Last year was one of the worst on record for a conventional stock and bond portfolio. The major stock and bond market indexes both fell by double digits.

Investors who were diversified into physical precious metals fared much better. While it wasn't a banner year for gold and silver markets, they eked out slight gains – which translated into a massive outperformance versus conventional financial assets.

Unfortunately, conventional financial advice continues to keep most investors 100% allocated to financial assets with zero diversification into hard assets.

Wall Street's shunning of gold and silver serves the interests of brokers and investment bankers – not clients who would stand to benefit from exposure to precious metals.

Prominent precious metals analyst Jeff Christian, who often positions himself in opposition to gold and silver bugs, nevertheless provides some valuable insights into Wall Street's institutional bias against metals.

In a recent interview with the Korelin Economics Report, Christian spilled the beans on the little-acknowledged conflict of interest that exists:

"There are a lot of sell-side institutions that know... if I sell an investor a stock or a bond or an ETF or a note indexed to the stocks, the turn on that is probably somewhere between three quarters and five quarters.

So, I'm going to see that money come out of that asset and get redeployed, reinvested in another asset and I'm going to get a sales commission.

But if I sell that investor physical precious metals, I'm not going to have another commission on that money until he's dead.

Because people tend to buy, especially gold, they tend to buy gold and not sell it.

So, you have an institutional bias on the part of mainstream sell-side financial corporations against selling precious metals – physical precious metals."

Conventional asset allocation models are based on Modern Portfolio Theory. It tells investors that the greater their allocation to bonds and cash, the less risk.

That mostly held true when interest rates were on the decline and inflation was low. But it failed spectacularly when interest rates and inflation both surged last year.

That's where precious metals come in. Gold and silver are uncorrelated to conventional financial assets. The metals can gain (or at least retain) value during times when other asset classes are in bear markets.

In fact, gold prices tend to move inversely to investor confidence. During the late 1970s stagflation, the 2000-2002 tech wreck, and the 2008 financial crisis, gold performed far better than portfolios containing only conventional financial assets.

Despite the obvious advantages of including gold in a diversified portfolio, the financial industry is institutionally biased against precious metals. Bankers, stockbrokers, insurance agents, and financial planners don't benefit when investors diversify into hard assets.

The interests of the financial establishment aren't aligned with those of individual investors.

If they were, then financial advisors everywhere would advocate a sizeable allocation to physical precious metals.

How much you allocate to precious metals is ultimately an individual decision that depends on your own life circumstances, goals, risk tolerance, and expectations for the future.

Academic studies suggest a 10% or higher allocation to bullion boosts the risk-adjusted performance of a conventional investment portfolio. Higher overall return with less volatility along the way.

If you expect a currency crisis within your lifetime, then you might want to boost your metals allocation to a larger weighting.

Your current allocation to bullion may not be as big as you think.Consider all your financial assets, from brokerage and bank accounts to savings bonds and life insurance policies. In the event of a currency collapse they could all be at risk. Do you own enough hard money in the form of bullion to offset that risk?

Consider also the importance of diversifying within your bullion holdings.

If all you have are large bars stored in a third-party vault, your practical ability to access and spend your bullion during a crisis will be limited.

You should have at least something of an emergency stash hidden away at home where you can get your hands on it anytime, day or night. It should consist of several different sizes and forms of gold and silver for maximum flexibility and barterability.

You'll want .999 pure silver one-ouncers as well as fractional sizes, with pre-1965 quarters and dimes being a practical, low-premium option.

One-ounce gold coins or larger bars are useful for storing more significant amounts of wealth. But adding half-ounce, quarter-ounce, and tenth-ounce gold pieces will give you greater flexibility for bartering, trading, and gifting.

Consider diversifying beyond gold and silver and into the platinum group metals (PGMs). Though platinum and palladium bullion products aren't as widely recognized or as liquid as gold and silver, there are advantages to having exposure to the PGMs.

As scarce industrial metals that are used primarily by the automotive industry, they have their own unique supply/demand fundamentals.

Even during times when gold and silver are slumping, the PGMs can be appreciating.

From a portfolio diversification standpoint, that's an advantage. It means you can own precious metals that have the privacy and portability attributes of gold but with the price-performance attributes of a separate asset class.

Even if you are among the minority of investors who holds a sizeable allocation to physical precious metals, you can probably take steps to become a more fully diversified precious metals investor.

Whether it's acquiring tenth-ounce gold coins or one-ounce palladium bullion bars, by becoming more broadly diversified within the precious metals space, you are likely to be financially more resilient.

Share: Feed news

Money Metals Exchange and its staff do not act as personal investment advisors for any specific individual. Nor do we advocate the purchase or sale of any regulated security listed on any exchange for any specific individual. Readers and customers should be aware that, although our track record is excellent, investment markets have inherent risks and there can be no guarantee of future profits. Likewise, our past performance does not assure the same future. You are responsible for your investment decisions, and they should be made in consultation with your own advisors. By purchasing through Money Metals, you understand our company not responsible for any losses caused by your investment decisions, nor do we have any claim to any market gains you may enjoy. This Website is provided “as is,” and Money Metals disclaims all warranties (express or implied) and any and all responsibility or liability for the accuracy, legality, reliability, or availability of any content on the Website.

Follow us on Telegram

Stay updated of all the news

Join Telegram

Recommended Content

Follow us on Telegram

Stay updated of all the news

Join Telegram

Recommended Content

Editors’ Picks

EUR/USD holds above 1.0700, eyes on Powell

EUR/USD holds above 1.0700, eyes on Powell

EUR/USD edged lower toward 1.0700 in the early European session but managed to hold above that level. As investors await speeches from ECB officials and FOMC Chairman Jerome Powell, the pair struggles to make a decisive move in either direction.


GBP/USD trades with a touching distance of 1.2000

GBP/USD trades with a touching distance of 1.2000

GBP/USD came under modest bearish pressure and touched its lowest level in a month below 1.2000 on Tuesday. The pair seems to have gone into a consolidation phase near that level with market participants awaiting FOMC Chairman Jerome Powell's speech.


Gold clings to modest daily gains above $1,870

Gold clings to modest daily gains above $1,870

Gold price clings to modest daily gains and trades above $1,870 on Tuesday. Following Monday's rally, the benchmark 10-year US Treasury bond yield stages a downward correction, allowing XAU/USD to stay in positive territory ahead of FOMC Chairman Powell's speech.

Gold News

Will Bitcoin price test $20,000 again?

Will Bitcoin price test $20,000 again?

Bitcoin price shows clear signs of distribution occurring on the four-hour chart, which indicates the possibility of a trend reversal. Moreover, BTC has been consolidating for more than two weeks with no direction in sight.

Read more

Central banks, markets and the economy: Three times wrongfooted

Central banks, markets and the economy: Three times wrongfooted

In the US, financial conditions have eased in recent months and weighed on the effectiveness of the Fed’s policy tightening. Jerome Powell recently gave the impression of not being too concerned, so markets rallied.

Read more