Wealth Podcast Post

Gold-Silver Ratio with Patrick Yip

George Grombacher August 5, 2022

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Gold-Silver Ratio with Patrick Yip

LifeBlood: We talked about the gold-silver ratio, how precious metals have historically performed during inflationary periods, gold as a wealth protector, a new precious metals credit card, and how to get started, with Patrick Yip, Director of Business Development for APMEX and One Gold. 

Listen to learn how to think about diversifying your portfolio with precious metals!

You can learn more about Patrick at APMEX.com, OneGold.com, Twitter, Facebook and LinkedIn.

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Our Guests

George Grombacher

Patrick Yip

Episode Transcript

george grombacher 0:00
Come on Oh blood for this is George G and the time is right welcome today’s guest strong a powerful Patrick Yep. Patrick, are you ready to do this?

Patrick Yip 0:18
I am ready.

george grombacher 0:19
All right, let’s go. Patrick is the director of business development with App X. They’re one of the nation’s largest precious metals, e retailers. Patrick, welcome back. Tell us a little about your personal life smart about your work, and why you do what you do. Yeah, well, thanks

Patrick Yip 0:35
for having me on George. So starting with my personal life, I have a lovely wife, four year old son and an extremely large 150 pound German Shepherd dog called Zeus, my wife, little baby. My hobbies include traveling and analyzing financial markets. Transitioning to my work. I’m the Director of Business Development at at maximum one gold. what our company does is we like to provide solutions for all types of precious metals investors. So our parent company APMEX, is one of the largest online retailers of precious metals in the US. We do sell gold, silver, platinum and palladium bars, rounds and coins, to retail investors for physical delivery. A subsidiary of x is one gold, and it’s an online investment platform that allows customers to buy sell trade and redeem faulted positions of gold, silver and platinum. So many people call it the Robin Hood of precious metals, since it’s so intuitive and easy to use. We’re also working on a lot of exciting projects, including the first ever precious metals rewards credit card, which I could discuss in a bit.

george grombacher 1:35
Nice 150 pound dog. I guess the only possible name for that is Zeus.

Patrick Yip 1:41
Yeah, it’s funny. My four year old son probably thinks that’s the normal size of a dog. So when he sees a 50 pound dog, he’s thinks it’s a small dog.

george grombacher 1:48
Let’s go now with this tiny dog. All right, that’s a whole whole nother podcast are talking about living with 150 pound animal. So anyway. All right. So I think, you know, everything is sort of blurred together between the pandemic and then all the other awful things that are happening in the world. How How has how have sales been since since everything happening with Ukraine?

Patrick Yip 2:16
Yeah, I think sales in the last couple of years last couple of months have been crazy for precious metals. I think that it’s almost setting up the perfect storm, I think many people will believe or agree that 2022 is unlike previous years, you’re having inflation at 40 plus year highs, everything from groceries to gas to housing is much more expensive. In fact, you look at gas, it’s averaging about $5 nationwide right now, which is a massive increase from the sub $2 levels we saw just a couple of years ago. If you have an investment portfolio, the s&p is down 19%, year to date, and bonds are down about 14% year to date. So that typical 60% stock 40% bond portfolio did little to help you I mean, diversification basically didn’t help you in 2022. So a lot of people that we’re hearing is calling and emailing in is is they’re looking for an alternative Off option. So where does Where does gold fit in. So if you look at past high inflationary cycles, where the Fed is hiking interest rates, which is certainly what we’re in right now, gold did well, while stocks struggled, if you look back at the 1960s, and 1970s, which is the last time inflation was as high in the US, unfortunately, you have to go way back from 1965 to 1974, gold did extremely well, it went up fivefold from $35 to $200, while in the same period, the s&p struggled, they’ll actually lost 26% nominally over that same period, you had a brief period from 75 to 76, where the Fed got inflation under control, but they quickly lost control of it. From 1976 to 1980, you had another period of high inflation, gold started at $100 went up eightfold to 850. And meanwhile, the s&p remained flat, it didn’t go down this time, but it only increased 4% nominally. So that’s what happened historically. And let’s fast forward a little bit to modern times too. So in modern times, many asset classes are cyclical, one will go up and go down and so on like that. And it’s important to get into the right asset class that’s performing well. So from 2000 to 2011, stocks had their last decade. So basically, in that 11 year period, stocks lost 14% Gold another hand increase from 250 to 1900. So a seven fold increase during those 11 years. From 2011 to 2021, you had the cycle reverse so gold had its last decade basically struggled to perform started at 1900 went all the way down to 1050. Went back to 1900 basically didn’t go anywhere for 10 years. Stocks, on the other hand, did extremely well went up four times from 1250 to 4800 in 2021. And then now you look at 2022 and stocks are declining. So it’s looking like that cycle may be reversing. Obviously no one knows the future but that’s what it’s looking like as of today. And if if the cycle does reverse That means gold will likely outperform stocks in the next upcoming years.

