If you’ve ever mentioned buying silver or gold to a friend or family member, you might have been subjected to the “eye-roll” that comes from these conversations. Why is it that precious metals get a bad rap?
This is usually followed by some well-intentioned advice that investing in any and all precious metals is a pretty bad idea. You might be told that the stock market has consistently out-performed any commodity and that is where you should be placing the majority of your investments.
The issue with this argument is the assumption that precious metals are the only investment that you’re going to use, or want to make. Hopefully, I’ll be able to talk about how this culture purveys in Canada when I’m on Mercury Dimes Podcast next week.
Here, we’re going to tackle the issues involved with precious metals getting a bad rap.
Other Investments Are Substantially Better
As far as profit metrics go, this is 100% true if you’re looking at the average over a long-term period, if you’re looking at the short-term, gold takes the crown.
Investing in long-term IRA’s or RRSP’s (for the Canadians) definitely provides a consistent form of growth. However, these investments are not full-proof, they are subject to the dips and curves that come with economic trends (just like gold and silver).
You likely will not want to sell these investments on a dip, as you are essentially shorting yourself. Of course this pertains mostly to those nearing retirement, but unless you have metals set aside well before this time you may not have enough to cover your future costs.
You will be forced to use investments that could be experiencing an economic downturn, and subjecting yourself to a reduced gain.
Those who are looking to purchase a house for the first time may want to take advantage of a reduction in housing prices, but their investments are simultaneously experiencing the same reduction.
In these situations gold and silver can provide a “hedge” against inflationary markets. However, these metals only constitute a “hedge” if they’re hedging something else for you, and I wouldn’t recommend ignoring the advice of your financial advisor to pour your money into one investment.
Diversified investments are important, so you aren’t reliant on the marketing trends of one investment.
I’ve already touched on the subject of fakes in the industry here, and truth be told they really do present a massive problem. While there are many ways that you can go about avoiding fake coins and bullion, it’s not always known to the general population.
They may have even been ripped on in the past and that’s translated to “bad-taste” associated with metal commodities. Even worse, those who create these fakes tend to be more active during recessionary periods.
Why? Because they know many will want to capitalize on the inverse relationship metals have to the market during this time.
Many individuals who purchase these might not even know they have a fake, until it’s too late, or they may purchase a product well above the melt value.
Dishonest Gold Buyers
Most of us have seen large signs displayed in small-business windows saying “Gold Bought Here!” While I’m sure many businesses are honest, there are some who would rather give you less money than what your product is worth.
They might decide to weigh your product in another room, test it’s karat value in the same room, and then give you a lower weight than what it’s worth, or just plain offer you less than melt value.
This issue can be easily avoided by simply selling to more well-known bullion dealers, who do everything under camera, or reading online reviews. Never sell gold to a pawn shop.
People who engage in these practices are contributing to the bad name gold has, and are ripping off those who don’t know any better.
The best way to help people avoid this is to help direct them where to sell their gold and silver, if you have friends/family who are looking to do so.
Lack of Intrinsic Value
I see this argument a lot, and on my Instagram page I’ve looked to tackle some of the uses of various precious metals.
Silver, platinum, palladium, and rhodium all have outstanding uses and will likely to continue to have them for quite a long period of time. And we’ll also be covering these in future posts.
Gold has a variety of uses as well, but by far the one reason people have invested in it historically is that it’s always been agreed upon to have value.
We’re still buying wedding rings and jewelry made out of gold, rappers are still wearing gold chains, and this trend isn’t going away anytime soon.
Even Warren Buffet who has historically said the only use for gold is jewelry, is now buying gold stocks. That’s sure to turn a few heads in any discussion involving these commodities.
People just don’t know about precious metals. They may have heard something an older relative had to say, or briefly read a headline and carried that with them. It’s the same reason many people hold similar beliefs about any topic.
It doesn’t take much convincing to show any open-minded individual that there are definitely uses for investing in commodities. New agency’s often report on investors fleeing to gold during times of economic crises, and there are reasons for this.
This issue can simply be tackled by using a friendly conversation, and directing them to resources that can help educate them better.
I don’t think the reputation of metals investing is going to turn magically for the better anytime soon. But with the introduction of members on the treasury board who at least see concepts such as a gold standard positively, steps are being made.
We’re seeing far more controversial conversations around cryptocurrencies than gold and silver. Hopefully in the future we can see the public shed a more positive light on these commodities.
In compliance with the Federal Trade Commission, none of the information presented in this article constitutes financial advice or should be taken as such. Precious Metals Professor does not recommend financial positioning or investment strategies, and does not take responsibility for any gains or losses made.