A Strategy for Accumulating Gold and Silver

   

Q: Can you offer a strategy for those who want to follow your allocations in gold and silver, but are just getting started? A: I begin with the assumption that they have read and understand the contents of Letters 1, 2 and 3.  Letter 1 - Getting Started Letter 2 - The Permanent Portfolio Letter 3 - Whom To Listen To Next, they need to understand my current allocations to gold and silver, which happen to be 14.1% and 23%, respectively, as this is written. But I did not invest nearly this amount of my original investment capital. They grew to these percentages because of increase in market value. That's the reason I talk about "target allocations" of 10% for gold and 20% for silver. Those are the maximum amounts of your total investment capital I recommend you commit to gold and silver, i.e. your cost. Q: Why have you not sold some of your gold and silver since your current allocation totals 37.1%, 7.1% above the target allocations?

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A: Good question. Answer: Because I believe they are the single best investment I know of when both potential reward and downside risk are considered. They may not turn out to be the single best hedge against inflation, but when adjusted for risk, I consider them to be. I reach this conviction from the study of my experts and prayer.

Q: So, assuming I reach the same conclusion, and presently have little or no gold and silver, what are your recommendations for accumulating them?

A: You have several decisions to make. I recommend they be based on your convictions after prayer and study of my recommendations or those of others in whom you have confidence.

1. First, select your target allocations for each metal. There's no reason they have to equal mine, either in total or in proportions of the two metals. You might decide on 20% total divided equally between gold and silver, or any other configuration. It's your decision, and your responsibility.
2. Next, you must decide over what period of time, and in what sized steps you will accumulate your target allocation. I assure you no one does this perfectly for two simple reasons, we don't know the future, and we cannot divorce our emotions from our actions. This is known as the "dollar cost averaging" plan. In any given situation it might not be the best plan, but I believe it is currently. 
3. Pick a percentage for purchase (5%, 10%, 15%...your choice). Buy that part of your allocation of both metals now. 
4. Pick an interval of time (3 months, 6 months...), and make your next purchase, and each subsequent purchase, after that time interval passes, WITH THE FOLLOWING EXCEPTIONS:
     
   - If gold trades at 875, 830, 800, 760, 720, 700, 650, then accelerate subsequent purchases
     (of both metals)
   - If gold trades above 1000, finish your accumulation.

This plan is based on my observation that gold has been trading between 700 and 1000 for the past two years, and will reach an intrinsic value of $3,000 over the next 5-10 years during the coming inflation. This assumption could be right or wrong.

References for further study:

• Collapse of the Dollar, presentation made by Dr. Larry Parks, MontanaSoundMoney, Mar. 14, 2009
• Silver/Gold Ratio Reversion, Adam Hamilton, Zeal Intelligence LLC, Zeal LLC, Feb. 6, 2009
• Delaying Tactics and Interview, Theodore Butler and James Cook, Dec. 8, 2008
• The Manipulation of Gold Prices, James Conrad, Seeking Alpha, Dec. 4, 2008
• Why Jim Rogers chooses silver over gold to beat inflation, Peter J. Cooper, Nov. 10, 2008
• 4 Fundamentals of the Silver Price, Jason Hommel, Silver Stock Report, June 5, 2008 
• 关于银币价格的四个基本原则 (银币和美元的供需本质)  , 治银信（Jason Hommel）,银币股票报告,2008年6月5日
• Silver and Gold Today and in the End Times