Is purchasing physical metals (Gold, Platinum, Silver) ever a good idea?

[Andy2]

My dad gave me 2 #10 cans filled with silver coins about 3 years ago. They never pay any dividend and have been going down in value since he gave them to me. On the other hand they are in my gun safe which also has some lead. If the apocalypse comes it will be the lead that saves me, not the damn silver.

You could always cast the silver coins into bullets....

 

[Texas Proud]

I'm surprised by most of the responses. I think if the economy collapses, or disaster wipes out a chunk of America, nobody is gonna care what metal is in your pocket. Shoes will be important. Blankets. Pants. Jackets. Non perishable foods. That sort of stuff. Not just for utility, but for trading.

That is why one of my old bosses said to invest in copper... bullets... that makes 'trading' easier....

 

[gerntz]

When you say "physical gold", do you mean strictly coins/bullion, or does that include ETF's?

 

[braumeister]

Has anyone here actually tried selling their coins? I think there is quite a spread and also some shady characters out there.

I'm sure you can sell them successfully, but only if you know what you're doing.

I inherited a bunch of old silver dollars and wondered the same thing. So I took about a dozen of them and carefully researched their value, then took them to a well-known, recommended coin dealer to see what he would give me for them. Most were nothing special but I mixed in a few of substantial value just as a test.

He looked them over and offered about 75% of their melt value for all of them. I questioned that and his response was simply "I have to make a living."

 

[MichaelB]

I'm sure you can sell them successfully, but only if you know what you're doing.

I inherited a bunch of old silver dollars and wondered the same thing. So I took about a dozen of them and carefully researched their value, then took them to a well-known, recommended coin dealer to see what he would give me for them. Most were nothing special but I mixed in a few of substantial value just as a test.

He looked them over and offered about 75% of their melt value for all of them. I questioned that and his response was simply "I have to make a living."

I remember that. What did you do with the rest? I have to deal with this in the next few months.

 

[Al in Ohio]

Most folks are ignorant of golds true value. These folks read and believe fund advisor and broker related interests who badmouth it as sn "investment" since its basically their competition.

Gold will forever retain its value as the pre-emminent monetary standard. Cash is just paper currency. It can be subject to dreaded hyper inflationary devaluation. Just go back in history and research what happened. People with gold or silver had plenty to eat plus could afford any luxury. Those with only currency became overnight paupers. If you don't think Warren Buffett has over a billion dollars in silver bullion for this reason, think again.


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[phil70]

I don't post often, but this is something I have given a lot of thought to.

There are some studies that indicate gold was the best hedge against hyper-inflation of the type seen in Weimar Germany or some of the Central and South American hyper-inflation scares. Real estate has intrinsic upper limits and is even less liquid than gold coins.

The evidence does not support gold as an "investment" that will gain value over time. It has not performed that way historically and it likely never will. (Sorry gold bugs, the evidence is just not there.)

Other hedges against hyperinflation are (i) equities (did not perform as well as commodities in 1930s Germany), (ii) real estate (ditto) and (iii) still having a job since wages typically track inflation closely in a hyperinflationary environment.

So, I view gold as a type of insurance against the very specific risk of loss of value of the currency. I am putting a couple of percent of my portfolio in gold coins that I will keep in a safe deposit box and hope I never need. In that sense, it is not part of my investment portfolio, but an insurance premium I have paid. The "policy" will pay out if the price of gas goes to $100.00 per gallon.

Note, there is a big difference between hyper-inflation and normal inflationary creep. I don't think studies even support the idea of gold as holding its value vs. inflation. It moves up and down based on supply and demand. In theory, oil is a hedge against inflation, and we can see how that bet has played out recently. However, if there is systemic loss of confidence in the official currency, commodities, including gold, offer an important hedge.

 

[mpeirce]

Gold will forever retain its value as the pre-emminent monetary standard.

I know some people believe this, but I just don't get it.

I get that historically it was valuable because of a few reasons: fairly rare, doesn't oxidize, looks nice, fairly rare, ah, what else?

So basically, other people see lots of value in it. Sounds like many other items, even fiat currency.

But then I'm a practical sort. If civilization ends, I'd rather had a huge stockpile of ammo. Squirrel isn't all that nasty...

 

[mpeirce]

I am putting a couple of percent of my portfolio in gold coins that I will keep in a safe deposit box and hope I never need.

Let's run with this. Let's say I have a kilogram of gold (just under $40,000 in today's value) in coins. Where should I stash it?

If your worry is hyperinflation do you really want to trust the banks to keep it safe? There have been instances of governments insisting on inspecting SDBs. You may not be able to get access to your "insurance" when you most need it.

