Why Investing In Precious Metals Is A Bad Idea
6 Minute Read | September 27, 2021
When the world seems like its going crazy and the news cycle is filled with a constant stream of bad news, you might be tempted to make some dumb financial decisions like go all in for a better bartering system based on commodities like gold or silver. But before you invest all your money into precious metals, lets get the facts straight.
You Can Buy Gold But Should You
Despite its age-old allure, gold isnt always the strong investment that movies and TV shows may have led you to believe.
I advise all of my clients to stay away from investing in gold, says Smith. Gold is a speculative investment and has a very poor long-term performance record. For individuals that still move forward on purchasing gold, buying gold in the form of a tradable security is a much easier and cheaper way of incorporating it into a portfolio.
I advise all of my clients to stay away from investing in gold. Gold is a speculative investment and has a very poor long-term performance record.
But while hes clear that he doesnt think investing in gold is a good idea, Smith does acknowledge the draw the physical metal can have. Theres something comforting about being able to touch what you own. You dont get that if you own a part of Johnson & Johnson.
Greg Young, a CFP and founder of Ahead Full Wealth Management in North Kingstown, Rhode Island, agrees. People like gold because its so easy to understand, he says. But anytime someone insists on a specific asset, there is an underlying emotional rationale.
About the author:Alana Benson is one of NerdWallet’s investing writers. She is the author of “Data Personified,””WTF: Where’s the Fraud?” and several young adult titles. She has spoken at multiple fraud conferences, most notably for the FTC.Read more
How Banks Lend And Sell Bullion
When a central bank lends gold to bullion banks for a specified period, say three months, it receives the cash equivalent of the gold lent to the bullion bank. The central bank lends this money on the market at a lease rate known as the Gold Forward Offered Rates , which is published daily by the LBMA. The higher the lease rate, the more incentive a central bank has to lend gold from its reserves. The bullion banks who borrow the gold can sell the gold or lend it to mining companies.
If the bullion bank sells the gold on the spot market, it will receive cash for the transaction. The spot market is where bullion and other commodities are traded at the prevailing market rate. An increase in the supply of gold in the market reduces its price. The bullion bank hopes that by the time its scheduled to repurchase the gold from the spot market, the price of bullion will be lower so that the bank can buy it back at a lower price than it had originally sold it. At the end of the loan period, the bank buys back the gold and returns it to the central bank.
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Investing In Gold Coins In Other Ways
You can even buy coins with your Individual Retirement Arrangement . You wont be able to take these coins home.
Your IRA administrator will keep them in a vault for you. Coins must meet standards of purity to qualify as IRA investments.
You can always invest in gold without actually bringing home any gold coins.
Is Buying Gold A Good Investment
If you had purchased $100 in gold in 1971, it would be worth over $2,990 in todays dollars. Lets explore exactly how much your gold investment would be worth in terms of individual purchases. Today, $2,990 would buy you 2 60 LED Smart 3D HDTVs, 6 plane tickets to the Bahamas, a paid sports package for 30 years, or you could pay your annual electric bill not once, but twice.
The purchasing power of your 1971 dollars not only maintained itself, it increased. But if you had left your $100 in cash, you would still have only $100 in cash, which today only retains about 17% of its former value .
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How To Buy Physical Gold
If you decide that investing in physical gold is the right move for you, here are some things to keep in mind.
1. Find a reputable dealer. From working with pushy salespeople to falling victim to scams, navigating the world of buying and selling gold can be sketchy. Sellers can inflate their products value, or use persuasion tactics to create a sense of urgency to buy immediately. Doing some homework ahead of time can help you avoid a bad investment.
You can use the National Futures Associations Background Affiliation Status Information Center to check on a firm or individuals background.
2. Watch out for fees. Gold dealers typically charge more than golds spot price, or the price at which gold trades on a commodities exchange. This premium typically consists of a dealers fee and manufacturing and distribution charges.
3. Find secure storage. People joke about burying gold for a reason: Its valuable, and because it’s a physical commodity, people may try to steal it. Its important to anticipate storing your gold somewhere safe, whether that is a literal safe or a safety deposit box at a bank. Storing gold safely can get expensive. Depending on their size, safety deposit boxes at a bank can run from $30 to a couple hundred dollars a year.
4. Consider purchasing insurance. Insurance is an additional cost of owning physical gold. If you purchase insurance, be sure your policy covers the exact type of asset you have.
How To Invest In Silver
Buying physical silver is relatively straightforward. You can buy from a local coin shop, but believe it or not costs are usually lower at online stores like GoldSilver.com. Thats because overhead is much lower, and shipping and insurance costs are usually included with a minimum order .
