Investing in Precious Metals

I've begun investing in silver and gold (physical) recently and was wondering if any other Goodjers have ventured into those markets. If you do, I'm curious to hear your reasons for doing so and alternatively, for those who don't invest in those markets are there any particular reasons why not?

I posted this in P&C in case any heated financial debates break out or we venture into discussions regarding economic collapse.

I have a pile of silver coins in a cookie jar. Is that what you mean?

KingGorilla wrote:
Do you mean investing in securities, bonds, IRAs, mutual funds, and precious metal futures? Or buying coins, jewelry, etc?

I'm asking about physical so bullion, coins, or scrap.

Do you mean investing in securities, bonds, IRAs, mutual funds, and precious metal futures? Or buying coins, jewelry, etc? I doubt many GWJers are licensed to deal in commodities though.

93_confirmed wrote:
alternatively, for those who don't invest in those markets are there any particular reasons why not?

Because investment 101 is to buy low, sell high. Not buy at an all time high and cross your fingers.

Yeah I bought like 7 years ago and just sat on them. I wouldn't get anything now.

Gold, typically has value inversely proportional to legal tender. When the dollar is low, like now, or the GBP is low, then the value of gold goes up. A high value on legal tender drives the price of gold down. This can change based on other variables. With the tech and gadget boom of recent years, gold as a raw material in circuitry, wiring has helped the value.

Something I really wish the FTC and SEC would look into is the rampant speculation in commodities in general that has led to driving prices up over nothing, truly. You can see this meted out in precious metals, agriculture, petroleum. Because these commodities are so inflated at the present time, I suspect it is only a matter of time before there is a new crash, the same as we saw with the Dot Com bust. Without slipping on my tinfoil hat, I have to wonder if attacking these few bright spots of the global trade economy have regulators in the US, EU, England, Japan gunshy to rock the boat. The speculation has been a problem for over a decade now.

I hold some precious metals to hedge against instability in the currency markets. I don't really see any fiat currency as being superior to another. They are all pretty bad with some being worse than others at this time. I think fiat will collectively depreciate against commodities, especially precious metals, over the years to come because of these instabilities.

LeapingGnome wrote:
93_confirmed wrote:
alternatively, for those who don't invest in those markets are there any particular reasons why not?

Because investment 101 is to buy low, sell high. Not buy at an all time high and cross your fingers. :)

Interestingly, studies indicate that buying a security (stock or commodity, at least) right after it breaks to new all-time highs generates above-market returns.

Back on topic, I'm another one of those people who owns physical silver and gold. Last time I bought was two or three years ago, but I'm certainly open to buying again. I have much more faith in physical shiny metal than banker-created money.

The last time I bought silver it was $12 an ounce! I wish I had been less destitute at the time and could have put away a couple ounces of gold too.

ZaneRockfist wrote:
I hold some precious metals to hedge against instability in the currency markets. I don't really see any fiat currency as being superior to another. They are all pretty bad with some being worse than others at this time. I think fiat will collectively depreciate against commodities, especially precious metals, over the years to come because of these instabilities.

That's my position and primary reason for moving cash into PMs. I also have concerns about the instability of the stock market and decided I'd rather have physical possession then invest in paper silver or gold. I plan to hold long-term and keep stacking whenever possible.

I wouldn't really term buying gold and silver investing, it's more of a savings vehicle. I plan on starting this year, probably focussing more on silver than gold.

Part of the reason precious metals are so valuable is because fiat currency is worthless, I'm not sure the gold bubble will burst unless the US decides somehow to get rid of a majority of the currency it's printed.

Metals hold their value better than fiat currency, and having a jar of silver coins means you don't have that value in a savings account allowing banks to leverage it into 20 times its value in bad loans.

MrDeVil909 wrote:
Metals hold their value better than fiat currency, and having a jar of silver coins means you don't have that value in a savings account allowing banks to leverage it into 20 times its value in bad loans.

