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

[EvrClrx311]

There has certainly been an explosion of this kind of thing recently. Until now I've avoided it, out of the expectation that in the long run (I'm only 33) equities will produce far more return. I had a debate with a family member this weekend that got me thinking as to if it might be worth allotting 1-2% of my net-worth toward gold or platinum. Most arguments I've heard point to a doomsday environment, which in my mind would create a scenario where physical gold isn't going to actually provide you much security anyway. You've got bigger things to worry about at that point.

I'm curious to hear peoples thoughts on this. The one point I took away was that it might be nice to have something to pass on to the kids or for a rainy day, that you know will always maintain some value. I can picture this if I stopped looking at the value as an investment. It's essentially locking a portion of your net worth into an inflation frozen (on a long enough scale) medium. Gold still seems high based on it's historic levels, but platinum seems reasonable. Thoughts or either of these? I'm curious if anyone else has considered the above.

 

[dixonge]

IMHO...

Short version: no. Never (again)

Longer version: Marginal at best, worthless at worst. That holds true for either investing or a doomsday scenario.

 

[NYEXPAT]

I closed out my gold position last Friday when the market started its reverse. GS is recommending shorting it now. I would not go that far and would look at it again at under $1000 or if central banks got rid of the 500 Euro and $100 bills.

 

[EvrClrx311]

I am more curious about the long term holding of these metals, not buying and selling on market timers. Abstract: but imagine you had the choice to buy at the lowest price over the last 5 years (whatever that is), with the expectation that you had to keep it for 20 years... would you? Does owning physical metals provide any peace of mind, if so what is that?

Reason I ask it like this, is if I did buy physical metals I wouldn't want to manage exchanging it multiple times over my life. I'd rather just accumulate and keep it in a safe. I just don't see the 'value' in it... so looking for thoughts others have, to consider, that I may be missing.

 

[jim584672]

In a worst case scenario, a collapse of the current regime, gold will get you to the next regime in tact. However the next established regime may take longer to establish than you have left to live. So I would think stockpiling food and supplies would be a better investment than gold.

 

[calmloki]

My gal has been getting proof sets since she was a wee one. Her Mom continued that every Christmas till she passed on, then I picked up the reins. Not an investment.

Back in 1999 we bought some physical gold and a generator and water purification tools and MREs and some .22 bricks and space blankets and all manner of fun stuff to seal in 5 gallon bug out buckets. Not an investment.

We have all manner of things that we don't sell or count on to do much of anything - OTOH, there are some imaginable circumstances where those things could be handy - or maybe we just like having them. Just checked, and we probably have about 0.5-0.75% of our net worth in gold and silver. Not enough to make any major difference to our retirement plan, but it gives us a direction we could dodge if need be.

 

[Texas Proud]

I had a boss who bought gold and silver... would talk about how the country was going to go under.... that the dollar was going to become worthless (and all it has done in the last few years is get stronger!!)...


He once said 'wouldn't you want to be paid in silver or gold when the dollar becomes worthless?'....


Well, if the dollar actually became worthless, I doubt that his company would be in business any longer so I would not have a job... also, since all clients will pay their bills in dollars, I do not see any advantage holding metals...

He bought when it was pretty high... I think he bought silver in the $30 range and gold in the $1500 range...

 

[Andy2]

Hard to give advice on this one. I have never invested in physical metals, largely because my parents grew up during the great depression and when they thought things were looking rocky they invested in gold (about 1980). Then the price crashed and they were under water for 20 years till they finally just took their losses and sold out.

On the other hand, some people have made a lot of money by investing at the right time....

 

[Big_Hitter]

I've got gold and silver coins I bought in late 2000 sitting in a safe deposit box.

 

[REWahoo]

The one point I took away was that it might be nice to have something to pass on to the kids or for a rainy day, that you know will always maintain some value.

I think you can 'pass value on to your kids' far better by setting a good example for them in how you conduct yourself financially. That's something that is truly gold.

 

[twd000]

I've been thinking about adding some physical precious metals as a portion of my cash emergency fund. My idea is to set an allocation between cash and gold, and rebalance yearly based on which has risen or fallen. Then if I need to dip into the emergency fund, that comes out of cash. Gold can be liquidated but has higher transaction costs.

 

[samclem]

It would seem useful to have a small amount in small denomination coins (1/10 oz?). Mainly to buy some discrete "cooperation" if things got very bad (it has worked before for many people in dire situations). I don't think it's worth having as any sort of investment.

