More new people may have made their first purchase of physical gold or silver in the past 4 months than in any four-month period in history. This sort of data isn’t reported and tracked. But if our experience as one of the nation’s largest precious metals dealers is representative, we believe that’s the case.
We’ve never seen so much retail demand, and a big portion of the buyers are first timers.
With the new wave of people entering the market comes a fundamental question lots of them have before they get started: What do I do with the metal after I buy it?
Physical gold and silver are useful both as an investment and crisis insurance, but it takes a bit of explaining.
Some folks wonder how they might go about actually realizing profits. It will be different than logging into a brokerage account and hitting the “sell” button.
Others have heard precious metals are a form of emergency money they can use to buy groceries should the U.S. dollar fail, but they have trouble picturing exactly what that could look like.
Here are some ways to think about how metals can work both as an investment and as money if our fiat currency outright dies…
Gold and silver are ideally positioned to capitalize on a couple of powerful trends which will dominate markets in the coming years: price inflation and declining confidence in institutions including government, the Federal Reserve Note dollar, and Wall Street.
Investors have an excellent chance of buying metal today and eventually selling it for a healthy profit – measured in both Federal Reserve Notes AND in real terms.
Unlike gold and silver ETFs or mining company stock, physical bullion is not a paper security. It does not have counterparty risks, among other risks.
Investors in an ETF, such as GLD or SLV, might be right on the money about the trends and find out their investment failed anyway. It could turn out the ETF was stuffed with paper IOUs which weren’t honored, rather than actual metal.
When the time comes to sell metal and cash in, new investors should know there is a ready and liquid market for their coins, rounds, and bars. They will have plenty of places to go.
Dealers are buying bullion products from customers literally all day long.
Selling bullion can be as easy as buying it. You can walk into a local dealer, call Money Metals Exchange, or go online to sell instantly at the current market price. Just lock a price, deliver your metal, and receive payment. It’s as easy as that.
When it comes to how precious metals might be used in the midst of a currency crisis, the truth is none of us knows exactly what to expect.
If confidence in fiat (paper) money collapses, perhaps the government will finally reform the dollar by resuming a gold standard.
Maybe a crypto currency will become a medium of exchange. The tokens could even be backed by physical metal to enhance trust.
Or, it’s possible merchants will price goods and services directly in grams of gold or silver. In that scenario, people will once again take silver to the grocery store.
There are lots of ways things could unfold. However, a few things are certain based on thousands of years of history. Fiat currencies always fail in the long run. Physical gold and silver are trusted, and even more so during uncertain times.
Meanwhile, they are always valuable in exchange for local currency. Today, there is a price for gold in virtually all of the world’s currencies and that will be true tomorrow.
The beauty of owning gold and silver bullion is that you don’t have to guess what people will be using as money in the future. Whatever it is, people will be eager to exchange it for your precious metal.
“’As real yields continue to move lower, it makes gold more attractive,” said [MKM Partners’ JC] O’Hara. “We plotted gold along with real yields and that’s the spread between the U.S. 10-year yield less the 10-year breakeven rate. … Yields have been negative and declining for the majority of 2020, and we see no end to that trend for the foreseeable future.’ That tailwind could lift gold as high as $1,900, says O’Hara, implying nearly 7% upside.”
