I accomplish my objectives?

Are Gold mining stocks are outperforming the overall stock market?

No. There are some green shoots poking through the ground but they haven’t spread their leaves fully.

IMO we are still in a mining stock environment where only two strategies make sense:

1.    Invest in the large-cap, well-established royalty companies like Wheaton Precius Metals Corp. (NYSE: WPM). With this strategy you have exposure to the mining stock sector while minimizing your risk and, you get paid for taking risk.

2.    Pick individual mining stocks based on the belief that the company has sound fundamentals. In other words, a stock-picking strategy where the investor believes they can identify the stocks that will outperform. (While avoiding the many, many mining stocks that will underperform or go out of business for one reason or another.)

Is there a better proxy for Gold mining stocks than GDXJ?

No. All of the Gold miners ETFs are essentially the same based on the component stocks they hold. They also look the same from the perspective of performing Technical analysis on a financial chart. The differences between the ETFs are trivial. For example, one ETF might hold Lundin Gold while the others do not. But if that difference is significant to an investor, they should invest in Lundin Gold directly in lieu of the ETFs or as a supplement to the ETFs.

 

https://satoritraders.com/blog/gold-miners-etfs-are-they-outperforming-the-broad-market

West Red Lake Gold stock – Madsen mine – Red Lake mining district - Satori Traders

West Red Lake Gold stock – Madsen mine – Red Lake mining district

In today’s video presentation we looked at West Red Lake Gold Mines (TSX-V: WRLG) (OTC: WRLGF). Bob Moriarty mentioned this company in a video interview on the 10th of September, 2024 where the interviewer was focused on undervalued Gold mining stocks.

It is important to note that Bob was not recommending this stock for Investment, nor am I. He simply mentioned the company in response to the interviewer’s question about currently undervalued mining companies. Based on Bob’s reference to the company I chose to perform my own due diligence and share my findings with you.

As always, you and only you are responsible for the Investment decisions you make with your hard-earned money.

WRLG Company highlights

• A fully permitted, emerging Gold producer targeting production in H2 2025
• Bought the Madsen mine and mill for a little over 10 cents on Dollar – the mine and mill had $350 million CAD in recent Investments and WRLG paid $42 million CAD for both
• The mine and mill were in production between 2020 and 2022 so the project has been significantly derisked
• The mill was constructed and commissioned in 2020
• The mill is currently rated at 800 tons per day with potential for expansion to 1,500 tpd with modest Investment – current permits allow for expansion to 1,089 tpd
• There are high-grade drill results at both shallow and deep depths
• Evolution Mining (previously Goldcore) is operating nearby and that company is extracting high-grade ore at a depth of 3,000 meters
• The Madsen mine has only been developed to 1,275 meters so it is reasonable to assume that there could be resources down to 3,000 meters like its neighbors
• WRLG has 100% ownership of the Rowan property which is less than 20 kms (12 miles) from the Madsen mine – this property includes three past producing mines – ore from the Rowan property could be economically hauled to the Madsen mill for processing
• Based on Technical Reports (NI 43-101) prepared in 2024, Red Lake Gold Mines has 1.65 million ounces of Indicated Gold resources at the Madsen mine and an additional 195.7 thousand ounces of Indicated Gold resources at the Rowan property
• WRLG has all necessary infrastructure in place to begin production: water, hydroelectric power from the national grid, easy access to paved highways, and experienced mining personnel from the nearby city of Red Lake
• The company is currently valued as a developer, when it could realistically be valued as an emerging producer – this point is demonstrated in slide 22 of the company’s Investor Presentation which is available on their website
• Able to obtain financing based on future Gold production instead of taking on debt or issuing additional shares of stock – these Gold-linked Notes and Warrants yield 12% interest to investors and will be paid off from Gold production starting in 2026
• WRLG is learning from the past operator’s mistakes – for example, while cleaning up the mill and processing plant, the company discovered locations in the processing circuits where Gold was getting stuck – they recovered 415 troy ounces of Gold from this cleanup effort which resulted in $750,000 CAD revenue – the company is addressing these inefficiencies in the processing plant
• The company poured its first Gold bar from Gold recovered during the mill cleanup process – besides accomplishing an important milestone, this Gold pour demonstrated that the on-site refinery is still operational after an 18-month period of sitting idle
• The existing tailings pond is being expanded to allow for 10-years of production at the 800 tpd rate
• Tightly spaced definition drilling is currently reducing hole spacing from 20 meters to 6 meters prior to defining a mine plan – this drill program will increase efficiency by allowing WRLG to focus on high grade ore while minimizing the amount of low-grade ore sent through the crusher and processing plant
• Test mining is being performed as part of developing the production mine plan – this preliminary mining is also creating a stockpile of ore to be processed in 2025
• A 1,200 meter connection drift is being created to connect the East and West mine portals at the Madsen mine – this will increase the efficiency of hauling ore and waste while also improving ventilation and safety

Capital Structure

Based on slide 29 in the Investor Presentation we find these numbers:

• 270.5 million shares issued & outstanding
• 395 million fully diluted shares outstanding
• $25 million CAD cash on hand

(information above as of September 5, 2024)

Also shown on slide 29 is a breakdown of outstanding warrants with the strike prices and expiry dates.