george grombacher 5:04
It’s always interesting, and it’s impossible to pick winners. And that’s sort of the, that’s sort of the the point of the conversation is, as if we can have money in as many different asset classes as possible, then we will theoretically be in the right one every year versus I just have all my money in the stock market. It’s going to have up years, it’s going to have down years, it’s going to have a good 10 year run, it’s going to have a bad 10 year run. That’s just what history tells us. So do you think that gold is still I mean, you’ve just laid out sort of the case for why and I agree that it’s important to diversify away from just traditional stock market investments. But when when people say, you know, gold is a good hedge against inflation, do you think that that’s still true?

Patrick Yip 5:56
I think it is. And I just like I said, I look at longer term periods to looking at the 1960s and 1970s. Obviously, no one, no one could predict what’s going to happen. I just look at for example, 2022, you’re you’re seeing, I guess, the tides kind of shift. What a gold gold essentially flat this year, which you know, you would say, well, it’s not really hedging against inflation. Well, if you look at it, it’s like, Well, what did everything else do? You know, s&p is down, bonds are down. It did what it’s supposed to do, it protected your wealth. And I look at Gold personally as a, as a wealth protection strategy if it if it happens to double or triple or quadruple great, but I’m more more looking at it as a defensive play, not an offensive play.

george grombacher 6:41
Nice. Good, that makes sense. So and then in terms of, we have this new asset class of crypto assets. And I was talking to somebody recently, and they shared with me the study of of all the assets under management. And they Blackrock did the the study, it was over 95% of it was was in traditional equities, and only 5% weren’t commodities. And as interest rates start going up, I think you’re going to see more money flowing away from just traditional stock investing. And as I think people have greater access to commodities through platforms like one gold and and other things, just going to see more money flowing towards them. Do you? Do you agree with that? Is it a matter of of increased awareness? Is it is it it’s easier now?

Patrick Yip 7:37
Yeah, I think I think a lot of times, you have, like, you have cycles to even financial cycles and commodity cycles to where I think, lately, I feel like that everyone has been getting into Kryptos, they’ve been getting into tech. Unfortunately, you know, everything either needs to be, you know, mine. That’s, that’s what we, we do is is it’s it’s either mine, or it’s grown. I mean, that’s where everything comes from you eat food, it’s grown. You, you know, you have a computer, it’s it’s has metals, it’s mind, it all comes from, you know, resources out of the ground, and I think you will have that cycle, shifting away from, I guess, the stocks and intangibles more to tangible items.

george grombacher 8:20
Which certainly makes sense. So as as, as, as consumers and investors are looking at their portfolios, is there a rule of thumb? Or how do you coach people on here’s maybe how much what what percentage of the portfolio makes sense to be putting into these precious metals?

Patrick Yip 8:42
Yeah, historically, if you look at the period from, let’s say, 1971, up till the present time, and the reason I chose 1971, it’s the year when gold was not pegged. So I’m not going to take take artificial market was pegged. But if you look at that, that time period, and if you did different allocations of gold, whether it’s 510 15%, and so on against the s&p, you actually it actually maximizes your return and minimize your risk around a 25 to 30% allocation to gold. I’m not saying this is the right allocation for everyone. Obviously, there’s there’s people who are more bullish on gold, and maybe it’s higher than that. There’s people who maybe don’t like gold or who said, Hey, I think everything’s gonna be fine. I think the economy is going to going to be fine this year, I think the Fed is going to get things under control. And then maybe it’s maybe it’s 5%. Obviously, I don’t know everyone’s situation. So it’s hard for me to offer a blanket Hey, the 25 or 30%, but I would say do your own analysis and then see what you feel comfortable with. And

george grombacher 9:43
appreciate that. So when when you are looking at making just personally when you’re looking at making investment decisions, how are you thinking about that? I know we were talking a little bit about silver before we got started, if you wouldn’t mind sort of sharing your thoughts process, I think that would be helpful.

