When I look at the precious metals markets all I see are the numerous anomalies that are screaming value and opportunity. The constant machinations of the bullion banks manipulating the markets and holding back Mother Nature has created distortions in the market place that present a real opportunity. Let me explain.
Look at the ratio of platinum to gold and it quickly becomes easy to see a real opportunity in trading gold for platinum. History tells us that it is a true anomaly to see platinum trading below a 1 to 1 ratio to gold for any extended period. Markets always correct to the mean. This is no different than a major league ball player hitting 400 the first month of the season only to end the year with a 250 batting average.
I look at the ration (ratio) of silver to gold and see an even greater distortion and opportunity. Hold a ruler or a piece of paper at the 70 mark on the graph and you will easily see that whenever the ratio is greater than 70 ounces of silver (to) 1 ounce of gold we are in rarefied air and can expect silver to gain relative (strength) (compared) to gold.
I look at the positioning of the most sophisticated, well funded and well informed traders on the globe. According to Ted Butler, over the last four years, JP Morgan has amassed over 600 million ounces of silver in their house account. They have accumulated all of this physical silver while simultaneously driving down the paper price which has allowed them to acquire the largest physical position of silver the world has ever seen.
Even within the marketplace I see distortions and anomalies, in this case with numismatic gold coins and to a lesser extent junk silver bags. The premiums on numismatic gold coins, as a percentage above gold spot, is the absolute lowest it’s been in 28 years. My top choice is the Pre-1933 United States gold numismatic coins. But ever since 2008 the premiums have been far too high for me recommend them over the better value of gold bullion. In 2008, with gold at $1,000 per ounce, we were bidding 60% over melt value for MS62 $20 Liberties. Today, with the current low premiums, these coins are selling at record low prices relative to spot. Demand for vintage gold coins is cyclical and we are currently in the valley of value.
Junk silver bags are also a screaming buy as the premiums are considerably lower than they have been over the last few years. Over that time, I was telling my clients to trade their junk bags and actually receive back MORE 1 ounce silver Maple Leafs. That too was an anomaly that I had never seen before and I was excited to inform my clients with large junk silver positions that this was the time to make that switch.
And like all anomalies, there followed a correction that has driven the premiums past fair value to where it is now, a rare opportunity that I want to call your attention to.
Honestly, I don’t know what to make of all the market distortions and the counter intuitive behavior they exhibit. But I do know that whenever I have seen similar anomalies over the last 28 years they have ALWAYS reverted to the mean.
Just because you purchased precious metals as a long-term store of value and insurance against the craziness that envelops the world more so every day, doesn’t mean you shouldn’t look for opportunities to maximize your portfolios value and potential.
We can help you analyze your portfolio and see if rebalancing makes sense for you. In many cases, we can even send you boxes, labels, packing material and even help with the insurance to help get your product sent back to us. I have even been known to fly out to help clients with very large silver swaps.
And even if you don’t want to swap from what you currently own to something different, but your gold or silver coins have fallen in value, you’re in luck. We can show you a legal tax move that allows you to benefit from falling metals prices, without losing your metal.
The Precious Metals Tax Swap:
Precious-metals tax swaps are a legal way to lower your tax bill while holding onto your metals. The IRS Code 1091 is known as the “wash-sale rule.” It prohibits the repurchase of a security you sell for 31 days. If you want to claim a loss on the sale of a security, you cannot buy a “substantially identical” security within 30 days. The rule applies to stocks, bonds, options, funds, etc.
But the rule doesn’t mention precious metals. They’re not subject to a holding period for tax-swap sales.
Here’s how it works:
Let’s say you own gold coins purchased for $1,600 per ounce…
You sell us the coins at current market prices of just under $1300 per ounce and then immediately buy them back for a 1-2% fee above what you just sold them for.
You realize a taxable loss of $300 per coin in the transaction, which will lower your 2017 tax bill while keeping your metals.
However, it is important to note that the metals much change custody in order to play by the rules. You simply send us your metals and we send them right back.
The 1-2% fee for the transaction in most cases should be less and in some cases much less than your tax advantages will be.
If you would like to explore this opportunity, I am happy to personally review your portfolio for you, as I believe that strongly in what I am saying. My personal email is andy@milesfranklin.com and I can be reached directly at 1-800-255-1129.