Maybe a well hidden safe?

Other options?

 

[phil70]

Let's run with this. Let's say I have a kilogram of gold (just under $40,000 in today's value) in coins. Where should I stash it?

If your worry is hyperinflation do you really want to trust the banks to keep it safe? There have been instances of governments insisting on inspecting SDBs. You may not be able to get access to your "insurance" when you most need it.

Maybe a well hidden safe?

Other options?

Yes the government could confiscate gold like FDR did. Or you could put it in a safe, and get robbed. Or your house burns down and your gold melts into a pile of slag. (And asteroids could strike, and zombies!) We all live with some risk. As I build my wealth and approach FI, I realize that one of the bigger headaches is protecting that wealth - not just growing it.

I sleep better at night with a small amount allocated to this hedge. I'm not a gold bug, but hyperinflation strikes even developed economies on occasion. (And that's what insurance is about, right? Small risk of occurrence, big downside.)

Wikipedia is not exactly scholarly research, but this is what happened to the value of paper money in Germany in the 30s vs gold:

https://en.wikipedia.org/wiki/Hyper...public#/media/File:Germany_Hyperinflation.svg

 

[gerntz]

But then I'm a practical sort. If civilization ends, I'd rather had a huge stockpile of ammo.

I think that also requires a functional weapon to be of value.

 

[braumeister]

I remember that. What did you do with the rest? I have to deal with this in the next few months.

I still have all of them, still gathering dust. I couldn't find a way to sell my coins for even half of the published wholesale price, so I just gave up and decided to wait for a better market.

 

[Ticker]

There must be some intrinsic value to the stuff, otherwise the government wouldn't keep tons of it locked up. Gold will always be money to me.

 

[MichaelB]

I still have all of them, still gathering dust. I couldn't find a way to sell my coins for even half of the published wholesale price, so I just gave up and decided to wait for a better market.

My brother has a couple of estate sale businesses as clients. He asked them what they do, they both named the same coin dealer and said he gives them the best terms so they always sell to him. We (which really means me) are going to assemble and document DM's collection this summer and see if he's interested.

 

[Al in Ohio]

There must be some intrinsic value to the stuff, otherwise the government wouldn't keep tons of it locked up. Gold will always be money to me.

Every major nation state keeps tone of gold on hand. Even China went on a massive gold buying spree several years ago to increase the amount they have on hand. The reality is that all governments view gold as the only true monetary standard. It's been that way for centuries. It ain't gonna change. If you don't get, you don't get it. Historically gold has caused huge armies to move into battle and launched thousands of ships. Large sums of cash have caused ... Well a few handfuls of robbers at any one time to pull off some noteworthy bank vault heists. You figure it out.


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[braumeister]

My brother has a couple of estate sale businesses as clients. He asked them what they do, they both named the same coin dealer.

Thanks, that's a good suggestion. I'll look into that.

 

[Big_Hitter]

Are you guys trying to sell the coins for numismatic value or just the value of the metal?


When I bought mine, it's just the value of the metal plus a little "extra" for coin form - Gold Eagles, Vienna Philharmonics and Silver Eagles.

I used to use a silver eagle as a ball marker (back when they were worth $6) but someone swiped it.

 

[braumeister]

Are you guys trying to sell the coins for numismatic value or just the value of the metal?

If a coin has a published wholesale value of $20 or more, and the melt value is around $10, it seems worthwhile looking for something closer to the former.

 

[eytonxav]

For us, we inherited our gold coins, so holding has both sentimental and collection value vs the physical value of gold.

 

[Big_Hitter]

If a coin has a published wholesale value of $20 or more, and the melt value is around $10, it seems worthwhile looking for something closer to the former.

agreed - when I was in the market I was looking at buying bags of 90% silver coins but decided to get the silver eagles instead. sounds like yours may have some numismatic value, mine are just metal.

 

[Badger]

I have never considered purchasing any precious metal in anticipation of some kind of financial or government collapse. I might, however, stock up on beans if the future appeared to be that bleak. They would be more than worth their weight in gold but I don't think I would trade.

Cheers!