I know nothing of the precious metals market, but I'm not sure I can ever trust these statements. Luckily I was not involved but my wife's family members got lured in by the promises of real estate being a better investment than "X". We all know how that went in 2008. Yes... many people saw it coming but many did not.

I know they are completely different markets, but bottom line any investment is a risk, so be informed be careful on how much you invest. You never know what will happen.

MrDevil - I understand you are not advocating it as an investment, but even savings is a risk.

I've begun investing in silver and gold (physical) recently

I bought in the late 90s and early 2000s. This has done very well indeed, but the risk of an investment is relative to the price you pay for it. Buying today has a lot more potential downside than it did 12 years ago.

The world economy is basically caught between competing forces; the vast unpayable debts we've taken on in the First World are a strong deflationary force, because a huge fraction of the money that people owe cannot be paid at par value. Meanwhile, the governments are injecting larger and larger and larger amounts of cash to try to juice the economy up, which is a strong inflationary signal. But that's also a deflationary signal, because all money is lent, and has to be paid back, so every dollar that's lent to hold the economy together this year is another dollar that needs to be repaid next year. The longer we continue down the bailout path, the stronger the deflationary pressure becomes, and the stronger the inflationary pressure must become from underneath to keep things from collapsing.

Eventually, the dam is going to break. I don't know which way it's going to go, but if we break to strong deflation, you could lose a lot of value. If we go to hyperinflation, you could do pretty well, but I suspect that you won't so much profit as preserve wealth. That is, if you can buy 5000 boxes of cheerios with your stored gold, you should be able to buy 5000ish boxes when you're ready to cash out.

Basically, some gold and silver is a very good thing to have, but you also want at least a month or so of cash, and you probably want to be looking into inflation-resistant companies, those that provide services that are considered very necessary, but can provide those services with goods that can be sourced from the US. This will make the companies in question more resistant to the ravages of really severe inflation.

My belief has always been that we'll hyperinflate, that we're living way beyond our means, steadfastly refuse to admit it, and have a central bank that's focused only on the very short term. But this is not at all a certainty. A deflationary crash remains absolutely possible. This would actually be much better than a hyperinflation, but it means that gold and silver become just another good, when what everyone wants are dollars. Being heavily long precious metals, when precious metals are no longer money, would probably not be a very good position in a deflation.

I had this conversation with a friend in College, he had a lot of valuable items. It can only be an investment if you sell the item off at a profit. Ultimately precious metals, stocks or bonds, collectible cars, etc. need to be sold off for it to pay off. There are some exceptions. Revenue generating stocks actually benefit you more by holding on to them, not selling them for example.

Has anyone sold off their investments?

To spice up this thread a little.

Here are my moral reasons I don't invest in metals such as gold.

Morally I think it is wrong because it doesn't do anything for people. It doesn't increase productivity or employment.. (well maybe just gold miners)... It doesn't help with innovation... and it is a defeatist attitude.

LeapingGnome wrote:
93_confirmed wrote:
alternatively, for those who don't invest in those markets are there any particular reasons why not?

Because investment 101 is to buy low, sell high. Not buy at an all time high and cross your fingers. :)

But Glenn Beck says to buy gold. Why would he do that? Does he own stock in a gold seller or own lots of gold himself?

goman wrote:
To spice up this thread a little.

Here are my moral reasons I don't invest in metals such as gold.

Morally I think it is wrong because it doesn't do anything for people. It doesn't increase productivity or employment.. (well maybe just gold miners)... It doesn't help with innovation... and it is a defeatist attitude.

This is kinda my line of thought as well. With the exception of space helmet coating and some computer uses, gold is largely a useless - albeit shiny - soft metal. I don't really feel the need to hoard it like
Smaug. If people are hedging against the crumbling of our species' power, gold seems like the last thing worth keeping.

I am, however, tentatively supportive of a salt based economy.

I would prefer a beer based economy like we saw in Egypt.

Bonus_Eruptus wrote:
But Glenn Beck says to buy gold. Why would he do that? Does he own stock in a gold seller or own lots of gold himself?

