A Beginning Note,
A friend recently called me up and informed me he is interesting in holding some Gold & Silver as part of savings & investment goals. This individual having zero knowledge on the issue, I could tell that he was getting a little overwhelmed with the information I was spouting at him. As a result, I told him I'd send an e-mail with a breakdown of the basics. After I wrote the e-mail, I thought it would make one heck of a blog post!
Now, I'm well aware I'm writing this on Steemit: an application operating on the STEEM blockchain. While I think it's a safe assumption that most people creating content on here are pro-crypto to some extent, I really don't know how varied the opinions are on holding gold & silver. I was introduced to Bitcoin in 2010 via the Libertarian community (which I became involved with in 2007 when Former Congressman Ron Paul ran for President.) Most Libertarians are pro-gold/silver and consider it a valid form of currency and, therefore, most of the Bitcoin enthusiasts I was interacting with at the time were as well. I want to make it clear that I am an certainly advocate for various uses of crypto, however, I have never discounted precious metals as a good means for storing wealth after being introduced to the blockchain world.
I hope someone reading this learns something new. Enjoy!
Important: I am not certified to give financial advice and nothing in this blog post should be taken as such. This is strictly to learn/educate yourself. Any action I talk about taking is simply a reflection of what I do and NOT a recommendation for someone else.
Financial investment, in general, can mean different things for different people (which is fine) and it's important to both get your definitions defined clearly (as well as the motivations behind the reason for investment.) For example, I personally do not have an IRA/401k/etc. I have made the choice (for better or worse) to take charge of my own financial future because I don't like the idea of putting parts of my paycheck into a "fund" and letting another group of people manage it in a way that's going to be the best for them. Maybe I'm delusional in thinking I am smart enough to make good financial decisions, but at the end of the day, we all have to own our actions (regardless if we delegate them to someone else or not.) Therefore, to me, the motivation to invest is to fund my retirement. This might be different for you and therefore you might decide to take different actions than someone else.
A Few Reasons Why People Invest Their Money
- short term profit
- long term profit
- because simply saving money is dull/boring
It might seem silly, but just taking few seconds to think about why you're doing this will put you ahead of a lot of others.
How Does Gold & Silver fit in?
Without getting too philosophical on the nature of money: gold, silver, and other precious metals have been used as currency for almost 3,000 years. That's a pretty decent amount of history to have behind something to encourage confidence that people are going to want to buy gold from you in the far future. It's also a finite resource - and - it takes A LOT of work and risk in order to mine/discover more. Gold, silver, and other metals also have practical uses in engineering, as well as sentimental uses like having gold in jewelry or watches (and yet, there's probably a better way to invest money than buying gold watches and jewelry - more on this later.)
Why Do People Invest in Gold?
1. To Preserve the value of their current wealth - since the creation of the federal reserve (not the first, but the latest "national" bank that semi-controls the value of the USD) in 1913, the USD has lost about 100% of its value due to inflation (inflation meaning more USD in circulation and not a rise in prices - the latter is what most high school and college classes teach.) To keep the math simple, we'll estimate the USD has lost 1% of its value each year. This presents a huge problem for people who deal strictly with USD in long-term investments (and even a LARGER problem for people who simply save their money and don't invest at all.) Who wants to spend 40 years saving money, only to have 40% of it depreciated? That's a huge net loss. That's basically like living in NYC and paying taxes.
2. To Make Money - this one is trickier, takes careful accounting, and a lot of patience. It's also WAY easier to do this with a group (and I don't mean pooling money, that's silly to me, but I mean a group of people who share their reasoning behind certain future decisions before taking action.) Making money with Gold/Silver is definitely possible, but it's not an opportunity that comes along very often and I would argue there are easier ways to make money. Some people (not me) in the Libertarian community got REALLY lucky in 2011. Not only did they make 4x their money with Silver, but they also received an unexpected rise in the value of the mining industry (but this also attracted a lot of scams.) Therefore, the public stock in Gold & Silver mining companies - as well as your standard gold/silver stocks - rose drastically.
What Type of Gold/Silver to Buy
There are different opinions on this and so I want to make it clear that the following is just my opinion, but I do believe in it strongly. When buying physical gold & silver, there are only two types you should ever spend your money on: "bullion" and "junk."
