DRIGGS, IDAHO – Greetings from our winter bolthole in the American West. It’s time for our weekly mailbag edition, where I answer the latest questions and comments you’ve sent in.

This week, gold is on a lot of readers’ minds. Did I make a mistake going “all in”? What’s an appropriate premium to pay when buying physical gold? Should we be worried about the recent decline in the gold price?

We also talk about whether it’s a good idea to move some money from silver to gold… as well as the “Income for Life” insurance policies I often mention in these Postcards.

Let’s get right to it…

Reader comment: A reader this week stated it was in his opinion a mistake to go “all in” on one investment – in this case, gold. I agree with that sentiment – life throws up too many unknowns.

I’d never go “all in” on a single stock, or a trading strategy, or a rental property, or an untested business idea… but gold is an exception.

It’s money. It’s cash in the bank before there was “cash” or “banks.”

In a way, going “all in” on gold is the most conservative, prudent thing someone could do with their savings.

Reader question: I would really love your feedback on gold right now. I bought gold with Australian dollars. There has now been a 27% decrease in gold in AUD, completely wiping out all the gains from the previous year during that bull run. This has left me down 19% to date.

I know it is a long-term play, but when you’re starting 20% behind the eight ball, it is a long way to come back. I just would like your genuine take on all of this because I heard you say before that it won’t matter what currency you’re invested in; gold is still going to rise substantially.

We’re now in the reflation stage of the boom-bust cycle.

In the reflation stage, risky things like commodities, tech stocks, energy, junk bonds, and industrials do best. And currencies like the Australian dollar, which are leveraged to industrial commodities and global trade, also do well.

Gold and U.S. dollars do not do so well. They are defensive investments. And in the reflation part of the cycle, people aren’t seeking safety.

This is why gold has been falling for the last six months. Meanwhile, the Dow-to-Gold ratio has climbed almost 50% from its lows last year – a reversal of its previous downtrend.

With all my capital tied up in gold and silver, I have missed out on the huge gains in bitcoin, Tesla, and the stock market. And my experience tells me these trends still have further to run. Maybe even another six months or a year.

But if it’s any comfort, this is all temporary. Everything will reverse sooner or later, when the next deflationary shock comes. Gold will shine again, even in Australian dollars.

If you have the patience to wait for the stage when everyday people start to lose confidence in the paper-money system, gold will go so high, our setbacks this year will seem like rounding errors.

Reader question: My question is in regard to premium costs for gold purchases. In earlier Postcards, you indicated not to pay more than 4-5% premium costs.

Since the gold prices have risen so much higher in the last couple of years, what premium prices should we expect to see? Most dealers I’m looking at are charging 9% or more per coin, unless I’m making purchases of 10 or more coins. The best premium price I’ve found was 7-7.5% for 10 coins. I’m curious about your thoughts on current premium costs.

I bought gold coins for a 2% premium last week, and although I bought more than 10 of them, I’m pretty sure I could have gotten a smaller quantity for under 3%.

You just have to look around. And if you’re willing to buy gold bars (which I am), the premiums are even lower. [Click here to find out the top three places I’d suggest buying physical gold.]

Reader question: I have been expecting prices for gold and silver to have risen a bit by now and have been wondering why they have not but have been in decline.

I have noticed more and more talk about the manipulation of the gold and silver prices, controlled by short selling. You have not commented on this and I would like to hear what your take on this is.

Gold has been declining because it’s a safe-haven asset and we are in the reflation stage of the credit cycle. People don’t want safe havens at the moment. They want risk assets like industrial commodities, energy, and value stocks.

As to your question about short selling, the gold market has been manipulated for years and continues to be. But when you think about it, all markets are manipulated to some extent.

Don’t worry about it. Be grateful we still have the chance to buy cheap gold and look forward to the time when it breaks its chains and explodes higher.

Reader question: I currently own about 20-25 ounces of silver bullion as well as some gold bullion.

I have been interested in trading in the silver to invest in gold stocks. However, I am concerned that the fees, taxes, and other expenses associated with the stock purchases would not outweigh dumping the silver, as both should be going up soon.

What is your take? I am hoping this would not be specific investment advice and this is something you can post in the mailbag edition! Thanks!

I wouldn’t trade my physical silver for anything. In fact, I wish I had more, but the premiums are too high.

I definitely wouldn’t trade my physical silver for gold mining stocks, especially considering the transaction costs…

Reader question: As the dollar is devalued, so is the value of an insurance policy. If we go the way of a “Third World Country,” what is the point in owning a policy if it is going to become worthless?

If one has a cash value in their policy, even though it is much less than the payout, wouldn’t it be better to cash out and buy gold/silver to preserve value? Curious to hear your thoughts on this matter.

I think about this often. I’ve put my Income for Life whole-life policies on auto pilot with dividend reinvestment, but now, I’m considering borrowing against the cash value of our policies to buy gold and silver.

I will probably do this if gold and silver fall significantly from current levels. Otherwise, I’ll keep this cash as “dry powder.”

Even if you’re convinced – as I am – that this great experiment in paper money is going to end with a massive devaluation, cash still has optionality value.

Whatever happens, there’s no way I’m surrendering the policies.

And that’s all we have time for this week. Thanks to everyone who wrote in!

As always, please keep sending me your questions and comments at [email protected]. I can’t give personalized investment advice, but I’ll do my best to address them in future Friday mailbag editions.

– Tom Dyson

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