Patrick Yip 10:02
Yeah, I always like to look at like, what’s the downside versus what’s the upside? So silver is great example right now silver is trading around $19. I think there’s a lot more upside the downside. So you know, what’s the worst that silver could get down to, you know, maybe $15? Again, maybe even 10? I don’t think it’s going to go much lower than that. That’s lower than the cost of production. But let’s say you have, you know, five to $10. On the downside and silver, what’s the upside that silver go to? Well, it’s been that $50, twice, in once in 2011, once in 1980, I certainly think it could be 40 or $50, again in the future. So if I look at that, if I say okay, there’s potentially five to $10 On the downside, and there’s maybe $30 Plus, on the upside, the risk reward is there. Same thing with s&p Two, you look at the s&p and it hit about 1400. Last year, it’s like, well, what’s the, you know, what’s the upside versus what’s the downside? You look at it. And we haven’t had a major correction in the s&p since 2008. And I’m long term bullish on the US economy. But unfortunately, nothing goes up forever. You can’t just have a 50 year boom period. Not that we did have one. But eventually you need to clear out the excess. So I think that if you look at a 4800 SNP, would it surprise me if it went down to 30 503,000? And then it started to spool trend up? No, it wasn’t. So I just look at that and say there’s probably more downside risks with s&p at 4800 than the upside. And I know certainly it’s lower today with with a about 20% correction in the s&p this year. Why do people

george grombacher 11:34
invest in silver, why not just invest in gold does it have practical uses that gold doesn’t.

Patrick Yip 11:39
So a lot of times people look at it and gold is like the higher volatile or Silver’s the higher volatility of gold. So like, let’s say gold went up by 1%, silver might go up by 2%. On the other side, if gold went down 1%, silver might go down 1% or 2%. Two as well. So people looking at Silver are looking for like that higher volatility, higher return play. Most of the time, we see people getting into gold, if they’re looking to protect assets, and people are getting into silver, if they’re looking to, I guess, grow their portfolio. Another thing people look at too is is what’s called the Gold Silver ratio, that’s the price of gold divided by the price of silver. So if you look at that ratio, and that’s basically been as high as 120, in 2000, I believe 2020, I believe during the COVID times, and it’s been as low as about 15. There, I guess way back during when silver and gold were monetary metals, too. So the thought there is when when the Gold Silver ratio was high, you maybe sell your gold by silver, or just buy silver. And then when the gold gold to silver ratio is low, you you know, sell your silver and buy gold.

george grombacher 12:48
And what is it now?

Patrick Yip 12:50
Roughly it’s about I believe it’s high 80s or 90. I don’t know off the top of my head, but last time I checked a couple days ago.

george grombacher 12:57
Got it. Okay. And so when it’s higher than sliders, silver is

Patrick Yip 13:03
generally undervalued compared to gold. Got it. So that’s why personally I’m looking into buying silver.

george grombacher 13:12
It’s fascinating. How much time do you is probably you probably spend all the time thinking about precious metals. What about what are some of the other really popular categories of precious metals that you find people are investing in?

Patrick Yip 13:29
Yeah, I, I also look at precious metals research precious metals has actually been a hobby of mine for a long time, probably since 2008, when we had that massive financial crash and started here at at Mex in 2011. And I feel like some sometimes my day never escapes from precious metals. I go drive home, listen to a financial podcast, and everything revolves around precious metals, but it’s great. I love what I do. And I feel like that’s what makes our company so great as you have people passionate about the products.

george grombacher 14:02
Makes sense. So this, this new offering you have the Boolean card that I get that right? That’s correct. Tell me about that.

Patrick Yip 14:10
Yeah, so I’m excited to announce a first for the credit card industry and the precious metals industry. It’s called the bullion card, and it’s the first credit card that allows you to earn precious metals with everyday spin. So instead of earning cashback or airline miles this card allows you to earn gold or silver. So in about a month since publicly announcing the card we’ve received over 9000 interested customers, myself included too. So here’s how it works. You simply spend your credit card like you normally would. You buy groceries, you buy gas, you shop at your favorite retailers, every dollar you spend, you’ll earn points. You can then turn these points into precious metals. There’s two variations of the card available. So if you’d like physical metals, you could apply for the card on amex.com. Your points would then be similar to a gift card balance where you can redeem them anytime you want for any of the 20 5000 gold, silver, platinum or palladium products available at Amex. Or if you prefer a vaulted solution, you can apply for the card on one gold.com. That’s the second alternative. And then your points will automatically be redeemed every month into gold, silver or platinum depending on what you want. So this is basically a set it and forget it plan. Every time you use your card, you’ll be earning fractional ounces of gold, silver and platinum.

george grombacher 15:24
That’s pretty cool. It seems like that is something that should have been around for for a while. Is it hard? from a regulatory standpoint? What was or your y’all are just the first?

