Precious Metals & Commodities
David J. Mitchell, Founding Partner of Auctus Metals Portfolios, on the pockets of opportunity to hedge your investments against uncertainty
Stock markets will continue to rise, even though that doesn’t make any sense as far as valuation models are concerned. What I’m suggesting is to be very sector-specific.
Yes. Wealth and hedge fund managers typically advise a 5-10% allocation in precious metals, but that advice relates to a normal economic cycle. We’re not in the normal part of the cycle any longer. The investment case for the bond markets is a disaster. Corporate and sovereign debt issuance is at an all-time highs and rising; we’ve never seen it this high as a percentage of GDP. We’ve got debt dynamics that are unsupportable in an earnings recession (a severe global debt crisis); overvaluations in the stock markets; the housing market is heading sharply down; currencies are being debased, and the banks’ balance sheets are recognised as severely at risk or in a great many cases insolvent when applying good accounting.
At Auctus Metal Portfolios, we’ve built up a number of algorithms to process an enormous amount of data and it’s an active and diversified investment portfolio across gold, silver, platinum, palladium and rhodium – we don’t just buy a pile of physical gold, stick it in the vault and forget about it – we actively re-weight the client's physical metals within their own wholly segregated and fully allocated vaults recognising pricing anomalies and trend changes to generate a clear outperformance (alpha return) over and above gold.
We’re walking into a global solvency event so physical asset ownership is going to be critical. Within this historically important period, I personally would not invest in an ETF. An ETF is a financial derivative product with no physical backing per se as the metals are predominantly held with sub-custodians who are involved in re-hypothecation policies with no physical audit requirements. I’ve read the prospectuses of these instruments in great detail and written into them is a force majeure clause; so they can basically close it down at any time and simply say, “This is the settling closed price, so we will settle your account in full at these prices” even though gold has and continues to go up. Meanwhile, everyone’s missed that huge [upwards] move.
I think a diversification to bitcoin is probably wise. Personally, I would suggest not more than a 5% allocation to bitcoin, but that really depends on your own personal belief system and understanding of the legal frameworks and risks involved. Do not hold currency in the bank. Whilst that used to be considered risk-averse, it is now quite the opposite.
As far as when you’re going to see these spectacular moves, they tend to move very, very slowly [at first] and then all at once. The old rule of thumb is that you will see 80% of the move in the last 20% of the timeframe.
Find out more about Knox here.
David J. Mitchell is the Founding Partner of Auctus Metals Portfolios and Managing Director of Indigo Precious Metals Group with 35 years experience working for some of the world’s largest and most renowned banks. Connect with David on LinkedIn.
About Jamie Nonis
Jamie Nonis is an independent journalist with two decades of experience interviewing esteemed artistes, world-class athletes and influential captains of industry including Olympic champion Joseph Schooling and Singapore President Mdm Halimah Yacob. Jamie’s work has been published in Channel NewsAsia Luxury and Tatler Singapore amongst other top-tier luxury lifestyle publications. Connect with Jamie on LinkedIn.
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