 

[Texas Proud]

I've been thinking about adding some physical precious metals as a portion of my cash emergency fund. My idea is to set an allocation between cash and gold, and rebalance yearly based on which has risen or fallen. Then if I need to dip into the emergency fund, that comes out of cash. Gold can be liquidated but has higher transaction costs.

The one problem with physical metal is the cost of the transactions... the fees are a killer if you have to buy or sell all the time... kinda like money exchange rates... you buy high and sell low even if the price does not move....

 

[Mr. Tightwad]

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.

 

[ejman]

There may be value in holding gold or silver for psychological comfort but frankly I think a favorite blanket would work better. I've only lost money in two investments that I've held for longer than 10 years. Gold and silver. I bought both early 80's when I drank that time's cool aid and held for almost 20 years and finally sold for less than half of what I paid (not even adjusting for inflation and certainly no dividends in the meantime). Afraid to report I didn't get any warm and fuzzies during the holding period.

 

[ejman]

It would seem useful to have a small amount in small denomination coins (1/10 oz?). Mainly to buy some discrete "cooperation" if things got very bad (it has worked before for many people in dire situations). I don't think it's worth having as any sort of investment.

Maybe, but if things have gone downhill that far I'm afraid the "cooperation" would be my forking over the small denomination coins to the bandits holding me at gun point...

 

[Lsbcal]

I kept one 1980 Canadian Maple Leaf gold coin. Nice reminder of a foolish investment.

 

[scrinch]

In the case of economic business as usual, I think the consensus here is that precious metals are a poor choice for a buy-and-hold investment. In the case where civilization as we know it breaks down for a significant period of time, I'm hearing that food, blankets, shoes, and possibly guns and bullets would be more valuable. 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. Would holding a modest amount of precious metals help maintain some purchasing power in that more historically common scenario? Or is that scenario not possible because we are the USA and there's no currency large and strong enough for the dollar to lose that much value against?

I've got about 2% of our NW in precious metals, not as an investment for today's climate, and not to help with a Mad Max scenario, but as insurance to help get through a late-1980's Argentina scenario. Probably it won't happen, but it only costs us 1/50 of our annual potential investment income as a hedge, and I do kind of recognize that governmental "spend and print" pattern.

 

[samclem]

Maybe, but if things have gone downhill that far I'm afraid the "cooperation" would be my forking over the small denomination coins to the bandits holding me at gun point...

Well, that brings us to the first prepper purchase you should make . . . .

Anyway, it's good to have options, and highly portable, non-traceable lucre has proven very important for people in the past. It's a very low probability/high impact proposition. Insurance, not an investment.

 

[eytonxav]

We have quite a few gold coins which are less correlated to the actual metal's price.

 

[ejman]

In the case of economic business as usual, I think the consensus here is that precious metals are a poor choice for a buy-and-hold investment. In the case where civilization as we know it breaks down for a significant period of time, I'm hearing that food, blankets, shoes, and possibly guns and bullets would be more valuable. 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. Would holding a modest amount of precious metals help maintain some purchasing power in that more historically common scenario? Or is that scenario not possible because we are the USA and there's no currency large and strong enough for the dollar to lose that much value against?

I've got about 2% of our NW in precious metals, not as an investment for today's climate, and not to help with a Mad Max scenario, but as insurance to help get through a late-1980's Argentina scenario. Probably it won't happen, but it only costs us 1/50 of our annual potential investment income as a hedge, and I do kind of recognize that governmental "spend and print" pattern.

I suspect that real estate would probably be a better hedge against the type of inflation that you envision https://www.biggerpockets.com/renewsblog/2014/04/12/argentina-can-teach-us-real-estate/

 

[Big_Hitter]

I bought a bunch of coins 15 years ago when it was dirt cheap - like $280oz gold and $5oz silver. I guess I didn't time it correctly but still a pretty good ROR for that time period... 10%?


How is that a bad investment?

 

[Andy2]

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. Would holding a modest amount of precious metals help maintain some purchasing power in that more historically common scenario?

Zimbabwe is a classic case of that. In that type of scenario hard assets are definitely a huge advantage, but typically security becomes an issue too so very often the hard assets form part of an exit strategy rather than a bartering medium to obtain survival supplies.

 

[Lsbcal]

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

 

[dtbach]

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.