We live in difficult times.
Every day in the news is talk of inflation, interest rate hikes, bank runs, bank failures, and bailouts. Unfortunately, the global economy appears to be in real trouble.
When talking with our financial advisor the other day, I asked him what the best asset class was to invest in for a good return on investment. His answer was not encouraging.
Every dollar I have is at extreme risk today. Every time I go to the grocery store, gas station or buy anything at all, I am faced with inflation which, no matter how you look at it, is a tax, plain and simple.
The dollar is fiat currency–backed by nothing. P. J. O’Rourke said, “A US dollar from the Federal Reserve Bank is not backed by gold or silver. It’s a promissory note that doesn’t actually promise anything.”
Central banks have all the control. And don’t even get me started on the central banks’ planned CBDCs (Central Bank Digital Currency). If you think the big banks are in control now, just wait until they roll this brilliant plan out–and make no mistake–it’s coming.
When CBDCs are implemented, the central banks will control every single aspect of our lives. Don’t believe me? The Federal Reserve is launching FedNow, an instant digital payment system that will eventually usher in CBDCs.
Given the central banks’ plans, there is no better time to consider buying some gold and silver.
Before investing in bullion, it’s essential to comprehend the contrast between physical and paper gold and silver. Investing in these precious metals requires research into reputable dealers, understanding investment goals, calculating costs associated with storage or transport, and securing your investment against theft or damage.
So, let’s take a closer look at investing in precious metals.
Introduction to Investing in Gold and Silver Bullion
Gold and silver bullion offers potential protection against inflation, currency devaluation, and the general roiling of the markets. Gold and silver have been seen as a reliable refuge for those wishing to broaden their investments outside the conventional stock market and bonds.
There are two choices: buy physical gold and silver or paper assets such as ETFs (Exchange-Traded Funds).
Physical bullion refers to coins or bars of actual metal that can be held by the investor directly or stored with a third-party custodian. Paper assets represent a claim on gold or silver held by the asset’s issuer but do not involve any direct ownership of the metal itself.
While paper assets have their place, I am a big proponent of the adage that you don’t own it if you can’t touch it or hold it in your hand. Physical gold and silver are being vacuumed up by investors quicker than suppliers, and coin dealers can meet demand.
If gold and silver, or precious metals in general, seem like something you might be interested in acquiring, it’s essential to evaluate the potential risks, like short-term price volatility or long-term market fluctuations.
Inflationary protection should be taken into consideration. If inflation rises faster than expected, it could erode the purchasing power of your money over time – however, this depends heavily on interest rates at any given point too.
Genuine upheaval insurance ensures that owning physical gold provides financial security during political unrest since paper assets do not guarantee actual ownership of the metal itself.
Physical bullion provides the tangible benefits of owning physical assets, so it’s essential to understand the differences between paper assets versus physical investments when considering investing in precious metals.
Physical Bullion vs. Paper Assets
Physical bullion and paper assets are two of the most popular ways to invest in precious metals. Physical gold or silver, such as coins or bars, offer investors a tangible asset that can be stored securely.
However, buying physical bullion is more expensive than other forms of investing in precious metals due to additional costs like shipping and storage fees. On the other hand, exchange-traded funds (ETFs) provide easy access to gold or silver investments without requiring storage. ETFs also charge a small annual fee for managing the fund.
When selecting between tangible bullion and paper investments, it’s essential to be aware of the risks linked with each.
Short-term price movements can affect both physical bullion and paper assets; however, when it comes to long-term volatility, gold or silver may be less susceptible since their worth isn’t tied to market changes like ETFs.
Additionally, inflationary protection offered by owning physical gold or silver cannot be replicated through ETFs since their values aren’t backed by any tangible asset. Finally, some investors see owning precious physical metals as genuine insurance against economic downturns, which cannot be provided through paper assets like ETFs either.
Physical bullion is a more secure investment than paper assets, as it can protect against inflation and catastrophic changes in financial markets. Though investing in bullion may have benefits, potential hazards should still be considered before making a choice.
Risks Associated with Investing in Precious Metals
Investing in precious metals may be an intelligent move for portfolio diversification and protection against inflation. However, risks must be weighed.
Various elements can significantly affect the cost of these items, including supply/demand discrepancies, government actions/regulations, international politics/economics, warfare, and terrorism incidents. This means investors should always do their own research before committing capital to any commodity-based investment opportunity.
While gold and silver have historically been good hedges against inflation over time, they can also suffer from long-term downward trends if market conditions become unfavorable or economic fundamentals change drastically. Investors should vigilantly observe their investments to be able to modify their holdings if necessary.
Gold and silver bullion offer a hedge against inflation since these physical assets usually remain steady when currency values diminish due to the heightened demand for goods and services.
Finally, owning precious physical metals provides genuine upheaval insurance, an advantage not offered by stocks or bonds.
These commodities have intrinsic value beyond their face value (i.e., coins made out of real gold and silver) and thus provide stability even when all else fails around them. This makes them ideal investments during global economic turbulence or instability, as they are valuable assets no matter what the future holds.
When done strategically and appropriately diversified, investments in gold and silver bullion can provide a hedge against inflationary pressures while also providing genuine financial disruption insurance.
Strategies for Investing in Gold and Silver Bullion
Comprehending the contrast between actual bullion and paper investments when investing in valuable metals and their accompanying risks is crucial.
Additionally, understanding global economic conditions is essential for assessing potential investments in commodities such as gold or silver mining companies since geopolitical events beyond their control may affect their share price.
Diversification within portfolios is essential when investing in precious metals because sector investments are more volatile than those across many sectors and companies.
Large-cap stocks have historically outperformed narrow-focused sector investments like mining stocks due to greater stability over time, but they still carry some risk if not managed properly.
Gold has traditionally been viewed as a valuable asset class due to its ability to protect wealth during market turbulence while offering higher returns than traditional safe havens like real estate or cash deposits held at banks paying low-interest rates.
Understanding the differences between physical and paper investments is essential before you commit.
Make sure that you consider your investment goals carefully, find reputable research dealers for competitive prices, calculate all costs associated with purchasing or selling precious metals, and secure your investment appropriately.
Careful consideration of these factors when investing in gold or silver bullion can ensure that it is a practical addition to your financial strategy.
Holding paper gold and silver assets or physical precious metals, which is the safer bet?