Get this, the price per ounce of bullion or different coins, best examples would be Kruggerand or American Eagle gold coins have gone up in the recent years. And even the price of silver has gone up as they are usually following the price of gold. And as always, if you listen to “gurus” and commercials you can hear that the price has gone only up.
So, 2015 is a GREAT year for investing in gold or silver? Doesn’t have to be.
Is gold and silver a good investment?
To answer that age old question, first we must understand how do the prices of silver and gold move up or down. First, we will start with gold.
What should you know before investing in gold?
- Let’s start with what kind of gold you should buy. The answer to this question might be more complicated than you could imagine and it is not as straightforward as you might think. If your only goal is hedge financial uncertainty or if you want to capitalize on gold movements, you should invest in bullion coins. They are highly liquid and have relatively strong premiums over their gold melt value.
- Secondly, you should buy gold, first and foremost as a wealth insurance. You should approach gold the same you would approach a stock or a bond. Think of it more as a real-estate investment. You are not in a hurry and timing is not an issue.
- Thirdly, net assets. It’s hard to say the specific number, but the general rule of thumb should be anywhere from 10% to 25%. As James Rickards, a strategic investment analyst said, “Gold is not an investment. Gold is money par excellence.”
- Choose the right gold company for you! If you are investing in gold for the first time, you should check out everything there is on a company before you decide to do business with it. A good place where you can check out the company’s profile is Better Business Bureau. Second, choose a firm that has a solid track record. Last, but not least, choose a company that is committed to keeping you informed as much as possible.
- Lastly, do business with a solid, professional gold company that can help you, the investor, in the long run. A good company will help you with some pitfalls and problems encountered along the way.
How can I sell gold?
If you own gold and you want to turn it back in cash, how can you do that? Well, it’s fairly easy to be honest. You can go to a coin shop and sell it for a collectible value of the coin. Unfortunately, since gold is considered a luxury commodity its prices can fluctuate on the market, therefore there is always the risk of losing your money.
But hey, in a post-apocalyptic world all you will have is a shiny metal that does absolutely nothing. Owning a cow at this point would be smarter.
What should you know before investing in silver?
- Let’s start with industrial demand. Everyone knows that the industrial use for silver is much greater than gold and unfortunately, that makes it susceptible to an economic crisis. For example, the uses for silver are increasing every day; medical uses, electronics uses, food processing, paper industry, wood preservation, etc. Today, you can get pretty much anything that contains silver in it. Fun fact: you can even buy silver-based soap, crazy, right?
- Investment demand. It is soaring and won’t stop. China’s net imports of silver quadrupled in 2010. Also, don’t forget all the people who don’t own any gold or silver. So, even know the demand is huge, and supply can’t meet the demand. The potential for silver is still enormous.
- The third factor to take into consideration is supply. Total demand for silver in 2012 was 880 million ounces a year, give or take. And the production of silver was a mere 760 million ounces a year. Scrap made all the difference. It is crucial that we recognize that supply is only going to increase.
- Based on this information, we can conclude the following. The silver should rise for quite some time. It can go on for a long time, just think of the period from the 1970s to 1980s. It rose by 3,646%.
Precious metals and their symbols
Since precious metals (silver and gold) trade in troy ounces, their abbreviation is oz. A troy ounce is only a tiny bit heavier than an avoirdupois ounce. So, investors trade precious metals in troy ounces. When you the spot price of gold or silver, know that it is always the cost of a single troy ounce.
Furthermore, you can’t really buy precious metals like gold and silver in the open stock market, nor they have some special symbols like GOLD, GLD, SLVR, etc. What you can do is buy special funds that track precious metal prices.
Should I invest in silver or in gold?
First of all, you should ask yourself this question: why do people invest in gold? Why do people invest in silver? Why do people invest in precious metals? When you understand and answer these question for yourself, you will know how to make a rational and sound investment. If you are a conservative investor, you should go for gold and keep it as wealth insurance.
On the other hand, you can ways buy pieces of companies that produce some actual value, S&P 500 Index Fund is a great place to start.