Patrick Yip 15:37
Yeah, no. So this is, to be honest, it’s been a two or three year process by now. We’ve met with different banks throughout the nation met with Visa, MasterCard met with a whole bunch of payment processors. I feel like the credit card industry is heavily regulated, finally found a bank in Kansas City UMB Bank that was willing to play ball with us. And we’ve been working with them for the last, let’s say, a year and a half to get this program live. We’ve run into a whole bunch of different issues with supply chains, including card shortages, and so on like that, because of the chips. I mean, you hear charges for autos, but then you don’t think well the card has a chip too. And secondly, those were short, too. But it’s been it’s been an exciting journey. And I feel like the rewards are amazing too. I could talk to you a little bit more about some of the rewards to me. I feel like they’re very competitive. Just the fact that we got like, let’s say 9000 customers in the first month or so. says a lot about the rewards.

george grombacher 16:36
For sure. Yeah. Lay it on me. Yeah, so the

Patrick Yip 16:39
card offers 4% back on in gold and silver on AmEx and one gold purchases. So if you spend, let’s say $1,000 in that next you’ll receive 4% or $40 back. Many people in the industry know that the precious metals business is typically a one to 2% margin business. So this is a massive benefit. In fact, we are not making money on this 4% It’s more of a customer loyalty play. The card also offers 1%, back in gold and silver on all of all other purchases, including gas groceries and shopping at your favorite retailers. In addition, you’ll get 15,000 bonus points, which has $150 value after spending $1,500. In the first 90 days of account opening. The card has no annual fee, which I know is a massive plus for a lot of customers. And we do offer to promotional APR. So the cards offering 0% APR for purchases for 12 months. So if you’re looking to make that big purchase, might be a good idea to get one of these cards and charge it up. And lastly, the card offers 0% APR for 12 months on balance transfers made within the first 60 days of account opening. So nice option if you do want to save on interest on outstanding debt. Yes. Any thoughts questions? It also offers a couple elite club benefits on that maximum Visa Signature benefits I could get into those as well.

george grombacher 17:56
I tell you what, that is evidence right there of a chip shortage if credit card companies can’t even get enough credit cards made then. Then it’s absolutely real.

Patrick Yip 18:08
It was it was a surprise to me. I got well, technically Yeah, I guess it is a chip.

george grombacher 18:12
Oh, it turns out, just go back to the old fashioned just swiping and get rid of the chip.

Patrick Yip 18:17
Yeah. Now we wanted to make sure the card had a chip and it had the whole contactless ability. We didn’t want it. We didn’t want a low tech going on, you know looking backwards card. We want something that’s new and exciting. know for sure we waited to get the right card to the market.

george grombacher 18:32
smart, smart. Love it. Well, Patrick, people are ready for that difference making tip. What do you have for them?

Patrick Yip 18:38
Yeah, so as I mentioned earlier, 2022 is trending to be a difficult year for many people’s finances. Unfortunately, I think the next upcoming years may be equally or more difficult. If you do have savings, I’d recommend getting some exposure to precious metals, which have historically done well during these times. You don’t need to be 100% and 50%. And you don’t need to go crazy just have a 10% allocation may significantly help your finances. If you prefer physical metals check out@mex.com That’s APMA x.com. If you prefer like a vaulted insured solution, check out one gold.com That’s a 20 Gol d.com. And lastly, if you want to get in on a hot new credit card, which as I mentioned, I’m currently excited about it I’m getting in you can view the complete details in terms on the Bullion card.at mex.com and Bullion card.one.com

george grombacher 19:27
Well, I think that that is great stuff that definitely gets come up. Well, Patrick, thank you so much for coming back on. Let’s see. Appreciate it. If you want to learn more, go to apmex.com one gold.com And then the Bullion card.apmex.com and word bullion card dot one gold.com Perfect. Thanks again, Patrick. Thanks. And until next time, keep fighting the good fight. We’re all in this together.

Unknown Speaker 19:59

Transcribed by https://otter.ai

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