Given the strike prices of the warrants and the expectation that WRLG is going into production before the warrants expire, it is my opinion that all of them will be exercised. This will result in the 395 million outstanding shares as shown above.

Using the closing price of $0.78 CAD for WRLG on 09/06/2024, we can determine these values for the company’s market capitalization:

• $211 million CAD based on shares issued & outstanding
• $308 million CAD fully diluted

When I first looked at the number of fully diluted shares outstanding (395M), I was disappointed. West Red Lake Gold Mines has so much going for it I was hoping to find that it was also tightly held with a minimal number of shares issued.

My disappointment was somewhat abated after I calculated the market cap using the fully diluted number of shares. Although 395M is a lot of shares, a market cap of $308 million CAD is not excessive for an emerging producer in my opinion.

The rule of thumb I use is that a market cap of $300 million US is fully-valued for an exploration company. $300M US is $407M CAD so WRLG is well under my threshold and, on top of that, the company is an emerging producer not an exploration company. Again, this supports my opinion that the company is currently undervalued.

West Red Lake Gold stock charts

In the video we look at charts of WRLG in both the US over-the-counter market and the Canadian TSX-V market. Both charts show that price broke above a resistance zone on Friday. MACD is in Bull mode suggesting that the primary trend is upwards, and Stochastics is elevated suggesting that WRLG and WRLGF stock has plenty of energy to head higher.

Wrapup

West Red Lake Gold Mines (TSX-V: WRLG) (OTC: WRLGF) is an interesting emerging Gold producer. Given the current environment of rising Gold prices, the company’s planned production start in H2 2025 could catapult the stock price higher.

Investors love a good story so a solid company starting production during a Bull Market could attract more attention than would otherwise occur. Fortunately, WRLG appears to have the fundamentals needed for success, even if investors get carried away and temporarily overvalue the company’s stock price.

Disclosure

At the time the video presentation was recorded and published, I did not have a position in West Red Lake Gold Mines. I did, however, take a small position on the open Monday morning (09/16/2024). As always, I may buy or sell shares in the company without notifying anyone before doing so.

Disclaimer

I cannot and do not give financial recommendations and I am not recommending that anyone invest in this stock. I am simply doing my own due diligence and deciding if I want to invest in this company. I am sharing the information with you to help you do your own due diligence. Please perform your own due diligence before putting your hard-earned money at risk.

https://satoritraders.com/blog/west-red-lake-gold-stock/

Gold price predictions - Gold price prediction chart - Satori Traders

 

Gold price predictions - Gold price prediction chart

In today’s video presentation we looked at the Gold price charts, including some long-term Gold price prediction charts showing us how Gold could potentially reach $2600, $2800, $3600, and then $7928 in the next two years.

Watch the video to see Gold price predictions for next 5 years.

Gold price prediction 2027

The last Bull Market in the Precious metals started in the early 2000s and ran for 12 years. During that time span the price of Gold increased by 758 percent. In the subsequent four-year Bear Market Gold was cut nearly in half with a 46 percent loss.

There are several factors suggesting that the Bear Market ended in late-2015. In the video presentation we show this behavior to support our thesis that a new Bull Market began at that point.

Using these data points, we can predict a price of Gold at $7928 in late-2017.

Adding 12 years to late-2015 gives us late-2017 as a target date.

Using the low price of Gold from late-2015 ($1045.91) and projecting a 758 percent increase gives us a target price of $7928 per ounce.

 Remember that we are just spit balling here - throwing mud against the wall, so to speak, and the mud may or may not stick.

BRICS Gold backed currency

As I explain in the video, there are significant events on the horizon that could dramatically affect the price of Gold.

On October 22nd, 2024, BRICS Summit XVI will begin in Kazan, Russia. There is widespread expectation that BRICS will announce their new Currency, or at least lay out a time frame for the introduction of their new Currency.

