Should Your Church or Non-Profit Consider Investing in Gold & Silver?
We regularly hear from churches, religious organizations and other non-profits who receive donations in the form of gold, silver, coins and coin collections that they’re interested in liquidating to help fund their ministries and organizations. In some cases, individuals are streamlining the process by reaching out to us and directing where the funds should be sent. Whether we’re working with a charitable organization or with an individual who is donating to a charity or non-profit, this form of giving is becoming more common as folks are looking for alternative ways to help support their favorite charities.
However, we also occasionally hear from some of these same organizations who are interested in investing a portion of their assets in the form of gold and silver coins and bullion. This is being done for a multitude of reasons, including, but not limited to as a hedge against inflation, in anticipation of central bank digital currencies (CBDCs) being launched, concerns about the banking sector, and to combat the effects of a depreciating currency.
Furthermore, as we’ve recently seen, more individuals, companies and organizations are being cancelled and de-banked; primarily for holding views that are contrary to the views embraced by our current culture. Many religious organizations hold these beliefs, and as much, find themselves as potential targets. In some cases, if your accounts are suspended, you may be prevented from accessing your funds for an indefinite period.
You’ll want to read further if you’ve been contemplating an investment in precious metals for your church, religious organization or non-profit organization, as we’ll provide you with some basic information to help you get started.
Long Term Returns of Gold & Silver
To begin, it’s helpful to know how gold and silver have performed over a longer term of time. We’re going to use 1973 as our starting point, as the U.S. went off the gold standard two years prior when Nixon closed the gold window in 1971. In other words, this is when the price of gold became free floating and was no longer fixed by the U.S. government. The price of silver was trading at close to $1 an ounce until 1973, so this is also a good starting point to use for the long term returns of silver.
The gold price at the start of 1973 was $42.22. At the time of this writing in early 2024, it’s $2,030, which is a 48-fold increase. If we use a financial calculator, we see that the average returns are roughly 7.5%, which is about 4% over the rate of inflation during the same period. In other words, you received real returns of 4% above and beyond the inflation rate, which isn’t typical with most fixed income investments. Silver has returned closer to 5.5% over the same period. While not as strong of returns, the upside potential appears to be greater with silver, as the current price is less than half of its all-time high. However, this investment also comes with more volatility and higher risk.
Gold to Silver Allocation
Now that you have an idea how gold and silver have performed over the long term, you may be wondering if you should purchase gold, silver or a combination of the two. There’s really no right or wrong answer, as some organizations are primarily looking for stability, in which case gold would be the better choice, while others are more interested in upside potential, which would make silver the preferred investment.
While not a recommendation per se, many choose to go with a combination of the two with gold to silver allocations ranging from 70/30 to 80/20. As mentioned above, the reason gold has a larger allocation is due to the stability of the metal relative to silver. It’s primarily viewed as a storage of value or wealth protection. Obviously, if you’re in the non-profit sector, you don’t want to see dramatic fluctuations in your holdings, in which case you may decide to invest solely in gold.
Another factor to consider is storage. If you have limited secure storage available, then gold would be the best choice. However, if storage capacity isn’t a limitation, you may want to invest a larger percentage in silver.
Gold & Silver Investment Options
As far as the investment options are concerned, there are a wide range of coins and bullion from which to choose. Considering that you’re likely investing these funds as a hedge against inflation and a currency collapse, you’ll likely want to focus your attention on bullion or bullion-type coins. These are lower premium investment options whose value is primarily determined by the underlying gold and silver value. On the other hand, the value of numismatic or collectible coins is based on the rarity and condition of the coins, which may be many times the value of the underlying metal.
As a side note, when using the term bullion, we’re referring to privately produced bars and rounds. In other words, these are from private mints. The premiums on privately minted items tend to be lower than on government-issued coins, but on the flip side, these items may not be quite as marketable as government-issued coins, so you may not have as broad and liquid of a market in the future when the time comes to sell.