 

[jerome len]

I've been buying gold since it was $300 an ounce......I've never sold any gold.....ever.
Now I give my kids an ounce of gold each Christmas; my grandchildren 2 ounces of silver.
My reason? Look at the world and all the chaos.....and if they don't need it.....I ask them to pass it on to their children. But.....I don't consider gold as an investment.....I use Vanguard and Fidelity for that

 

[EvrClrx311]

What are peoples thoughts about the possibility of space mining? There are so many opinions and variables at play here, and I understand some think it is absolutely absurd, but there are real companies spending millions right now planning out a path forward to extract resources from asteroids. Obama passed a law recently stating that essentially space rocks are fair game to claim rights to... as in, they don't belong to anyone. Does this concern anyone? Despite peoples beliefs as to the feasibility of such a technological adventure... it is already impacting the markets in a real way. The reason Platinum is sitting lower than gold right now is in large part due to a report released in 2011 showing that a space rock which flew by very close to earth contained more platinum than all that has ever been mined on earth.

On July 17, platinum prices plunged to their lowest level in 6.5 years.

That same day, NASA identified UW-158, a half-mile wide asteroid hurtling by Earth's orbit that so happened to contain an estimated $5.4 trillion worth of platinum.

Coincidence?

Well, consider this: According to the U.S. Geological Society, the world mines a mere 190 tons of platinum each year due to its extreme rarity. By comparison, the "Platinum Asteroid" is estimated to contain 90 MILLION tons of platinum in its core. At that rate, it would take 468,750 Earth years to excavate the asteroid's natural reserve.

"This has made [US-158] one of the primary targets of the asteroid mining company, Planetary Resources," writes a July 20 article.

So, it stands to reason: If, one day, robotic mining succeeds, platinum will no longer be a rare precious metal as the “astronomical” surge in supply dilutes prices.


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Now, it seems absurd that that information alone would tank the price of platinum... but it essentially has. The reason I think it's absurd is because it shows that emotions play into the pricing point. The logistics of actually obtaining ALL of that platinum from a rock that is now heading VERY fast away from earth and won't return until 2036 is ludicris... but the report itself had a major impact on the market for platinum. At least many people are pointing to that as the reason why platinum has dipped so substantially. If that same rock had gold in it (which many do) would we see the same thing happen to the global gold price? Speculation... yuck.

Cost/Reward? Obviously there is a huge cost in going to an Asteroid, mining for precious metals and returning them to earth. This is also a bit of a self defeating en devour from a supply and demand side of things.

I'm just rambling. Personally, I think it would be at least 60 years before autonomous robots could successfully mine anything from asteroids... so not in my lifetime. However, I am interested in how the development os such technologies may impact the market for precious metals based on these speculations as to what it'll do to the global supply.


Gold does have very valuable properties as it relates to electronics and space travel (anti corrosive properties). Platinum as far as I can tell is really only used to catalytic converters.

 

[Done]

I inherited a significant amount of gold and silver in the mid 2000’s and it was by far my best performing asset through the recession and up to 2012. I happened to sell most near its high but still keep 5% of my investable portfolio in gold coins and an ETF. This portion has done poorly for the last 3-4 years as equities climbed -- and it delivers zero income. Gold also has a higher max capital gains tax rate since it is considered a collectible.
https://www.bogleheads.org/wiki/Gold#Taxation

So I can't recommend a substantial amount in asset allocation, but the timing happened to be in my favor. Demand for gold is unpredictable as it is used in jewelry, industry and central banks, and is a hedge against the dollar. It is marketed as a vehicle for safety but it does not always respond that way.

 

[sengsational]

... So what about the middle ground, where the dollar tanks and we get 100-200% inflation for a couple of years before the situation stabilizes? That scenario has occurred in many, many places over the recent (and ancient) past, usually when a government overspends and then coins or prints more money to pay its bills. That could end up in a devaluation of currency by a factor of 2 to 5, say, like in the Asian crisis of 19 years ago, or perhaps more like in the cases of Argentina, Chile, Venezuela.

I think something like this is probably more than ten times as likely than the direction most posters here take whenever financial instability is mentioned: guns, bullets and whiskey. And it's understandable....most posters here are savers, and savers need financial stability to feel good. Even the thought of financial instability causes a "throw up your hands and give-up" mentality....everything is lost, savers and non-savers are on equal footing....all that saving for nothing. It's too much to bear.

Has anyone here actually tried selling their coins? I think there is quite a spread and also some shady characters out there.

Thanks, that's a good suggestion. I'll look into that.

I did some research into that recently. Not for me, but for someone I'm helping out.

Some modern mainstream 1oz coins can be purchased for as little as 2% above spot. That's because minting adds value. So the market value of the coin might 1.02 * spot price. If you end-up with the spot price in your pocket after all is said and done, you've paid a spread of about 2%. But that kind of deal is only available with the mail order outfits (kitco is an example). If you walk into a coin shop, they'll take you for about 3.5 or 4% (if they're not trying to rip you off). I was surprised to see that the spread was the smallest on old non-collectable quality english sovereigns.