A Brief History of Precious Metals
Studying the price history of gold
and silver is fascinating. For over a hundred years the value of an
ounce of gold was $20 and an ounce of silver $1. Silver historically has
a ratio of 20:1 to gold, so eventually it should match that again -
meaning the price should increase. At today's gold prices, we should
expect that silver would be priced around $80 per ounce instead of $31.
There are various theories on why this is not the case including demand
and industry fluctuations, the US leaving the gold standard and market
manipulation. No one can be certain why the historic ratio is out of
whack but we can infer that the ratio will return to historical
averages. On the other hand, gold has historically equaled the DJIA. If
this were to become reality again, either gold will skyrocket or the Dow
will crash. In either case, I think holding a mix is a better option
because of diversification and to have flexibility if you do need to
purchase things in the future using these assets. It will take a strong
person to lug a heavy bag of silver into a store to buy a nice TV. Why
not just hand the cashier an ounce of gold instead? This was standard
practice 100 years ago in the United States. Empires dating back to
Egypt, Greece and Rome all traded in silver and gold coins. This was a
time tested practice. Fiat currency systems (paper money backed by
nothing) are a rather new invention and don't have a good track record
economically. Recent failures in the fiat experiment were witnessed in
Zimbabwe and Germany to name a few. Because the historical significance
of gold and silver is so proven, I recommend that everyone should own
some as an investment and safety net.
Ways to Invest in Gold and Silver
Gold seems like a pretty lucrative
investment right now considering the coming inflation and slow global
growth outlook. So how can you actually invest in gold or silver? There
are several ways actually. Just please make sure that you know the spot
price of gold if you're buying or selling gold you own or want to own.
As of this writing the spot price is about $1642 per ounce, silver $31
per ounce. The price fluctuates daily but can be found easily on the
internet or in financial newspapers. This means you shouldn't buy an
ounce of gold or silver for much more than the spot price (unless it's a
rare coin) and you should never sell an ounce of either for much less
than the spot. I've heard horror stories of people selling a lot of gold
to cash for gold companies and getting a quarter of the weight value
back in payment. And the worst part is they're usually happy about it
until someone points out it was worth 4 times more. Please educate
yourself so you don't get ripped off. It's easier than you think to
invest in gold. The best way to invest is to buy and hold physical
bullion. The ETF's are sketchy because it's hard to guarantee that the
paper is backed by physical stock of the precious metals. I like to go
to coin dealers or coin shows and stock up on pre-1964 coins which are
90% silver or the old gold eagles which you can also get in one, half
and quarter ounce weights. You can also buy jewelry, coins, gold bars or
other tangible items with gold or silver content. As a last resort, you
can buy a gold, silver or precious metals ETF or mutual fund if you
have a brokerage account or buy gold or silver futures on a futures
exchange. Trading futures is more risky and requires a lot more capital
but is still another way to do it.
About The Author
Jamie has
an MBA from Rutgers University and a Professional Certificate in Real
Estate Finance, Investment and Development from NYU. He's traded stocks
since he was 13 and bought his first property within a year of
graduating college. He also flipped properties and got out before the
2008 mortgage meltdown because he was able to see the market turning
before it happened. He's started two companies and also has experience
in investing in antiques, collectibles, gold, silver and trading
futures. He currently operates a website dedicated to helping people
achieve financial freedom. For help with money visit www.jamiesmoneyadvice.com.
No comments
Post a Comment
Note: Only a member of this blog may post a comment.