Although many analysts are suggesting that this BRICS Currency will be backed by Gold, that is not my expectation. No government or politician wants to commit themselves to a Gold backed Currency or a Gold standard of any sort.

Think about having Fiat money and a printing press. All you have to do is go down in the basement, hit the go button on the printer, and before you know it you have a stack of Benjamins ($100 US bills), Rubles, or Renminbi.

If you choose to adopt a Gold standard you can't do that anymore. Gold forces you to be disciplined because Gold can’t be printed.

For that reason, no entity, including BRICS, is going to willingly announce a Gold backed Currency or tie themselves to a Gold standard. Let me state for the record, however, that I have been wrong before and I’m certainly willing to be wrong on this.

An important point to keep in mind is that we don’t need the introduction of a Gold backed Currency in order to see the price of Gold rise dramatically.

In March of 2022, the LBMA and COMEX banned Russian Gold and Silver refineries from trading their Precious metals on the global exchanges. Implementing the ban was achieved quite simply by declaring that Russian-produced Silver and Gold bars were no longer considered good for delivery. In other words, these bars could no longer be used to fulfil futures contracts at either the COMEX or LBMA.

The ban set off a movement in Russia to create their own international Precious metals exchange and, more importantly, to break the stranglehold that the LBMA and COMEX exchanges have on the price of Gold and the price of Silver.

Russia is working towards this objective by strengthening the Moscow Exchange and its benchmark price of Gold. Similar moves are being made by China via its Shanghai Gold Exchange.

When alternative mechanisms exist for the global pricing of Silver and Gold, the LBMA and COMEX will lose the ability to control Precious metals prices by simply selling futures contracts that have no actual metal backing them.

New BRICS Currency

Analysts suggesting that BRICS will announce a Gold backed Currency point at the UNIT as the possible mechanism for doing so.

If you look on the web you can find the white paper describing the UNIT (or go to unitfoundation . org and download it).

As it is currently being proposed, the UNIT would be a basket of BRICS currencies along with 40% Gold. Including Gold in the basket makes sense because this would instantly add legitimacy to the brand-new Currency.

Remember what I said earlier about no entity willingly choosing Gold as backing for their Currency. In the case of the UNIT, Gold would be chosen out of necessity in order to rapidly create an international settlement Currency that countries can trust.

Human beings have a long history with Gold. The yellow metal has been used as a circulating currency for 2,600 years. Before that, humans used Gold as a store of value in their treasuries and, because of its beauty, used it for artwork and personal adornment.

 There is evidence that humans have been refining and using Gold for at least 6,000 years. Given this history, it isn’t (or shouldn’t be) surprising that Gold would play a key role in any new Currency.

Gold as Currency

Let’s perform a thought experiment now and pretend that we are creating a Currency that will be backed by Gold or tied to Gold in a manner similar to the UNIT.

When we sit down at the kitchen table we need to start with these facts:

• Global M1 money supply is $48.9 trillion as of late-2022. M1 includes Fiat Currency in circulation, travelers checks, checking accounts, and savings accounts.
• Global debt is $305 trillion as of late-2022.

Using these numbers as a starting point we would want our Currency to accommodate at least $50 trillion (global M1) and potentially $350 trillion (global M1 plus global debt) in value.

Because of the magnitude of these numbers, we would probably decide that the current price of Gold ($2576 on 09/16/2024) isn’t high enough.

After some discussion we might decide that an initial price of Gold at $5,000 an ounce made sense. For our Currency to succeed we must be willing to buy Gold at the price we set, so we don’t want that price to be too high.

Now we launch our Currency on a Friday afternoon after the markets have closed. When the World wakes up Monday morning the new global price of Gold is $5,000 per ounce.

In a price chart of Gold this action would look like a stairstep as price jumped vertically from $2,576 to $5,000.

After two or three years of running our thought experiment, we might discover that a $5000 price of Gold was no longer working. In response, we could increase the price to $8,000 or $10,000 an ounce to ensure the viability of our Currency.

Obviously, this reset would create another stairstep in the Gold price chart.

Jim Sinclair, also know as Mister Gold, talked about the potential for stair stepping action in the price of Gold. He also predicted that Gold would reach $74,000 an ounce after multiple stairsteps higher.

Wrapup

It’s fun to think about potential price targets for Gold. Hopefully you’ve enjoyed this discussion. Watch the video for an in-depth explanation of how these Gold price predictions were reached. If you are interested in Technical analysis of price charts, you will learn about Flag patterns, Cup & Handle patterns, price channels, MACD, Stochastics, Andrews pitchforks, and doubling the range.

https://satoritraders.com/blog/gold-price-predictions-gold-price-prediction-chart