In a Nutshell: The wide world of investing and trading can be intimidating for newcomers but purchasing precious metals like gold and silver can make for sound investments, according to experts. And with today’s online dealers, investing in gold and silver is as simple as a few mouse clicks. We spoke with Jeff Clark, the Senior Metals Analyst at GoldSilver.com about some of the ins and outs of investing in precious metals. Clark discussed how gold and silver are sound hedge investments and clued us in on the importance of liquidity and precious metals storage methods.
The world of investing and trading in stocks, bonds, or bank products can be intimidating to newcomers. Perhaps you’ve managed to overcome some past financial mistakes, built up your emergency fund, and now have some extra cash you’re ready to stash away.
Trying to get a handle on the vast amounts of information available online about investment strategies, various exchanges, brokers, fees, and more can be a head-spinning experience.
For those who want to invest their funds into assets that may yield a greater return than a savings account, but aren’t quite prepared to wrap their heads around the volatile stock market, precious metals like gold and silver make a nice option.
New investors may feel more comfortable investing in a tangible object of value such as gold and silver bullion that, according to some experts, is actually one of the most sound investments a person can make.
That’s because one of the most consistent occurrences across the history of civilization — with its vast financial upswings and downturns — is that a society’s monetary system always returns to gold and silver, said Jeff Clark, the Senior Metals Analyst at GoldSilver.com, an online precious metals dealer.
“If you look at monetary history — which can be boring at times, let’s face it — there are these fascinating aspects to it, one of which is that you can see that monetary cycles repeat,” Clark said.
We sat down with Clark to learn more about the world of gold and silver investing, including how to acquire precious metals and the best ways to store them.
A Brief History of Valuing Precious Metals
History indicates that since the earliest developments of human civilization, gold and silver have been consistently considered to be among the most valuable and coveted metals.
While there are earlier civilizations that upheld gold as a precious metal, the Roman empire was one of the first to regularly use gold in its minted currency. But in one of those cycles alluded to by Clark, the downfall of the empire was in part due to gold.
“They devalued their currency to fund wars. That’s a major factor in why the civilization failed because they devalued their money and couldn’t recover,” he said. “In modern society, once you see bankers and politicians dilute the currency, that’s a clue that you need to protect yourself because these cycles repeat.”
But why, out of all the other elements on earth, do gold and silver, in particular, stand out as the historical basis for currency?
Of course, anything that holds value only holds that value because we, as humans, agree that it is valuable. Otherwise, gold is just a shiny rock.
But, as Andrea Sella, professor of chemistry at University College London, explained in a 2013 BBC article, gold was always destined to be the leader for most valuable currency, with silver following closely behind.
Sella explained that, after eliminating the most impractical elements from the periodic table as considerations for currency — such as gasses, volatile or toxic metals, and extremely rare metals that are hard to distinguish from one another — the noble metals are the only options left.
And most of those wouldn’t pass muster in early civilizations for various reasons. Iron oxidizes into rust, copper corrodes, aluminum is too flimsy. But gold and silver are the least reactive of the noble metals (silver does tarnish which is part of the reason it takes a back seat to gold).
“Both are scarce but not impossibly rare,” according to the article. “Both also have a relatively low melting point, and are therefore easy to turn into coins, ingots or jewelry.”
There’s also the fact that it is the only metal that is — gold. Gold stands out among its less pliable peers because of its color, whereas most other metals are along the grey or silver color spectrum.
Helping New Traders Navigate Gold and Silver Investing
Until 1933, the United States’ monetary system was back by gold. When President Franklin Roosevelt took the country off the gold standard he also declared that citizens must trade in for cash any gold coins or certificates worth more than $100 to the U.S. government. And, it was actually illegal for Americans to own gold bullion between 1933 and 1974.
Thankfully, Americans today are free to purchase as much gold as they’d like, and, with online dealers, including GoldSilver.com, it’s easier than ever for the average person to own a real gold or silver bar.
