You should have enough gold to preserve your wealth for 24 months - Wealth Research Group
Investment demand for silver is finding some momentum. Although the price has room to run higher as the gold-silver ratio falls to its lowest point in three months, below 100, one trader said that gold will remain the top asset to preserve wealth.
In an interview with Kitco News, Lior Gantz, creator of the Wealth Research Group, said that he likes silver as a short-term trade, but he is focused on gold as a store of wealth in the face of growing global recession fears due to the COVID-19 pandemic.
Gold is a hedge for purchasing power. “It's returned about 6.6% annually since 1971, outperforming the S&P 500 since 1971,” he said. "I don't see silver doing 6.6% over time until somebody or some government monetizes it or claims it to be money again."
As to how much gold you should have, Gantz said that he has a simple formula. He recommends people have enough gold to cover their living costs for two years.
"Let's say it's 'X' amount per month: times that by 24 and convert that into physical gold. If there's a two-year recession or even a depression, I have two years' worth of booming a lifestyle," he said.
However, the metal is more than a just store of value during an economic downturn. Gantz said he also likes precious metals as an inflation hedge. He added that with all the money central banks and governments are pumping into the global economy, inflation is going to be a major threat in the next few years.
"You're not looking at a trickle effect as in 2011, or in 2010 you're looking at money that is actually going to the system," he said. "With zero interest rates, you don't need 6% or 7% inflation to rattle the boat. 3% is enough."
As to how high gold prices will go, Gantz said that the market is only 9% down from its all-time highs. He added that it's only a matter of time before it the precious metal hits that target.
"Once [gold surpasses $1,930 an ounce], it will become mainstream news. Then you'll see retail come in. Then we start the real bull market," he said.
Along with holding the physical metal, Gantz said that he is also looking at the mining sector and recommends having a diversified portfolio of major producers and explores. In a time when major companies are cutting dividends, Gantz pointed out that miners are increasing theirs.
"It's a pretty simple business: You put money in the ground; you get gold," he said.
Looking at the junior sector, Gantz said that in 2009 it took an additional six months for the juniors to rally after the senior producers. He added that he expects the same scenario this time around.