When writing about the pros and cons of “investing” in Gold and Silver, I was hesitant to use the word “investing”.
I really don’t consider precious metals an investment.
They are more of an insurance against hyperinflation, a collapsing dollar, or general economic catastrophe.
Another store of value to diversify into that may or may not go up in value at some future time or in times of crisis.
Nevertheless, most people tend to view precious metals as an investment. That is fine, if you want. To keep things simple, I will use the term here.
Pros of Investing in Gold and Silver
1) Another Store of Value.
While the price of precious metals may fluctuate based on supply and demand, they have never-ending shelf life and intrinsic value.
For example, gold has historically retained its purchasing power for life’s necessities and has been used as money for exchange for thousands of years.
In other words, gold and silver will never become worthless.
The opposite would be holding on to a carton of milk which would become worthless due to milk eventually spoiling (therefore, not a good store of value).
2) Insurance against Hyperinflation and Economic Collapse
The dollar declines, inflation skyrockets, and economic turmoil sets in. Here is where it can benefit to have precious metals as an insurance.
Gold and silver can provide a hedge against hyperinflation.
Investors tend to flock to gold and silver when economic crisis hits. As a result, demand boosts the prices higher giving you a hedge against inflation.
3) Physical and Fairly Liquid
These are physical assets that you can touch, feel, see, and taste (okay, that last one is weird).
Gold and silver bullion can be held onto in your home.
Because these are physical and not some digital pixels on a computer screen that can be hacked by cybercriminals or lost in a blackout, you can access them directly when needed.
Overall, gold and silver are fairly liquid. They can be converted to cash in most instances.
Unlike your house which can take months to sell (or buy) with plenty of hoops to jump through, you can always find people willing to buy or sell precious metals for cash.
Cons of Investing in Gold and Silver
1) No Cashflow
Unfortunately, when you purchase physical gold and silver bullion there is no cashflow. Zero.
It would be cool of silver bars sprouted silver coins from them, but they don’t’.
Unlike stocks that pay dividends, this is a valuable physical asset that doesn’t generate a stream of income.
2) High Costs and Taxes
Gold and silver can be expensive to purchase. Gold especially (even in terms of fractional amounts).
As of this post, gold is trading at a spot price of over $1,700 per ounce. Silver is more manageable at a spot price over $20.00 per ounce (as of this post).
The price you will pay will be higher once the premium is added.
In the United States, the IRS considers precious metal “collectables” and when you sell your precious metals, you are required to report it and they are subject to the capital gains tax.
3) Storage
This can be a problem for those who own a great deal of physical precious metals. Where will you store them?
Lots of people will keep them in a safe at home or some may pay to have specialty storage. Like anything you own that has value, gold and silver are subject to theft.
Conclusion
There are some Pros and Cons when investing in gold and silver!
I actually don’t own any gold. However, over the years I have been buying silver bullion.
Currently, I own 45 ounces of silver. I stuck with 1 ounce rounds and bars since it they can be sold off piece by piece, ounce by ounce, if necessary.
Of course, my great hope is to never have to sell any precious metals as that would mean economic disaster and turmoil had struck.
I hold them as insurance, rather then to make a profit.
So, how about the rest of you? Do you own any precious metals? Let me know in the comments below!
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