He does that because gold goes really nicely with his tinfoil hat.

Seriously though, he does it because gold is a safe investment for when American society collapses. And, in case you hadn't heard, American society is totally about to collapse.

Jonman wrote:
Bonus_Eruptus wrote:
But Glenn Beck says to buy gold. Why would he do that? Does he own stock in a gold seller or own lots of gold himself?

He does that because gold goes really nicely with his tinfoil hat.

Seriously though, he does it because gold is a safe investment for when American society collapses. And, in case you hadn't heard, American society is totally about to collapse.

I think that the original intent of the thread was about precious metal as investment to accrue value either to sell of pass on to children.

The prudence of that seems dubious to me for a variety of reasons, buying any investment at peak price has been brought up.

There are certainly crazy people like my "father in law" stocking gold in preparation of the end of the US economy. Oddly there is this assumption that the very day the dollar collapses, fair and equitable exchange of gold will be had. I am not sure how many of those folks thought that part through. Apparently the dollar will be kaput, but standards of weights and measures stay intact in this doomsday scenario. The buying power of a given weight of gold is, after all, as constant as the length of a Meter.

I know I am barking up the wrong tree here. But if you are looking for an economic collapse, a more prudent investment would be in a milk cow or milking goats, fertile hens, 2 roosters, a few packages of seeds, and at least 50 acres of soil. My plan is a whiskey still.

But the real reason Glenn Beck pushes buying gold scrap, coins, bullion is that he himself is heavily invested in precious metal commodities. And journalistic ethics are somewhat voluntary in the US.

KingGorilla wrote:
And journalistic ethics are somewhat voluntary in the US.

Actually, I believe he was one of the pioneers of the "Entertainers Not Journalists" defense.

Goldline, the company touted by Beck, Hannity, Mark Levin and other conservative personalities, was indicted in 2011 for "bait and switch", enticing people to call in to buy bullion, then switching them to massively overpriced coins instead, which are nearly impossible to sell at a gain. It ended up refunding $4.5M to customers and paying for a court-ordered oversight officer to monitor it's sales practices in the future. However, it's head of compliance was recently demoted and then fired after she alleged that she was prevented from talking to the monitor, and she says they are right back to their old high pressure tactics.

None of the celebrities was accused of any wrongdoing.

Very good investment if your line of work is pimping. Any cash you have from your 'hoes' could be confiscated related to a crime whereas your pimp chain, rings, chalice, cain etc are personal belongings.

jowner wrote:
Very good investment if your line of work is pimping. Any cash you have from your 'hoes' could be confiscated related to a crime whereas your pimp chain, rings, chalice, cain etc are personal belongings.

Pimping. It ain't easy.

LouZiffer wrote:
jowner wrote:
Very good investment if your line of work is pimping. Any cash you have from your 'hoes' could be confiscated related to a crime whereas your pimp chain, rings, chalice, cain etc are personal belongings.

Pimping. It ain't easy.

That's what rookies say son. Play the game right.

Heh. Bitcoins are not exactly precious metals, even though resources are used in their mining. Call me when you can melt down your bitcoins and make a necklace out of them...

bitcoins are mainly used by tax cheats. So the pump and dump ponzi scam is just ripping off other tax cheats.

Robear wrote:
Heh. Bitcoins are not exactly precious metals, even though resources are used in their mining. Call me when you can melt down your bitcoins and make a necklace out of them...

There not but I read a recent article that I misplaced that linked the two together. Just in the sense reminding people that things only have value from other peoples demand or it actually being useful.

I think its safe to say gold extremely out paced its actual useful value and a large chunk was perceived value of people piling their money into a 'hard' currency. Which just corrected a huge chunk.

Also hopefully 93 was diversified. The thread is only 13 weeks old and gold tanked to a 2 year low.

I thought 93 was in over a decade ago; he's probably fine.

As for hard currencies, I don't think they have much use in a large scale modern economy. The evidence is that flexible currencies reduce negative effects more easily than hard currencies. But I've made that argument before.