The Missing Puzzle-Piece in Precious Metals Investing: the PMC Ounce® – Bonus Analysis by Jim Rickards

Precious metals investors have a very focused strategy for wealth management. They funnel much of/most of their liquid wealth into gold and silver – to insulate their wealth from the ravages of central bank-created “inflation”.

As discussed in a recent article, gold is the premier instrument for both wealth preservation and long-term investing.

Silver is currently significantly undervalued versus gold. Thus, in recent decades it has not produced an equal performance versus gold in terms of investing/wealth preservation. However, for precisely this reason, silver offers even greater long-term potential for asset appreciation as the gold/silver price ratio rebalances from the current extreme.

The need for a good precious metals hedge

Problem: as most precious metals investors are well-aware, the prices of gold and silver are heavily suppressed.

Central banks are the architects of all inflation through over-printing (and severely diluting) their unbacked fiat currencies.

Gold (and to a lesser extent, silver) is the ‘canary in the coal mine’ that warns us of the impact of this currency dilution – through rising bullion prices. To cover up all this self-created inflation, the central banks constantly seek to kill these canaries, suppressing precious metals prices to make inflation look less malignant.

There is no controversy here. None other than Sir Alan Greenspan has confessed to this nefarious strategy, during his tenure as Chairman of the Federal Reserve.

“Central banks stand ready to lease gold in increasing quantities should the price rise.”

• Testimony of Federal Reserve Chairman Alan Greenspan to the U.S. Committee on Banking and Financial Services, July 24, 1998

For those readers who don’t understand the significance of the quote, “gold leasing” is the indirect means by which central banks secretly dump gold onto the market in order to suppress its price.

Despite this constant price suppression, upward price pressures on gold and silver are so strong that prices occasionally break through this suppression and approach a fair market value. We saw this most recently from 2009 through 2011.

This is why, over the long term, gold has still managed to produce a superior investment return versus any other asset class. Silver mirrors gold’s wealth preservation properties to a lesser extent, but (as previously noted) offers even more long-term potential for appreciation.

Significant upward movement in the gold and silver market in recent years mean that we could be in the early stages of another major breakout in gold/silver prices. But what about the periods in between these bull market surges?

How do investors manage the short- and medium-term performance of their precious metals portfolio as they wait for these long-term windows where gold and silver assert their superiority as investment assets?

It was a question for which precious metals investors didn’t previously have a good answer. Enter Neptune Global.

The PMC Ounce®

Wouldn’t it be nice if precious metals investors had access to a reliable hedge that would boost their overall returns in precious metals during the lean years for gold and silver?  Wouldn’t it be even better if this “hedge” was also a precious metals investment, itself?

Neptune Global thought so. So, this bullion company created what it calls “the PMC Ounce.” The name describes the product’s diversified construction, Precious Metals Composite.

Since its inception, the PMC Ounce® has a 14-year track record of outperforming both gold and silver as investments on a risk adjusted basis.

The PMC Ounce® is a non-leveraged, 100% allocated bullion product.  It was developed to provide a better risk adjusted return versus investing in gold and/or silver alone, and has done so since its inception.  Additionally, over several long stretches of time, it has also outperformed gold and silver on a total return basis. The definition of a better hedge.

The secret to this strong performance and hedging quality is that this is a diversified precious metals product. The “PMC Ounce” is comprised of not only (fully allocated) gold and silver, but palladium and platinum as well.

Like gold and silver, platinum and palladium are also precious metals – both rare and aesthetically beautiful. However, unlike gold and silver, platinum and palladium are even more rare and (most importantly) their supply is primarily concentrated to just a handful of regions.

For these reasons, platinum and palladium have never been widely used as either money or jewelry.  But both of these metals have very important metallurgical properties that make them vital inputs for industry.

Because of this additional source of value, many pundits now dismiss platinum and palladium, and even silver (which also has many vital industrial applications) as “industrial metals”. This is a logical fallacy.

These rare-and-beautiful precious metals also have a number of useful properties that make them important in industry. Even gold (despite its value) is still required in some industrial applications.

These industrial uses (in addition to the aesthetic and investment demand for these metals) cannot possibly make these metals less “precious”. Rather, this additional demand can only make them even more precious.

By diversifying the composition of the PMC Ounce® beyond gold and silver to also include the precious metals platinum and palladium, Neptune Global has been able to offer investors a fully-backed bullion product that offers both short- and medium-term hedging of overall precious metals returns.

Precious metals investors are generally long-term investors. However, sudden/unexpected demands on capital may force investors to tap into these savings, since bullion is such a liquid asset.

Holding only gold and silver, this may mean investors liquidating some of their holdings at disadvantageous times – during troughs in the price of gold and silver.

The PMC Ounce® has historically outperformed gold and silver during those weak periods in gold and silver prices. This provides precious metals investors with a greater comfort level in allocating a larger percentage of their liquid wealth to bullion holdings.

The missing puzzle-piece in precious metals investing.

A liquid, transparent and fully-backed precious metals product

The concept of the PMC Ounce® is only one ingredient in its success. Neptune Global also had to carefully consider the composition of this “ounce”.

The PMC Ounce® is comprised of (by weight): 93.75% silver, 3.50% gold, 1.75% palladium and 1.00%

platinum.

Click on image below for Jim’s analysis of the PMC Ounce.

Alternately, each PMC Ounce® is comprised of 0.9375 ounces of silver, 0.035 ounces of gold, 0.0175 ounces of palladium, and 0.01 ounces of platinum.

This composition also mirrors Neptune Global’s “PMC Index®”. The PMC Ounce® trades in real time, with its value a reflection of current spot prices. Thus, it provides investors with complete price transparency.

As a fully backed and allocated bullion product, the PMC Ounce® offers the same investment properties for wealth preservation/inflation hedging, currency hedging and industrial demand.

Neptune Global handles all buying and selling via its own access to a live, two-way market. This provides full liquidity. The Company has even been awarded a US Patent for the PMC Ounce® as an innovative precious metals investment.

For U.S. investors, the PMC Ounce® is approved for retirement accounts for IRA, Roth, SEP, and 401k Rollovers.

Optimizing precious metals investing with the PMC Ounce®

Holdings in physical gold and silver are excellent vehicles for wealth preservation and long-term investing. However, as noted above, over shorter (and even medium) terms these metals may underperform – making returns volatile.

The PMC Ounce® has been created to seek a smoother and less volatile return in precious metals investing, while still allowing investors to hold a fully-backed bullion product.

For serious precious metals investors with a long-term investment horizon, the PMC Ounce® is the missing puzzle-piece that will allow you to optimize your returns on precious metals investing.

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