Furthermore, you’re likely to receive a higher value for government-issued coins than privately produced coins and rounds. We regularly tell our customers that if you pay more going in you tend to get more going out.
As mentioned above, the term “bullion” typically refers to privately-minted gold or silver. However, you may have also heard the term “bullion coins,” which are low premium coins produced by government mints. These coins are widely traded the world over and are highly recognizable. In the U.S., the most popular and recognizable gold and silver coins are American gold and silver eagles. These coins have been produced annually by the U.S. Mint since 1986 and tend to trade at higher premiums than foreign government-issued coins. Some of the most popular foreign-issued coins include gold and silver coins from the Australian kangaroos, Austrian philharmonics, British britannias, South African krugerrands, Canadian maples and Chinese pandas.
Factors to Consider
There are a couple of other important factors to consider when purchasing precious metals. While we’ve alluded to it above, it’s important to keep in mind that there are transaction costs associated with buying and selling physical metals. This means that you will pay a premium over the spot price of gold and silver when you invest in precious metals and you’ll likely receive a discount to the spot price of gold and silver when the time comes to sell. These are called buy and sell spreads, which you see in all investments, whether it’s stocks, bonds, cryptocurrencies, etc. Considering the transaction costs, gold and silver should be viewed as long-term investments, as it is cost prohibitive to frequently trade them.
Secondly, while we provided average returns over a long period of time, there’s no guarantee that your annual returns are going to be steady and consistent. This means that at times you may not see these assets perform as well as other investments. On the flip side, especially when we see financial, economic, geopolitical, banking or currency crises, these investments tend to outperform just about everything else. In other words, they have a low correlation to traditional investments, which should be viewed as a positive. This helps to reduce volatility and increase returns in an otherwise diversified investment portfolio.
How much should you consider investing in gold and silver coins or bullion for your church, religious organization or charity?
This is a tough question to answer, as it depends on your risk tolerance and that of your Board of Directors. However, we can share with you that many financial advisors recommend an investment of 10% for diversification purposes. Keep in mind that many of them do so begrudgingly, as it reduces their assets under management. In an attempt to keep as much assets under management as possible, they may try to steer you toward an ETF or mutual fund, which as we’ve discussed in the past, is not an acceptable substitute.
Risks on the Horizon
You are probably contemplating an investment in gold and silver because you’re concerned about risks on the horizon. While we don’t know exactly what the future holds, it’s safe to say that it’s uncertain to say the least. At present, the government is running multi-trillion dollar annual deficits, our annual debt is at a record high level,
our debt to GDP ratio is in banana republic-type territory, the stock market, bond market and real estate markets are all highly valued (likely in a bubble), the banking sector is on shaky ground, the dollar is at risk of becoming less of a factor in global trade (the BRICS alliance was formed in part to bypass the dollar), foreign governments are entering into direct currency swap agreements, central bank digital currencies (CBDCs) are right around the corner, and we could see ourselves at war on three fronts this coming year with Ukraine, Israel and Taiwan.
Of particular note and concern is the banking sector. As you may recall, three major bank collapses occurred in March of 2023, namely Silicon Valley Bank, First Republic and Signature Bank. The Federal Reserve established the Bank Term Funding Program (BTFP) shortly thereafter in response to these collapses, which allows banks to pledge their underperforming assets to the Federal Reserve for their full par or face value. This program is set to expire in March of 2024. If not extended, we anticipate more banking collapses in 2024. Keep in mind that your deposits are only insured up to $250,000 per financial institution and there’s no guarantee that the Fed will backstop future collapses and make account holders whole above the FDIC limits.
Considering the beneficial diversification benefits of gold and silver and all the potential risks that we have ahead of us, an investment in gold and silver coins and bullion appears to be a prudent decision.
Help to insulate your church or religious organization today by reaching out to Atlanta Gold & Coin Buyers. We’ll be happy to discuss the various options that are available, and which may be best for you and your organization.