Wealth Secrets: Gold Investing or Silver Investing – Is Now the Time?

+Hans Schoff wrote:

While gold investing or silver investing does not lead to creating wealth (unless you’re investing in a mine or something that creates cash flow), gold investing and silver investing is one of the wealth secrets that most people just don’t know about.

I’ll tell you WHY you want to be investing in gold or silver here in a moment, but first, did you see the spot price of silver and gold yesterday night?  Silver was down to $26.11 at 1am and gold was down into the $1500s, which is quite a bargain considering silver was near $50 just a month or so ago and gold was over $1900 (talk about a bargain!).

(Side-note: Contrary to what many people may believe, even the super rich like to shop for a discount or sale.  The difference is the rich shop for assets on sale – things that will only put more cash into their pocket at a cheaper price – versus what most people like to shop for, and that’s doodads or liabilities – things that do not put more money into your pocket.)

So why silver investing or gold investing?

I don’t like to strongly advocate too many things in the midst of all the economic uncertainty today – especially something as controversial as gold investing or silver investing. Thanks to the internet today and cell phones and email and all the other ways that we receive information, pretty much everyone today KNOWS about gold investing or silver investing. Yet many are still not really paying attention or are simply misinformed about these wealth secrets…

Let me just quickly recap the present economic conditions today (ie, why silver investing/gold investing):

• The price of an ounce of gold is around only $1600/ounce (has already risen into $1900s but has come back as of the original date this post was created).
• The price of an ounce of silver is now currently hovering around $31 an ounce (down from near $50).
• Most economists as well as the Fed had all predicted strong 2nd half economic growth this year which would even out the year at 3% growth (even though the first half of the year was closer to 1% GDP growth? That’s a lot of growth in the 2nd half of the year, especially considering the economy is currently stalling).
• The stock market continues to be erratic with the 3rd largest daily drop in history recently followed by several more days of equally impressive swings up and down in the 400-600 point range
• The US’ credit rating was down graded for the first time in our history (are we following in Japan’s footsteps when their credit rating was down graded, leading to 10 years or so of stag-flation?)
• Fed chairman Ben Bernanke announced – now that the money printing from QE2 has run out – that interest rates would not rise for two years (meaning inflation will continue to rise unchecked without the normal counteraction of rising interest rates which will further depreciate the US dollar).
• Precious metals margin requirements were raised yet again recently for both gold and silver, forcing those with positions in the silver market to put up even more money to maintain their current position or sell, which of course places downward pressure on the market (even though requirements had been increased as many as 10 times recently)
• Prices for goods and services across the board and beginning to rise as inflation continues to increase (officially at a rate of 3.5% but unofficially – read: in reality – at over 7, according to ShadowStats.com); the government has announced it will further revise it’s CPI (consumer price index) numbers, meaning they want to change the equation to reflect a lower CPI than the average person is actually experiencing (financial repression)
• The housing market remains weak as house prices continue to remain dismal
• The unemployment rate remains above 9%

These are all very well known facts, however taken altogether reveal a worrying trend.  To give some perspective, last year at this time to compensate for a weaker than hoped-for economy, the Fed implemented their QE2 money printing program to help stimulate the economy.  What it did do was stimulate the stock market as evident by the large double digit market gains in the market since about this time last year.  Of course this just sent the prices for gold and silver higher reflecting the additional money being pumped into the system which eventually leads to a depreciating dollar.

Wealth Secrets -Here’s the opportunity:

Typically, the precious metals cycle each year in the summer months.  There’s an old expression that goes something like “Sell in May, go away and don’t come back ’till Labor Day”.  The precious metals market is generally weak during this time (great for silver investing!) due to a decline in seasonal demand that usually picks up again in September.

Last year, given the state of the economy, Fed Chairman Ben Bernanke announced from his annual Jackson Hole Fed meeting that they would pump more money into the system via a QE2 money-printing stimulus program.  That sent prices higher in August.

This year, due to intense congressional pressure the Fed has refrained from implementing QE3 (so far, that is) which has resulted in a stalling economy which is causing the markets to become even more erratic due to the continued uncertainty.  Strong precious metal buying countries like India have not yet begun their seasonal precious metal purchases combined with repeated margin requirement increases among other factors has created the opportunity to pick up precious metals at these lower than normal prices.

The bottom line is, if you’re concerned about the health of our monetary system, our currency, our ability to meet our financial obligations, the growing government deficits, etc, etc, you may want to look a little closer at putting your money into something with real intrinsic value, something that has been recognized as true and honest money for thousands of years, something the government cannot manipulate or devalue.

How can you start investing in gold or investing in silver?

I’d start by visiting your local coin shop.  I’d visit a few, ask them their opinions and see what the prices are for silver investing or gold investing.  Typically you’ll pay about a dollar or so over spot for silver, for example, if you’re buying bullion. American Eagles that are minted by the US Gov’t will carry a higher premium because there is a limited supply run each year (there may be some tax advantages to buying American Eagles but if the dollar crashes, people likely will only pay you for the amount of silver your coins have, regardless of the number printed on them).

My suggestion is to buy the cheapest form of bullion you can find (which at the moment is junk silver, ie, a bag of old dimes and quarters from when they consisted of 90% silver).  Kitco.com is a great resource online where you can monitor the price of various precious metals, see charts and graphs and get the latest news from the sector (great way to add to your financial education).

For most people, silver investing is much more affordable because you can buy rounds now at $32 or so.  Even a 1/10th ounce gold coin will cost you nearly $170.  Plus, as I’ve mentioned in other articles on silver investing, silver is expected to outperform gold in the long run due to it’s fundamentals.  On the other hand, if you have a lot of wealth you want to store, it’s much more practical to store it in gold than silver (from a weight and size point of view – think storage and security).

And, if you’re in a situation where you aren’t able to purchase as much gold or silver as you’d like to protect yourself from the increasing inflation and uncertainty out there, I’d suggest finding other ways to make extra money, as much as you can right now, while prices are where they are and while things are where they are.  All I’m saying is that times are definitely changing and you cannot expect things will continue to be the way they have been over the past many years.  How things will change exactly or what may change no one knows.  In the short term at least, our way of life is not sustainable.  We can only kick the can down the road for so long before we have to deal with the circumstances.

So take the opportunities available to you today and make the most of them while they are available, do not delay.  Whether that’s starting a business from home, adding another stream of income or something else, take action today and I guarantee you won’t regret it.

Originally posted 2011-10-06 17:15:31.

Original post can be found here: “Wealth Secrets: Gold Investing or Silver Investing – Is Now the Time?