A consistent long-term trend that continues to play out is the inverse correlation between equities (stocks, bonds) and commodities (raw materials, gold, silver). The markets evolve in cycles and long-term investors who follow the age-old wisdom of “buying when prices are low and selling when they are high” follow the cycles closely to identify trends and price levels that make for attractive buying and selling opportunities.
Compared to the price of stocks today, commodities seem incredibly cheap. If global economic activity continues expanding, demand for commodities will increase, which will push prices higher—a great opportunity for long-term investors. If, however, inflationary pressures resulting from actions such as tax cuts, quantitative easing, and infrastructure spending occur, those too should make commodities outperform equities significantly over the next several years. Historically, when commodities are this cheap compared to equities, they outperform equities by a ratio of 8:1 in the coming years.
And just how cheap are commodities today? The ratio between commodities and equities is the lowest it has been in 60 years. Looking at the chart, which spans 60 years, you can see that these ratios don’t stay low forever, and when they do reverse, they change fast. When looking at the macro picture, commodities, including gold, have an excellent historical buying opportunity.
And we can help you take advantage of the opportunity. All it takes is a free consultation to see if this is the right fit for your needs, and we can discuss the various benefits you can get when diversifying into physical precious metals.
About Fred Abadi
In his over 14 years in the financial industry, Fred has focused on commodities and precious metals as investment assets. He has penned several articles on topics such as the commodities markets and investing in precious metals for retirement accounts. Fred has helped thousands of clients safeguard their investments with gold and other precious metals. He has been with Gold Alliance for over two years as a leading Sr. Portfolio Manager.