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Should You Buy Silver or Gold?

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US Gold Bullion Coin

An example of US Bullion Coins issued by the US Mint, these are mainly for investors and collectors.

You’ve seen the ads. Now’s the time to buy precious metals! They’re undervalued, a great investment, a necessity in changing economic times! So, what’s the truth? Are you really missing out if you don’t buy gold or silver? YoFreeSamples wanted to find out.

Undervalued

With the current price of gold at over $1200, gold isn’t a cheap date (silver is at a more affordable $17 an ounce) even if it is undervalued. And it is undervalued mainly because precious metals have intrinsic value which means they will always be worth something. But just because its undervalued doesn’t mean it will appreciate over time.

A Great Investment?

If you bought it 30 years ago, with adjustment for inflation, you’re now just seeing a modest return on your investment. In silver’s case, you’re just breaking even. Putting the same amount of money in a stock index fund where you reinvest your dividends, you’d be looking at an adjusted for inflation return that averages 7%. So, if you’re looking to grow your money over the long haul, buying and holding silver doesn’t deliver the goods.

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US Quarters

Only US quarters dated prior to 1965 are made with silver.

Insurance in Changing Times?

If you buy silver or gold coins, at the very least you can use them at their face value. Or, you can sell them for more. As an example, if you have US silver quarters, for example, you’ll need 6 of them to equal an ounce. As long as silver is selling above $1.50 an ounce, you can sell for an amount higher than face value.

However, those “changing times” they refer to in the ads are not the normal economic ups and downs as sharp as they seem sometimes. What they’re referring to is a collapse of the dollar, bank defaults, national or global chaos – doomsday scenarios. If you have concerns, maybe you do want to put some precious metals in a safe place at home (don’t count on getting to a safety deposit box). But if the worst does ever happen, metal prices will soar so even a small stash can help you get through tough times.

But…Someone is Making Money, Right?

For the most part, the only people making money on precious metal investments are those who actively buy and sell it. The jewelers, pawn shops and other merchants who pay you below the asking price then turn around and sell it to someone else at a price above what they paid you. It could get turned into specialty coins sold to the public at a premium or sold to day type traders who watch the prices rise so they can unload and profit on it.
US Gold Coin

To Buy or Not to Buy?

It’s truly a personal decision that depends on your personal situation and beliefs about the economy. If you do decide to buy, keep these tips in mind:

    • Skip commemorative or specialty coins or sets. These are always priced above the value of the metal that’s in them. And no matter what they say, few rarely obtain the numismatic value that coin collectors will pay extra for.
    • Stick with US coins. Besides being the currency of your home country, silver and gold US coins contain 90% or more of the metal. Canadian silver coins, for example, unless very old, contain either 80% or 50%.
    • Gold or silver bars are a second option, but if you ever need to use them, well, it’s hard to “make change.”
    • Keep in mind that the US stopped making gold coins for general use in 1933 though the US Mint started making Bullion coins in 1985. Made from gold, silver and platinum, these are primarily meant for collectors and investors – and they’re quite pricey! Silver coins for circulation were discontinued in 1964 in the US (and 1968 in Canada). That said, date a long doesn’t mean you’re getting the real thing.
Coins

You’ll still occasionally find silver coins in your change. Check the dates!

  • A quick test for real silver is to tap it with another coin and listen for a short, high pitched ring. For both gold and silver, you should be able to shave off particles with a steel file. However, chemical tests (bring your own) are the only truly reliable way to ensure you’re getting real gold or silver.
  • Shop around. Check the prices at those companies that advertise on TV or go to a reputable local jeweler or Gold/Silver store. Just do some homework before you go. Check the price of gold and silver – and understand that you’ll be paying at least – and likely more – than that price.
  • You’ll need a safe storage place.  Immovable or heavy safes are best, but they’re expensive.  A safety deposit box is a good choice as long as you believe you’ll always have access.  Otherwise, if you choose a hiding spot at home, though these metals don’t rust, avoid wet areas that may destroy any container you’re using.  And make sure it’s not on any of the “safe spaces to hide valuables at home” list.  Just like you, thieves can read the same lists.
  • Experts recommend that precious metals should make up no more that 10%-12% of your savings/investments.  This is plenty to act as a hedge for those “just in case” scenarios.
  • Instead of buying physical metals, buy shares in metals funds.  You’ll have your hand in the game and don’t have to worry about where to store your silver or gold.

References:

  • http://www.aboutinflation.com/gold-vs-inflation
  • https://www.caseyresearch.com/articles/gold-is-near-an-all-time-inflation-adjusted-low
  • http://www.aboutinflation.com/silver-vs-inflation
  • http://www.macrotrends.net/1470/historical-silver-prices-100-year-chart
  • https://goldsilver.com/blog/top-10-reasons-to-buy-silver/
  • http://www.simplestockinvesting.com/SP500-historical-real-total-returns.htm
  • http://www.dollartimes.com/inflation/inflation.php?amount=10&year=2007

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by on May 30th, 2017