When it comes to investing strategies and building wealth, a lot of investors will overlook these two asset classes as an investment.
Gold and silver have been considered assets for thousands of years from countries and civilizations all around the world. To overlook these assets would be foolish.
If you are an investor, it is imperative to protect your wealth from the unknown variables that can cause your wealth to deteriorate.
Protecting your wealth with a form of insurance, is the equivalent of buying fire insurance on your home or car insurance on your car.
You wouldn’t buy a home or car and NOT purchase any insurance on these 2 items, would you?
If the answer is NO, then why wouldn’t you purchase insurance on your investments that you build your wealth with?
We are going explore the history of gold and silver and what role it has played throughout time for civilizations. You are going to learn what purpose it serves economically and as an investment.
When you are done reading this article you’re going to walk away with some knowledge on the importance of gold and silver and we will show you how to buy gold and silver as an investment.
The history of gold and silver
The first recorded occurrence of gold dates to the Egyptians around 3,000 B.C. Objects have been found made of silver dating back as far as 4,000 B.C.
The first evidence of silver mining dates to 3,000 B.C. matching that of when gold was first recorded for use within a civilization.
According to the Daily Reckoning, if we look at countries such as Rome, China and France, we find that every one of these countries has supported an un-backed fiat currency.
What is also very interesting about this fact, is that each one of these countries had their un-backed fiat currency hit the price of zero as well.
Link to Daily Reckoning on Fiat Currency
You might be saying…so what! What does that have to do with gold and silver?
Keep reading and we will explain the relationships between these precious metals and fiat currencies, so you have a better understanding of their importance with economies.
The relationship between Gold, silver and Fiat Currency
- Gold has never hit the price of zero in recorded history of mankind.
- Without gold there is nothing stable enough in price to back up against a currency to determine the currency’s value or the value of the gold.
- Without Silver being used for monetary activity, there would be no other stable monetary system of barter outside the fiat un-backed currency.
Granted, human civilization would and will continue to create systems to barter with and that’s exactly what humanity has always done throughout history.
The point is, none of these systems were or are stable enough to use long term for monetary activity, which drives economic growth.
To prove this point, just look at how volatile the crypto currency market is…
Around 40 years ago, if you were an American and you owned gold, you could redeem it for U.S. dollars set at a base price. Another ward, you were guaranteed so many U.S. dollars to trade in an ounce of gold and those dollars were worth something because they were pegged to an ounce of gold.
Sadly, those days are long gone now! There is a total disconnect between U.S. dollars and gold.
You can trade in your gold and you’re going to get what someone is willing to pay for it. If you try to buy gold you’re going to pay around 1,196.35 U.S. dollars at the time of writing this. (Sept 8th 2018)
In 1971 an ounce of gold only cost you 20.67 an ounce. Why such a huge difference in prices now?
Back in August of 1971, President Nixon took the U.S. off the gold standard and from that day forward the value of a U.S. dollar was considered strictly FIAT based.
This means that the currency has no intrinsic value. It’s not worth the paper it’s printed on because it’s just that, paper money. So, you could trade in an ounce of Gold today for U.S. dollars, you just DON’T KNOW how much you will get for it on any given day.
It depends on what the value of gold is doing backed against other fiat currencies and the U.S. dollar. Depending on who you are selling to….it also depends on how much someone is willing to pay for it.
So now you see how it shares a relationship with currencies but has lost its importance overtime or so that’s what so many people seem to think!
What purpose does gold and silver serve?
- Gold Helps stabilize a fiat currency and give it value.
- Gold can be used in jewelry as a sign of wealth.
- Silver has industrial uses and monetary uses.
- Both by the technical definition, are considered money.
- Both can be used as a form of insurance to preserve wealth.
Gold and silver as investment insurance
As you read early on in this post, we said that you want to protect your wealth by getting insurance, right? That’s exactly what gold and silver do where the entire world is made up of FIAT currencies.
What do you think happens to a currency when the price hits zero?
What do you think happens to the purchasing power of the fiat currency if inflation goes out of control? (Just look at Venezuela, Argentina and Greece in recent times)
You guessed it, the VALUE of the currency goes to zero because the BELIEF system in that currency no longer exists. People wake up and realize, that the paper money is funny and nothing more than that.
What do you think people will turn to and what they have always turned to for barter and trade throughout the last 3,000 years? That’s right….gold and silver and that’s why we call it investment insurance.
The reason folks turn to gold and silver is that it’s real. It’s tangible, has value and always has had value for 1,000’s of years. It’s never hit the price of zero like the 100’s of fiat currencies around the world have in the past 400 years.
MOST OF ALL…it’s a belief system that is stable therefore it preserves its purchasing power of other items when there is nothing else to trade and barter with.
It is a form of INSURANCE because if all your other assets lose their value based in U.S. dollars, what else do you have that has value? Hopefully some real estate maybe…
If you want some deeper insight into what we just covered here, check out the new interview below, with Mike Maloney, owner and founder of Goldsilver.com and Jeff Burwick, founder of Dollar Vigilante where they talk about gold, silver and cryptos.
