Should You Invest in Gold or Silver?

Apr, 02   -   No Comments   -   Candice

As with everything else, there are obvious and less obvious reasons why you should invest in bullion.

To begin with, the laws of supply and demand dictate the bullion market’s fluctuations or stability. With gold and silver being the “commodity money”, it is only logical that something can be bought with it. The larger the scope of those goods, the bigger the value of gold and silver is. The moment the amount of goods decreases, so does the value of bullion. The lucky circumstance is that bullion never ceases to exist, just like any other highly-demanded commodity and hence, its value has proven to be rather stable.

Better yet, gold and silver fulfill the criteria of durability, portability, divisibility, and uniformity, just like regular money. It means they are non-corrosive, portable and divisible into smaller units.

The third most undeniable reason is growing and preserving your wealth. Gold and silver store the value over long periods of time due to their simplicity and accountability. Not only does bullion never go bankrupt or default on obligations but it also tends to increase in value in times of crisis. With the recent fluctuations in the world economy, this is a highly valuable asset.

Still, there are some differences between investing in silver and investing in gold.

Those include:

  • Price volatility. The price of silver tends to be more volatile.
  • Price range. Silver is cheaper than gold.
  • Differences in the budget. Silver is ideal for an investor with a limited budget.
  • Difference in density. Since silver is less dense than gold, it takes up more storing space.
  • Stockpiles of gold are abundant. Stockpiles of silver are not.

On the other hand, here are the advantages they share.

Privacy and anonymity

With this type of investment, no one has to know about your purchase. This means that a gold dealer is not obligated to report to the IRS or any other regulating body that you bought something from them. Still, keep in mind that the purchases over $ 10,000 or those made with actual cash must comply with the filing requirements.

Portfolio diversification

When they want to mitigate risks, professional and average investors rely on a portfolio. If there comes a time of a massive economic crisis, the stock market is the first to endure a blow. On the other hand, diversifying a portfolio with gold bullion is a safe choice because it’s not prone to inflation, deflation, or currency devaluation.

Fiat money vs precious metals

Once the value of dollar was decoupled from the value of gold, you could no longer go to the bank and get a certain amount of gold for that dollar. Ever since then, what you get for a dollar is what someone else (government, in this case) is prepared to give you in return. To put it bluntly, bills are not backed by anything of value and those bills are fiat money.

Unlike precious metals, which are limited in their resources, governments can print fiat money at their whim. This leaves a lot of room for fraudulent and risky activities.

Ways of buying gold and silver

  • Physical gold and silver can be bought from government or private mints, dealers and jewelers. Owning and storing it implies storage and insurance costs, as well as some additional fees and markups. In order to reach a well-informed decision about the costs, make sure to do your research thoroughly and know what to expect.
  • Unlike mutual funds, exchange-traded funds are listed on the stock exchange. Due to the fact that they are created as companies and trusts, ETFs comprise blocks of shares. They are sold just like regular stocks. With Gold ETFs, you can either have actual bullion in a portfolio or a group of stocks shared by different companies.

The absence of counterparty risk

Once you decide to buy precious metals, there is no need for a contract between you and a third party. While it sounds unbelievable, the reason is quite simple – it is the only financial asset which is your own liability, and not somebody else’s.

To conclude, although all these reasons are intertwined and depend on one another, the benefits of investing in precious metals have proved to be timeless. Regardless of whether you want to liquidate gold and silver or your own coins and bullion, options to choose from are numerous. Of course, make sure you are reaching an informed decision.