THE PRECIOUS METALS BUYER'S GUIDE
Is gold an investment or an insurance policy? What percentage of my portfolio should I convert to precious metals? What is the difference between the many options of coins and bars?
Buying precious metals for the first time can be an intimidating and sometimes frustrating experience. Hopefully this document will dispel your anxieties. Our intent is to expound on the buying process and to answer common questions collected from years of interacting with clients. The good news is that the process is not much different than buying any other product online. It all begins by establishing a plan. We will help you devise that plan by first addressing some general questions.
Are precious metals a good investment?
You will hear many precious metals companies extolling the upside “investment” opportunities of gold, silver, and platinum. In our view, gold and the other metals are less an investment and more an insurance policy. Investments tend to be income-generating, whereas gold and the other metals are “dead” assets. In other words, they act as stores of wealth, but not producers of wealth. For this reason, precious metals might be considered an alternate currency. If gold rises from $1,000 per ounce to $5,000 per ounce, the owner is not necessarily any wealthier. Gold’s true value is not measured in nominal (dollar) terms, but in relation to other assets. In other words, if gold becomes 5x more expensive in dollar terms, while cars, homes, food, the stock market, etc., also become 5x more expensive, you have simply retained purchasing power, not grown it. Investing in gold becomes interesting when gold’s nominal price compared to other assets is perceived to be low. If all asset classes crash by 50%, but gold maintains its nominal value, your purchasing power has increased by a factor of two even though, on paper, the gold price has not moved in dollar terms at all. Gold is relational. Further on we will explore the subtle differences between gold and silver.