Gold and Silver Investing

    Gold               

Many market gurus suggest that the strongest portfolios are those that are the most diversified.  Broadening your investing horizon - whether it be in stocks, bonds, cash, etc. - always helps to ensure that your portfolio has a steady rate of growth while at the same time minimizing your potential losses. One often overlooked type of investment is precious metals. These metals, consisting of silver, gold, platinum, amongst a couple of others, are vital in protecting your portfolio from the inherent dangers of recessions. While most people choose to add gold bars to their investments, we suggest adding gold bullion coins instead.

The primary reason for adding coins in lieu of bullion bars is the added collectors' value that gold bullion coins bring. For example, the Australian gold nugget has a design that changes annually and is manufactured to the same 99.9% pure specifications to which other coins (such as the American Eagle) are subjected. This, combined with the fact that a limited number are minted per year helps this particular coin to have a value that can easily rise above that of its base "metal" value. To this effect, adding rare or limited edition coins to your portfolio helps ensure that, even in the case of a gold price fallout, the price of the coins will hold their value better than generic gold bars.

Secondly, adding gold coins helps to provide downside protection in both directions. Most gold coins have a nominal face value. For example, a gold bullion coin containing 1 oz. of gold may sell for $2,000, or twice the value of the gold inside the coin. Yet, that same coin may have a face value of $500. In the unlikely event that gold crashes to $300 per oz., the face value of your gold bullion coins will still give you $500. Conversely, in the event that gold skyrockets to $5,000 per oz. (as a side note, this would likely be the byproduct of hyperinflation), the coin would be worth $5,000. As one can see, gold bars only provide the latter potential, while gold coins also provide protection against another potential "what-if" scenario.

However, it's important to note that many countries have regulations on what precious metals can be stored in retirement programs and other accounts, so it's very important that you check with your government regarding the sale and possession of precious metals. For example, should you choose to have a self directed IRA in the U.S., you can only add gold bullion coins that meet the 99.9% fineness requirement. That means that the South African Krugerrand, which is not 99.9% pure, would not be allowed in your IRA.

All in all, it's not too hard to see why investing in gold coins is definitely a smart idea. 

They provide downside protection and a strong element of diversification. Plus, gold is always in demand, so even if the entire banking system were to collapse, you'd still be able to get the essentials (if money were worthless, who wouldn't accept gold instead?).

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             Silver

Why invest in Silver bullion? To make money on an increasingly limited and in demand resource. By having physical possession of Silver in bullion form you know you actually have it, in precise quantity and quality and not just a paper promise. People want to move into something that will protect their underlying wealth, or even ensure they have something, anything that they can trade. Therefore they move into resources that will not lose value. Gold has been the traditional hedge in such times, but it does not take long for the price to be prohibitive as it is a rare resource.

Most Gold is held by the large investors leaving little for the small investor to get at a reasonable price. There is however another precious metal that itmore easily available to the small investor - it is silver, and currently it is relative cheap to Gold with a 1:70 ratio. This ratio is has no sensible explanation given that the ratio they are found in the earth is about 1:13.5. Should silver return to its God given ratio - those holding silver are likely to become very rich.

Silver has many qualities and properties that make it a very useful industrial commodity. For example silver paste is used in 90% of solar cells - and with many predicting and even demanding the move to renewable energy, the demand for solar panels is predicted to skyrocket. Thus the demand for silver paste is correspondingly over to increase. But if one takes a detail look at just how many industrial processes silver is involved in - its demand just as a commodity has the potential to skyrocket. But many are seeing the real increase in the price of silver will be the demand for it as an investment.

Silver is molded into bullion bars and coins. As such it forms an easily transportable form of wealth. Each bar is marked with its purity and weight and normally a makers mark. If you want to see how easily these items are traded one can check on eBay and see that bullion is highly tradable and convertible into cash.

As cash continues to lose its value, silver underlying value will increase in proportion. (For example if you had left your money in the bank last year you would have seen a low interest return (3%-5%) on which you would be required to pay tax. In truth by sitting your money in the bank you are losing value when inflation is factored in. If you had put the money into silver you could have seen a 56% increase in value) But where investors see the real increase in the demand for silver will be the demand to have something other than paper with which to trade, buy and sell. Once this process again becomes accepted to the general public the value of silver will only increase further.

The only way I see silver not exploding in value would be if some massive silver mine was discovered - I am mean massive in the sense of billions of ounces. This happened when the "new world" was discover in the 1500's, but I very much doubt with the world now explored there is another silver el Dorado not yet found. Currently silver mining production is about 600 million ounces most of which is currently used and "consumed" meaning any sizable move into silver as bullion will greatly increase its price. There simply isn't as much silver around as there once was.

The fundamental law of supply and demand is very well known. It is a law that is beginning to be applied to silver with people realizing it is a finite resource, it is precious.