Buying Gold and Silver
Younger individuals might have heard parents or grandparents talk about missing out on buying gold at $100 an ounce or silver at $5 an ounce back in their day. Or maybe you got a silver dollar or a silver maple coin as a gift growing up. In any case it is not hard to see that if you had been collecting gold or silver over the years, the value would be doing fairly well. Here are a few things to consider for the novice thinking about buying a little metal for their portfolio.
Gold and silver have been used as currency and storage of wealth well into history. Gold and silver are non reactive (noble) metals, meaning they won’t corrode away making them durable and great for storage. A gold statue for example will look as it does now in 1000 years. Also unlike some other valuable metals that are very rare, these metals are not so rare as to have been able to be used as currency at one time. Gold was used by many countries to back their currency known as the “gold standard”.
There are lots of differing opinions on the value of investing in gold or silver. It really comes down to your own judgment if gold and silver investing is right for you. On one side there are people who believe owning gold and or silver is not the best route to take. Owning either metal will not pay dividends and any value you gain is from the potential sale down the road. Often the argument is made that the better option is to invest in gold and or silver mining stocks which sometimes has the benefit of a small dividend, and no storage issues. Investing in mining stocks does have added risk however of potential bad management or other risk factors such and geography playing into the investments value over just the spot price of the metal. Many of these people do however agree that owning some gold or silver is a good diversification of your portfolio, and helps hedge against inflation.
There are some who believe both gold and silver are due for a large surge. You can see claims of $4,000 an ounce for gold or $100 an ounce for silver. Some of these investors put these metals as their primary investment. The point is there is a large degree of opinion and the truth is probably somewhere in the middle.
One drawback however to owning large amounts of metals is you need to keep in mind storage and security. This can produce an annual cost associated with the storage and security of your assets that should be factored in to your decision.
I have personally bought gold and silver as a means of diversification but they do not make up a large percentage of my portfolio. I decided to purchase through a bank, although banks charge a premium, I liked the idea that they claim to buy back anything they sell, thus expanding my metals liquidity. I looked at several Canadian banks, most seem to have policies regarding having to order a certain quantity. I ended up going with CIBCs precious metals site I liked how they update their prices real time as well as you can order a little or a lot. They have some interesting collector coins as well, although collector coins are a whole different topic with investing. They also offer some interesting deals. I have seen free silver coins and (I received a 1 ounce Canadian maple) and sometimes entries into contests. It is a route to definitely look into if you decide it might be something you are interested in.
Should you buy Gold or Silver?
As I am a strong believer in diversification when I read arguments for gold over silver, or silver over gold, I decided to just buy both. The same going with buying coins or bars, coins having advantages in some areas and vise versa for bars, so again I buy both. Really if you go one way or another I don’t think you are going wrong but it is up to you how you go about it and this is certainly not an endorsement one way or another.
The case for silver
It is noting one big obvious difference between buying silver vs gold is silver’s price. While at current prices while writing this you can buy an ounce of silver for a little over $20 and you are looking at well over $1,200 for gold. That can make it hard to invest in gold for many people especially if you are not wanting to make it a large part of your investment portfolio. Silver makes a great way for those just starting out in buying some metal. There is a lot of talk about the future of silver. For example if you believe solar energy will play a big role in the future, silver will be a significant resource needed for solar panels.
Investing in metals can be a lot of fun. Unlike stocks or bonds you can see and hold your investment. Really explore if buying metals is right for you, if you are thinking of adding a little bling to your investments it is worth considering. Everything comes with risk so do you research, talk to your adviser and decide for yourself.