Sunday, September 29, 2013

Why I’m Not Concerned When Gold and Silver Prices Fall

Commodities markets can be volatile at times.  Recently -- as well as historically -- we’ve seen gold and silver take some wild rides both to the upside as well as down.  I’m an owner of physical silver, and while I don’t hold it in vast quantities, over the years I’ve bought some for the kids and a little for myself.  And when metal prices take a dive, there are several reasons why it doesn’t really concern me.

Divergence between paper and physical metals
If you want a really good example of the spread between “paper” silver available through the commodities markets and ETFs, and the actual hard stuff, just pop onto eBay, head to the local coin or pawn shop, or even visit the US Mint’s website and see what you have to pay per ounce as compared to the quoted market price.  I’ve often noted a 20 to 30 percent or more markup between the two prices lately, so the paper market can quote whatever number it likes, to me, it only really matters what price I can actually buy or sell metals for in the physical market.   

Long-term outlook
I have a long-term outlook when it comes to silver and gold.  When I say “long-term”, I’m talking 20 or 30 years.  Commodities can be volatile investments, especially in the near term, but by taking a look at longer-term charts that go back several decades or more, like those at, I can get a better feel for the appreciation metals have had over an extended period of time.

Type of physical holdings
Personally, I prefer silver coins as a form of investment.  As a child, I was given some of these by family members and found them to be an interesting and safe form of investment.  I like them more than say things like silver bars since they can carry a numismatic value as well.  A nice quarter from the 1920s could be worth $4 or $5 in silver content, but it could be worth 10 times as much to a coin collector.  In a way, such an investment is covering me on several fronts, since if silver values go down, the collector value of the coin might still rise, and vice versa.

An insurance policy
I look at investing in metals as a sort of insurance policy.  Such an investment could possibly help protect me against inflation and certain economic uncertainty.  But just as I don’t look to make money on our auto or home insurance policies I don’t expect this with things like silver or gold either.  They are there for peace of mind and should the worst happen to occur.  As with other forms of insurance, I hope not to need them, but I’d be thankful to have them if or when I need them.

The author is not a licensed financial professional or commodities expert.  The information provided in this article is for informational purposes only and does not constitute advice of any kind.  Any action taken by the reader due to the information provided in this article is solely at the reader’s discretion.

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