Mining for Gold and Silver
Gold and silver mining and exploration have been ongoing for thousands of years. We know the value of gold can be traced back to before Christ. The value of Precious Metals has never changed but what changed over the last 100 years is that we don’t transact with these coins or bars anymore.
Investing in Gold or Silver with Mining Company Stocks
If you are an investor looking to churn your stocks or looking for an immediate return on the investments, then you should look to purchase either individual mining company stocks or buy in an ETF. You can also hold stocks in companies for long term, short the stock or long the stock as investment methods.
You are not a physical gold investor when you use the market for your investments. The concern for buying into individual companies or ETFs is the stock markets has an influence on the perceived value of the stock. You may buy several hundred or thousands of shares, but until those companies provide a dividend you only are speculating on the value to go up or go down.
Additionally, if the company has a great mining season or finds a new motherload of minerals, as a stock holder you don’t get the same compensation as the mining company. Your reward is if the stock market is doing good you may see the price of the stock rise.
Investing in Gold or Silver Coins & Bars
When you purchase Physical Gold you are buying an asset that you can hold. Your investment in physical gold comes from holding coins, bars, or bullion. An investor holding coins and bars is not looking for income off the investment, they are only looking for the investment to appreciate in value.
The price of the bullion can fluctuate and the spot price is a key indicator of the value for the coins.
As the cost of materials and mining goes up, the value of gold will likely follow. Over the past 30 years we have seen over 300% increase in value of gold.
There is a difference between rare coin values and melt gold value. Many times the rare coin market is speculating on the value of a coin becoming more rare because there are less in circulation. We know that rare coins are not being called back to the government like they were in 1933 so the rare coins in circulation today will stay consistent going forward. Therefore the value will likely not change significantly.
Rare coins are sometimes traded higher than their melt value. If you are an investor looking to buy rare coins make sure you completely understand the market for that coin. If the coin is selling over a premium for the melt value, make sure you understand the value.
Gold and Silver Minerals Made to Coins and Bars for Investment Purposes
When you’re ready to invest in precious metals for retirement you have two options.
First, you can buy with CASH. Cash equivalent transactions are ones where you have a choice to hold the physical asset yourself or you can place the metals in a depository, bank, or safe.
If you choose to hold the coins and bars personally at home, make sure you are securing them in a safe or some type of secure location. One thing many forget to do when they hold the asset personally is they don’t insure the asset through their insurance carrier. This physical asset has no markings and can be highly tradable with local coin shops or several online precious metals dealers. So make sure you insure your gold for safekeeping.
Second, you can buy your gold and silver in a self-directed IRA. When you purchase in an IRA you get all the tax benefits of the IRA including delayed tax payments.
If you don’t have a precious metals IRA or a good company to choose from, consider checking out the 5 Best Gold IRA Companies Review completed over at The Plug. They provide good options and comprehensive review of the five companies.
The downside of holding within an IRA is you cannot take the coins or bars before 59 and 1/2 years without a penalty. The great part of holding within an IRA is when you reach the age you can take disbursements you can take the precious metals as-is or you can sell them off and take a cash disbursement.
Downside of Physical Gold Ownership
There are three downsides in our opinion of owning physical gold.
- Spot price of gold is an actual number, but when you go to sell your gold or buy your gold the price is reflective of the market. So if there is a rare coin or few productions of a certain coin then the price could be higher than a typical troy ounce. So make sure you understand price is reflective of what a willing buyer and willing seller are willing to sell or pay for the asset.
- We don’t transact in gold or silver coins. Therefore if you need to buy a car you would have to find a coin dealer to sell the coin or bar to. You may have to pay fees for that sale and so the value you get in the end may be lower than the spot price of gold or silver.
- Investors could get a better return on their money if they invested elsewhere. This is true for any investment. You always have the possibility to make more money with you investment dollars elsewhere. We believe in holding 10-12% of your portfolio in gold as a hedge against inflation. And yes the returns over the next 25 years maybe less than those if I invested in the S&P 500, but I know my investment is secure and I can physical hold the investment and show it off to my friend.
If investment diversification is what you are looking for then investing in gold should be one of your considerations. When investing in physical gold you are hedging inflation and you securing the principal of you money.
When the dollar can’t buy more today than it could have 10 years ago but gold prices have increased, then holding my money in Gold is more valuable than holding it as cash.