Setting up an online account is not much different than establishing a bank account, and shopping is just like using Amazon. Once your remit payment, your metals can either be shipped to you or deposited into one of our surprisingly affordable storage vaults.
And if youre on a budget or simply want to accumulate in the increments of your choosing over time, you can use our InstaVault gold program or Instavualt Silver program.
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Biden’s Presidency: Why Buy Silver Now
Firstly, Joe Biden won the US 2020 election. As a major supporter of the Green New Deal, Bidens impact on the silver price is inevitable. Silver is one of the best conductors of electricity and heat, and one of the most light-sensitive metals in the world. This makes it ideal for solar panels on top of its preexisting use in batteries, for purifying water, and in the fabrication of control rods in nuclear reactors. On President Bidens campaign website, it is written:
We can lead America to become the worlds clean energy superpower. We can export our clean-energy technology across the globe and create high-quality, middle-class jobs here at home. Getting to a 100% clean energy economy is not only an obligation, its an opportunity.
Bidens aggressive stance on climate change goes to show that the US will shift to greener technology on a national scale. Therefore, silver demand will climb if he holds up his promise to fight against climate change. However, this comes with a price. The silver supply has reportedly already peaked. After the silver crash in 2011, fewer mines are open, and there are not many efforts to reopen or replace the closed mines.
The Case To Buy Silver Now: 2021 Is Likely To Be Rewarding
Were entering a perfect storm for silver. Not only are central bank balance sheets exploding, but major economies are passing stimulus bills. Whats more
In many ways, most of us cant wait to put 2020 behind us and call it last year.
Weve experienced a once-a-century global pandemic, infecting almost 80 million people. Lockdowns caused businesses to shutter and soaring unemployment, with massive economic consequences.
If you dig a little deeper, other costs include soaring debts and deficits worldwide. Were approaching an unfathomable $280 trillion in global debt. Governments and central banks have facilitated tens of trillions in stimulus spending this year alone, and its far from over.
The U.S. is now passing its latest $900 billion stimulus bill, promising new stimulus checks, boosting unemployment, small business aid and funds for schools and universities.
Its little wonder that some asset classes have been riding this wave, not the least of which is silver. And looking ahead, the metal appears primed for another great year in 2021.
Debt, Deficits and Stimulus Boosting Silver
2020 was good to some investors. Stocks gained, with the S& P 500 ahead about 13%, while the Nasdaq is up some 17%.
Precious metals investors fared even better. Gold has gained around 23%. Yet silver outshone all of these with an outstanding 44%. But as Ill explain, I think golds cheaper cousin is set for another year of outsized gains.
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Silver Is More Practical For Everyday Small Purchases
Silver isnt just cheaper to buy, but can be more practical when you need to sell, too.
Maybe someday you dont want to sell a full ounce of gold to meet a small financial need. Enter silver. Since it frequently comes in smaller denominations than gold, you can sell only what you want or need at the time.
Every investor should have some silver around for this very reason.
Keep in mind that silver coins and bars bullion can be sold virtually anywhere in the world.
Getting Started With Silver Investing In 2021
Silver may be one of the smartest investments that you can make in 2021. With the specter of multi-year inflation and increased government spending, silver may be the one investment that could outshine the rest over the next decade. If you want to get started in silver investing, consider adding silver coins, silver bars, or junk silver to your portfolio today. The most exclusive precious metal dealer to purchase silver from is through Allegiance Gold. Allegiance Gold has the most exclusive and rarest silver coins that will be great additions to any financial portfolio. For more on silver coins or bullion, contact Allegiance Gold at 844-790-9191 or visit www.allegiancegold.com to view the best collection of silver coins.
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Heres What You Should Know
Investing in precious metals, such as gold and silver, is one of the wisest moves you can make with your money. Gold and silver have been shown over centuries to hold their value remarkably well. Unlike national currencies, gold and silver dont suffer drastic losses in value due to economic crises. In fact, in times of market stress, these precious metals function as diversifiers and assets to mitigate losses. However, despite all their positives, many people dont know where to start when it comes to buying gold and silver. Thats why TRB Bullion is happy to provide a few tips on getting started with your gold and silver investments.
So Is Gold And Silver A Good Investment Right Now And Where Are These Commodities Heading In In The Last Quarter Of 2020 And Into 2021
Gold and silver are very safe, long-term investments in fact, when it comes to gold, the long-term trend shows that it grows at an average rate of around 10 per cent per annum.
That said, these assets have an inverse correlation to world markets. In other words, if the stock market is rising, gold and silver are generally flat or down. Therefore, if you decide to invest you need to expect there will be years of limited to no growth.