How to buy gold and silver for investment purposes
Now that you know what purpose these assets serve the next question is where do you go and how do you buy gold and silver as an investor?
There are many ways to invest in precious metals. We will list them out below.
Ways to invest in gold and silver
- Gold and silver stock or ETFs.
- Gold or Silver bars
- Gold and silver coins
Gold and silver stock or ETFs
If you want to invest in gold and silver stocks or ETF’s you can do so through mutual funds, 401k’s and stocks. We prefer individual stocks or ETF’s for this approach because if you purchase through an individual broker account at least your liquid.
What we mean by liquid is that you can sell the stock and get out of the investment at any time and you’re not going to pay a huge fine for doing so like you do with a 401K.
You have complete control over selling and buying, however, you must be careful with these paper assets. They are paper because they are stocks which means that you don’t actually own the physical gold or silver.
You can’t redeem these stocks for the physical gold and silver and even if you could do so, you better hope they have it on hand and can meet the demand with the given supply.
Gold and silver bars
Another way to invest is to own the actual metals physically buy purchasing in bulk. So rather than investing in stocks you have the physical silver and gold. You can buy these bars through online dealers or local dealers who supply these bars.
We typically find purchasing through online brokers is far easier. The only disadvantage is shipping fees for the larger items and of course going with a legitimate dealer.
This is a far better way to investing in gold and silver rather than purchasing a stock. The only issue with owning bars is that it’s heavy, difficult to store in a home and if you ever had to barter with it, you are going to have problems.
To barter with a bar, you would have to make a larger purchase to get the most out of the investment.
For example, you wouldn’t want to hand over a full silver bar for a few gallons of milk, would you? Especially if it came down to that type of an emergency.
If you are looking to invest and own a large supply of bars and you don’t want to store it in your house, you can also have these stored in vaults through the online dealers.
Not all online dealers offer this service, so we have provided a list below of the top dealers you can store gold and silver with through their vault storage service.
- goldsilver.com
- schiffgold.com
- goldcore.com
- bullionvault.com
This leads us to our favorite way to invest in gold and silver which is investing by the coin or investing in bullion.
Investing in gold and silver bullion
This is by far the best way to invest in gold and silver in our opinion from our own personal experience. It’s usually cheaper, lower costs in shipping and it’s an investing approach that allows you to invest in individual coins.
There are 2 types of coins to be aware of for investing in gold and silver bullion coins.
- Bullion coins
Bullion coins – are coins that have been minted and struck from precious metal for investment rather than to be used for day-to-day commerce use.
- Numismatics or collectible coins
Numismatic – Is the study or act of collecting coins, paper money and medals. Numismatic coins are usually rare valuable coins that have a value that is above that of the base value of precious metals.
It is completely up to you regarding which type of coin you would like to invest in. Just remember that with numismatic coins, you are at a disadvantage when it comes to using them for a scenario like bartering.
The reason why you are at a disadvantage is because honestly…. who is going to know what the value is of a rare coin, unless they know their coins and are a collector as well?
What we are saying here is that you are limited to who you can sell these coins to and get back what they are worth in value.
Therefore, we prefer investing in bullion because people are more likely to know what the value is of a 2018 silver eagle versus a rare silver dollar eagle that has a defect in it that gives it value.
How much gold and silver should you own?
It’s best to follow what investors call the golden rule. Invest around 10% of your portfolios total value in gold and silver.
The reason you don’t want to invest too heavily in these metals is because they are individual assets that vary in value throughout time.
They tend to only rise in price when the value of the dollar drops, or the dollar loses purchasing power. These are metals or what Warren Buffet likes to call, shiny objects that look pretty.
Precious metals don’t produce anything unlike a company which can give investors an annual return on their money through dividends. The value of the metals is strictly tied to the market price of the metal.
Last thoughts on gold and silver
Hopefully you walk away with some new knowledge on investing in gold and silver after reading this. Just remember that with whatever approach you take with investing, don’t invest everything you have in gold and silver.
Diversify your holding across all asset classes and only put about 10% of your portfolios total value in these. Why you may ask??? GOLD & Silver will act as a hedge against stocks or as we like to refer as…”fake money”. Stocks are nothing more than a vehicle to create cash flow or create money out of thin air because what you own through your broker is nothing more than digital 1’s & o’s.
If you don’t believe this just listen to the interview below which was taken on 08/05/19, almost a full year AFTER writing this article. Don’t believe us…..
- Check out the most updated video from CNBC on opinions of GOLD. Keep in mind this article was written last year 08/2018 and we are now in 08/20019. A year has went by and yet the main stream media is ONLY backing the knowledge and insight we have into GOLD.
Watch the video Below:
Be sure to leave your own thoughts in the comments section below on gold and silver. Please share your experience with different dealers if you have had a good or bad experience. Let us know what your view is on precious metals and what dealers you recommend.