Bullion: These are your straight up bars or rounds that are as high in purity as you can get and often very plain looking; sold with an imprint of the company who made them as well as their weight. They aren't always pretty, but you're only paying for your weight in gold/silver. You're not paying an extra markup/premium for a fancy art design, or some limited release nonsense that is hip and trendy and that no one will care about in 20 years. Does anyone care about the 1oz $50 silver coin with Ron Paul's face on it that I bought in 2008? No. The coin was worth around $10 then and it worth around $15 today. Buying anything other than bullion involves an extra layer of risk (which can sometimes work in your favor) and you'd have to devise a pretty good argument as to why that risk is going to pay off.
Junk: These are non-bullion pieces (usually coins) that have little to no collectible value. For example, the Silver Dimes issued by the U.S. up until the 60s. Yes, they're kind of worth their weight in silver (which is only 90% by the way,) but not much else. I actually have a tube of a few hundred copper pennies that I've collected over the years for this very reason. Any penny minted by the U.S. gov before 1982 is actually 95% copper and (I think) worth keeping.
What Price Should I Buy At?
Well, this is really the question. Anyone who claims to know the answer to this is a liar. Check out this tool...
Silver Price Chart
Click on the 10 year history and you'll get a good sense of where we are. There are a LOT of different ways you can read charts and a lot of different ways you can make charts - all in an attempt to answer that one question: is the price more likely to go up or down? There's something called "technical analysis" (see: https://www.investopedia.com/terms/t/technicalanalysis.asp) and people will spend hundreds of dollars and put in hundreds of hours learning how to make educated calls based on data. Some people have done really well this this, including one of my friends who is really decent at technical analysis. I haven't gotten into this myself. It's important to remember that technical analysis only focuses on numbers/trends and not any of the other near-infinite factors in what causes price-change.
So, the 10 year chart will give you a good snapshot. This happens to be almost as long as I've been buying silver. You'll see silver prices now are roughly as low as they were 10 years ago. That might not seem like a good thing, but I think it is. Except for those poor souls who bought during that $40 spike and are STILL waiting to sell for a profit. Yikes. Anyone who did that took an action based on hype and not research (kind of like all the people who bought Bitcoin recently when CNN was shouting about how high the price was.) Don't buy high and sell low. You'll be tempted to. But just don't do it.
Where Should I Buy Gold/Silver?
So if you've decided to buy some physical gold and/or silver. You need to find a reputable dealer. You know people have tried to sell my friends silver coated bars full of a cheaper metal? Yeah, it happens.
- Online - https://www.jmbullion.com/
NOTE: I'm not affilated in ANY way with JM Bullion and I don't receive any kick-back from any purchases anyone makes there.
This site is pretty good and I think very reputable. They don't charge too much over the spot price (even on bullion you're going to have a little markup, there's no escaping that so make sure you keep track of everything,) shipping is usually free, and they even have "sales" where they will lower their markups over spot for certain types of coins. I subscribe to their mailing list to get these alerts.
If you're going to order from them, this might be a good first purchase: https://www.jmbullion.com/starter-pack/
You'll get ten (10) one-ounce rounds of bullion silver with free shipping and ZERO markup (no one does this regularly, it's just a really good promotional deal to get you in the door. they limit one per person/household.)
- At this point in the e-mail to my friend, I also talk about a couple local coin shops I like to goto, but they probably aren't relevant to the vast majority of people reading this.
Rapid Fire Q&A
Q: Is it better to buy gold or silver?
A: Silver is more volatile and can potentially get you a better ROI. It's biggest downside is it becomes harder to store than Gold once you have a lot of it.
Q: Do I have to buy physical gold/silver?
A: No, you can purchase gold/silver stocks or pay a company to hold your metal for you. You'll have to be comfortable with giving someone your money and getting an IOU in return.
Q: What % of Gold/Silver should makeup my entire Investment & Savings Portfolio?
A: "Experts" and Financial Advisers and people who write investment books will say 10%. I'm paranoid, so I do 20%.
And that's it! Have fun. Pretty much everything in this e-mail is just my opinion (except for the facts, which I promise are not fake news... yes the federal reserve does depreciate the currency but at least it's not Venezuela level) and so because I've that, I've left some additional resources below if you want to learn more from other people who aren't me.
Other Resources to Learn From
He was also on the Joe Rogan show.
Gerald Celente - A little eccentric (in a good way) and very political, but I like him.
Steemit: Let Me Know Your Thoughts & Disagreements!
As I said in the beginning, I wrote this bit off-the-cuff for a friend. If you think I got something wrong or have a different opinoin, I'd love to hear it in the comments below! I'm always open to learning new things and new points of view :)