There May Be More than One Reason to Buy Gold & Silver Coins & Bullion
We recently met with a well-informed young gentleman who came in to buy silver bars as a hedge against inflation. He asked if he was making a good purchase, which we agreed that he was. During our conversation he inquired about why someone would be interested in purchasing other types of gold and silver considering that large silver bars sell at the lowest premium.
We shared with him some of the most common reasons individuals purchase coins, including smaller size or fractional coins. Our conversation helped to provide a different perspective he had not previously considered, and one that will likely result in him diversifying his purchases in the future.
When we sit down with a new customer, we always ask them the reason they’re interested in buying gold and silver so that we can tailor the right options for them. However, an important thing to keep in mind is that you don’t necessarily need to plan for just one specific event. You can invest in different options so that you’re prepared no matter the event or series of events that occur.
We’ll give you a few examples to better illustrate our point.
The individual we mentioned above chose to purchase large silver bars because he feels that the price of silver is undervalued and wants to protect against inflation. Furthermore, he was looking for the least expensive way to hedge against this scenario. While gold and silver don’t necessarily move in sync with inflation, historically they’ve been one of the best hedges against inflation and have allowed investors to maintain their purchasing power over time.
We would say that above average inflation in the years to come is near certainty. Mass inflation at some point in the future (i.e. annual inflation of 20%+ is likely) and hyperinflation, which is certainly not baked into the cake, is a possibility. You can assign probabilities to these possibilities as you deem necessary. The higher the likelihood you assign to mass or hyperinflation, the larger your gold and silver holdings should be as a percentage of your overall portfolio.
Another exposure, and one that has historical significance, is confiscation. For students of history, you may be aware that FDR signed Executive Order 6102 in 1933 making it illegal for U.S. citizens to hold gold coins. Numismatic or collectible coins were an exception. Considering that pre-1933 U.S. gold coins today are considered numismatic or collectible coins, in theory, these coins would be exempt from confiscation.
What is the probably that this will occur again? If you believe there’s a 10% chance, then 10% of your gold coins should be in lower premium light numismatic coins, such as $5, $10 & $20 Liberty Head & St. Gaudens gold coins. Don’t fall prey to shady salesman that attempt to sell these coins to you at many multiples of the underlying gold value. Remember – you’re attempting to protect against this exposure, not necessarily become a coin collector.
What about bartering? Where do you think the dollar is going? If you’re of the opinion that the dollar will crash and become inconsequential in the future, you may need to use silver for bartering – at least until a new currency is established. What do you think the chances of this are of occurring?
With the recent BRICS alliance and
more and more countries de-dollarizing, there’s probably a higher likelihood now than there was in the past that the dollar’s position in global trade will continue to erode. If you believe there’s a 25% chance of the dollar collapsing, then 25% of your silver holdings should be in junk silver. These are 90% US dimes, quarters and half dollars issued in 1964 & earlier. The small sizes allow for smaller exchanges and provide folks with more flexibility than a 100 oz silver bar.
We could go on with examples, but we think you get the point. It’s important to consider all possibilities when purchasing gold and silver coins or bars so that you have your bases covered.
Do you sleep soundly at night? If so, then you’re probably properly prepared.
However, if you find yourself tossing and turning, consider moving your cash, cash equivalent or low yielding investments into precious metals until you feel properly prepared. The experts at Atlanta Gold and Coin are here to help. Share with us your goals and we will be happy to provide some suggested gold and silver coins that might best fit your circumstances.