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Investing In Gold And Silver
The dangers were not corrected, but only disguised with more paper debt. That makes a greater financial catastrophe possible, which could force transportation shutdowns, food shortages, lost jobs and other economic chaos, erasing that most important characteristic of money confidence in the dollar and other fiat currencies.
If so, new rules and values, varying from community to community, would emerge while governments scramble to regain or maintain authority. Someone will decide those new rules for their families and communities. Someone will set a new price for apples.
That someone will be he who has the gold.
Advantages To Buy Gold Coins
Gold and other hard metals have always been a time-honored part of traditional investment plans. Heres why:
- Gold tends to go up when other investments decline, providing a stabilizing effect for your portfolio.
- Gold is a bulwark against inflation.
- You dont have to pay capital gains tax until you sell.
- Nobody has to know you have it if that matters to you.
- In worst-case financial scenarios, such as massive currency devaluation, you can use gold and silver to buy and sell. That may sound crazy but it has happened in other countries.
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Why You Should Buy Gold Now
Gold is known as the safe-haven asset, and whenever we see a meltdown in the equity markets or prospects of loose monetary policy, its price begins to explode to the upside. Currently, the gold price has a strong negative correlation with the equity markets meaning when the equity markets fall investors pour money into gold and vice versa.
Gold and SPX chart shows negative correlation
The fact is that the current sell-off in the global equity markets is only a start because there is a lot more to come. After all, the economic weakness isnt fully baked into economic data, let alone in earnings. Thus, there is no better time to buy gold.
First, the equity markets are in major turmoil as a 1000 point move for the Dow Jones index has become the norm. Secondly, the Coronavirus has pushed the Federal Reserve into a corner, and its being forced to keep its monetary policy on the dovish side. The Fed cut the interest rate by 50 basis points only a couple of weeks ago, and yet the market expects further cuts.
Should I Buy Gold Or Silver
Those adding to their investment portfolios understood the old adage of buying low and selling high. Unfortunately, others wait until dollar values of gold and silver have zoomed before deciding to convert their paper money.
Still, most make buying decisions for their own good reasons. They either have the confidence of their convictions, or they have good questions still unanswered.
One of the frequent questions we get at Money Metals Exchange is a good one How would I go about spending my gold and silver assets in a barter-type economy?
Readers and clients want to know if gold and silver would be accepted by a shop merchant or by a tradesman offering his talents. They ask how a seller would make change for gold and silver coins or bars. We feel those are perfectly valid questions.
The answer highlights the simple advantage an investment in gold and silver would give you in every financial transaction.
Every deal requires a seller making an offer and a buyer accepting that offer. Unless the buyer pays his money, there is no deal. The buyer always has the final option to seal the deal or walk away to find another seller who accepts metals..
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America Was Hours Away From Financial Catastrophe On September 14 2008
Don’t let them claim these inflationary and economic crises can’t happen, because they have happened.
History is littered with nations and societies destroyed by overprinting paper currency, exactly the situation we face today. Each time, without exception, gold and silver money flourished. The example of silver coins and bushels of apples is straight from The Great Depression of the 1930s.
More recently, the U.S. suffered bouts of debt-induced inflationary disasters in the 1970s and again in the 1980s. Gold and silver climbed to then-record highs in dollar values, as buyers lined up to trade their paper for precious metals.
There was another recent disastrous date in American history most cannot identify. It’s not 9-11.
Just six years ago, on Sunday night, the 14th of September, 2008, the U.S. came within a few hours of complete financial collapse, marked by the bankruptcy of financial giant Lehman Brothers and imminent disaster for its counterparties, and known now as the sub-prime housing mortgage crisis.
Years of disgraceful, mounting public and private debt viciously brought down banks like dominoes across the globe. Fortunes and futures were erased, putting tens of millions out of work and into impoverishment.
The U.S. government and Federal Reserve responded with an $800 billion bailout and by frantically printing trillions of paper dollars to temporarily rescue what was left of the global banking system, solving none of the problems that same debt created.
Should You Invest In Gold Or Silver
Despite the uncertainty and challenging times this year because of COVID-19, many investors flocked to defensive assets such as silver and gold.
This has paid off handsomely, particularly given that the All Ordinaries Index is down over 10 per cent.
Since 1 January 2020, gold is up around 24 per cent while silver has performed even better, as it is up over 40 per cent for the year.
While these figures indicate that these were great investments this year, you cannot compare an index of stocks, such as the All Ordinaries Index against a single commodity.
This is because there were three stocks in the ASX top 100 that performed better than gold and silver, which include Evolution Mining , which is currently up 62 per cent, while Fortescue Metals Group and Dominos Pizza are both up over 50 per cent.
In addition, six stocks are up over 20 per cent for the year, but the challenge for investors is identifying those stocks that are likely to perform well.
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