Clark said that in today’s market, gold and silver are often viewed as safe investments that can offer protection from uncertainty. This is also the view that Clark and GoldSilver.com Founder Mike Maloney take.
“The main thing about gold is it is an ideal hedge,” Clark said. “Gold is inversely correlated to a lot of other investments, so when stocks go up, gold tends to be flat and not do much. But when stocks go down, enter a bear market, or even crash, gold tends to rise and offset losses elsewhere in your portfolio.”
At GoldSilver.com, investors can purchase gold and silver bullion in a variety of forms and price ranges.
“Our goal is to offer investors gold coins, gold bars, and bullion-grade gold jewelry with low premiums and high purity because we believe precious metals carry intrinsic value that can persist through any monetary or economic storms,” according to the GoldSilver.com website.
Clark said gold is not only valuable in today’s world as a hedge investment, but it also has the potential to see notable appreciation over time.
For investors who are new to the market, purchasing gold or silver these days is as simple as ordering a shirt from your favorite online retailer. On websites like GoldSilver.com, shoppers can choose from an array of bullion options, including coins and bars of varying sizes and weights.
Once the precious metals are added to the shopping cart, purchasers can choose from a variety of payment methods — just like shopping on many other e-commerce sites — complete the transaction, and wait for their new investment to arrive.
Safe Storage and Liquidity are Key to Holding Gold and Silver
One key question a bullion investor must consider is how they will store their assets.
Clark said most people’s first instinct is to store it in a safe inside their home or put it in a safe deposit box at their bank. But, he strongly advises against these storage methods.
“A number of years ago, I stored gold in a safe in my house and it was stolen,” he said. “It was a large portion of my gold holdings at the time and was a traumatic experience.”
He said even though the safe was hidden from view inside his home, and the key was hidden away in a separate room, the thief was still able to make a clean getaway with his bullion.
“Based on that experience, I no longer store any gold or silver in my house. I encourage new investors to get it out of the house,” Clark said. “I actually keep a small stash of dummy gold and silver coins at my house now.”
Clark said safe deposit boxes are also not a great choice because they are not insured by the bank. If anything happens to the contents of the box, the owner is simply out of luck.
Liquidity is also an important consideration in the event of a crisis or recession, Clark said. If investors store their bullion at home or at a bank and they need to quickly turn their gold or silver into cash, it’s not always the most simple process, he said. You have to find a reputable dealer — ideally locally since shipping costs can be high for precious metals — that will buy your assets.
Clark’s recommendation is to store your gold and silver with a reputable allocated storage service. GoldSilver.com offers this service as well through partnerships with leading names in the security industry.
With allocated storage, customers can have their bullion shipped directly to storage. The investment is fully insured and held outside of the banking system in an account in your name. Clark said this storage method is ideal because the investment is safer and you can cash in your assets immediately at any time without having to haul precious metals around to dealers.
Investors can also request to have a portion of their bullion shipped to them if they ever desire.
Finally, Clark said because of the scale of storage GoldSilver.com maintains, it is fairly inexpensive to utilize the service — just .06% of an investor’s asset volume per month or $6 for every $10,000 stored. “I spend more than that at Starbucks every month,” he said.
For More Tips, Look for the Upcoming Book, “The Great Gold Rush of the 21st Century”
Clark said he and Maloney are currently finishing up a book they wrote together called “The Great Gold and Silver Rush of the 21st Century,” so new investors and precious metals enthusiasts should keep an eye out for its upcoming release. It is the follow up to Maloney’s No. 1 best-seller “Guide to Investing in Gold and Silver,” which is now available as a free download.
“The new book details the difference between the upcoming boom in gold and silver and the one in the 1970s,” he said. “We think it will make for a fun, entertaining, and compelling read.”
Whether you’re a seasoned trader or a new investor looking for sound assets, gold and silver seem to be logical choices no matter what the outlook is for the economy.