How do I invest in gold and silver? Is it a reasonable thing to do as an investor who is headed to their retirement years? Are there some rules that one must observe as they invest in gold and silver? Welcome to today’s article in which we shall cover these questions by having a look at some of the things that one should expect as they get started with precious metal investments. If this sounds interesting to you, read on to find out more.
Why do investors choose gold and silver investments?
That are several reasons why investors add gold and silver to their retirement investment portfolios. The main ones include:
Precious metals such as gold and silver have been used as money for several thousands of years.
Kingdoms and empires have risen and fallen for more than 5000 years, and so have their currencies. Gold, has, however, continued to function as a medium of exchange, as well as a store for wealth throughout those years.
Gold and silver have intrinsic value
Modern paper and electronic currencies are simply conventions. This means that they are declared to be money by the ruling authorities, and are accepted as such by those who are meant to use them. In and of themselves, however, these currencies do not have any intrinsic value. Precious metals, on the other hand, represent physical commodities, which are valued for their rarity. Beyond that, they’re also valued for their practical applications. For instance, both are used in the manufacture of jewelry, and other industrial applications.
Gold is a counter-cyclical investment
Whereas a couple of arguments have been made against gold, most people do not realize that gold is actually one of the few assets that perform best when the economy and other financial markets are performing very poorly. This is why gold is viewed as a counter-cyclical investment, in the way it is the only asset that performs positively when other paper assets are performing poorly.
How to invest in gold and silver
Now that you know why you need gold and silver in your retirement investment portfolio, let’s look at the ways in which you can invest in these precious metals.
Gold and silver bullion
Throughout the years, investing in gold and silver by purchasing bullion has been the most preferred way to own gold and silver. Even in the present day, there are some investors who solely rely on bullion as the best approach to retain or expand the value of their portfolio, in the face of potential economic downturns. The main benefit of owning bullion is that they’re essential “cash and carry assets”, which you can take physical possession of. You can purchase bullion in coin or bar form. Some of the most popular gold coins today include:
- American Eagle
- Canadian Maple Leaf
- South African Krugerrand
These coins are available in different denominations, which are mostly based on weight and purity.
Silver bullion coins are mostly pre-1965 U.S coins which include:
- Minted silver dollars
- Half dollars
Their availability has, however, become gradually difficult since many of them have been melted down. Investors also have the option to buy commemorative silver bullion coins, but these have a significant mark-up above the regular price of the metal in the market. Silver coins are, in most cases, available in numismatic varieties, which were minted several centuries ago, hence are priced higher than the bullion value. This is mainly attributed to the rarity of these coins. You also have the option to buy gold and silver bars, for which the amount ranges from 1 to 400 ounces. There’s usually a lower mark-up on the prices of the bars, and they’re usually a better approach to buy large amounts of gold and silver.
N.B. If you’re investing in gold and silver through a gold IRA (highly recommended), then you should be fully conversant with the rules set by the IRS, pertaining to the purity of precious metals that can be held in an IRA.
2. Gold Exchange Traded Funds (ETFs)
If you want to invest in gold and silver without necessarily owning the physical bullion, you can rely on gold ETFs. This is an ETF that holds the bullion at a central facility and allows you to purchase shares in the fund. You can purchase or sell ETFs through a reliable investment broker.
3. Mining Stocks
Another approach you can use to invest in precious metals is through mining stocks. Mining stocks will in most cases have more leverage than physical bullion. For instance, if you have invested in gold and the price of physical gold increases by about 20%, then the value of gold mining stocks may go up by 50% or more. There are, however, some problems with owning mining stocks, which include:
- Investing in mining stocks is not the same as investing in precious metals.
- Economic forces (government regulations, trade issues, interest rates, etc.) that affect the mining companies can lead to the rapid decline in the value of the mining stocks.
- The mining industry is highly speculative, and capital costs can get in the way of profitability. It could, therefore, take several years for companies to convert mineral deposits into reliable mines.
- Most gold mining activities happen in politically unstable regions. Mining companies can have their operations terminated by local governments, or impeded by civil wars. This would have adverse effects on not only the mining company but also the mining stocks.
Overall, mining stocks are quite speculative and are as such not recommended for the average investor. The average investor should rely on safer options, physical bullions being the best option.
Thank you for making it to the end of this article that was addressing the question, “how can I invest in gold and silver?” I hope that you found it informative and that you can now make your decision based on the information presented herein. If you have any questions about this subject, kindly drop them in the comments section, so that I can respond to them ASAP.
I wish you well,
Eric, Investor and Team Member at Gold Retired!