WHY DAVE RAMSEY’S VIEW OF PRECIOUS METALS MISSES THE MARK

When this article was originally published, Dave Ramsey had presented a case for Why Investing in Precious Metals Is a Bad Idea. The original article argued that his discussion might persuade readers with limited familiarity with the topic, while experienced precious-metals investors and advisers could identify weaknesses in his presentation. It then set out the facts it considered relevant and why an investment in precious metals deserved consideration.

Where Dave Ramsey’s Reasoning on Precious Metals Fell Short

At publication, Dave Ramsey had established a notable career as a prominent voice in radio, podcasts, and books, reaching millions of Americans. In the period described by the original article, his radio program reached more than one million listeners each week in the United States alone. Personal finance was his principal area, and much of his work focused on helping people work their way out of debt.

The original article contended, however, that Ramsey was not a precious-metals specialist. It said that his comments on the subject therefore reflected broad impressions and assumptions rather than specialized knowledge. On closer review, the article argued, his position largely amounted to saying that the view held by precious-metals experts was mistaken.

Gold’s Worth Requires Research, Not Assumption

The article said Ramsey opened with a straightforward assertion that “Gold isn’t worth what you think it is.”

At the time of original publication, the article described the following: The original article characterized that as an unusual claim. How, it asked, could he know what a reader believed gold was worth? For readers uncertain about gold’s value at publication, it pointed to the spot price as a way to investigate. The article said that reviewing spot prices and historical charts could provide a useful sense of precious-metals prices then and of expectations for them.

The original article also said that, at the time it was published, readers could speak with a precious-metals professional, including those at Atlanta Gold & Coin Buyers, for additional perspective. It maintained that deeper research shows gold has held value since ancient times and suggested there was no apparent end to that history. It asked why people had otherwise invested in precious metals for hundreds, and even thousands, of years.

Ending Dollar-to-Gold Conversion Did Not Eliminate Gold’s Value

In seeking historical support, the original article said Ramsey discussed Nixon’s decision to end the government practice of exchanging dollars for gold. It noted that 2021 marked the 50th anniversary of the gold window’s closing. The article summarized his argument as follows: because dollars could no longer be exchanged with the government for gold, gold would not assist people during inflation.

The article argued that Ramsey did not address the reasons Nixon acted. It explained that the president and other officials feared a run on gold, driven by large war-related debts and high inflation associated with the Federal Reserve’s loose monetary policies. In essence, it said, foreign central banks had started to conclude that the dollar was not as sound as gold.

According to the original account, the available gold was insufficient to cover all paper currency if foreign central banks sought to trade their dollars for gold. At the same time, European currency was weakening, and European banks began converting dollars into gold to safeguard their interests. The article’s point was that those banks regarded gold as much more valuable than paper currency.

The article further asked why a weak dollar, combined with the lack of government convertibility, would make holding gold a poor idea. It reasoned that, because gold and the dollar were no longer tied together, a dollar devaluation would not affect the nation’s gold reserves. It also said a decline in the dollar’s strength could increase demand for gold. Citing Jean Folger’s article, What Drives the Price of Gold, the original article stated that gold generally rises when the dollar falls.

For a fuller account of that historical period, the original article directed readers, at publication, to Sandra Kollen Ghizoni’s 1971 article, Nixon Ends Convertibility of U.S. Dollars to Gold and Announces Wage/Price Controls. 

Gold and Silver May Have a Role During an Economic Crisis

The original article said Ramsey repeatedly maintained that gold would have no practical use in an economic crisis. It described him as insisting that people would not use gold or silver in barter.

The article responded that Scott Burns, another personal-finance authority, had written in The Seattle Times that barter has increased throughout history when a currency loses value. It also noted Burns’s view that silver and gold might be used either in barter or as currency.

The original article pointed to what readers had recently seen at the time of publication, gold and silver are currently being used for barter purposes in Venezuela, where it described hyperinflation as widespread. It reported that precious metals there were being used for everyday purchases and needs, including meals and haircuts.

The article acknowledged that silver’s, and especially gold’s, higher value could make small transactions difficult. It said the same practical issue applies to other items people use as a medium of exchange for bartering. Its conclusion was that, if currency were no longer a workable choice, people would probably use precious metals for at least part of their exchanges.

The article described one reason gold and silver could be logical for purchasing goods and services during a crisis: their balance of availability and scarcity. It said enough metal exists for investment, trade, and industrial use, while the supply is not so large that it exceeds demand.

Finally, the article asked readers to consider that, apart from collector or numismatic value, there must be a reason a denomination appears on the reverse of a minted coin.

Physical Precious Metals as an Inflation Hedge

The article noted that Ramsey twice portrayed the idea of precious metals serving as an inflation hedge as a myth.

It then argued that most experts held the opposite view and had evidence for it. Although U.S. inflation had been relatively restrained over prior years, the article cited an inflation period of 8.8% from 1973 – 1979. It stated that gold returned 35% annually during that same period, making it, in the article’s view, one of the stronger inflation-hedge investments for much of that decade.

The original article said readers could review the then-recent historical relationship between metal prices and inflation or inflation concerns. It asserted a clear correlation showing confidence in, and rising demand for, commodities such as gold bullion, silver coins, and other bullion coins made from rare metals.

At the time of original publication, the article described the following: The article cited Forbes senior contributor Clem Chambers and his article on The Crash of 2020. It said Chambers explained why he believed inflation was likely unavoidable in the near future at that time. The article also reported that he identified safe-haven assets, including precious metals and bitcoin, as preferable places for money in such conditions. It noted, with interest, his suggestion of platinum because of scarcity, possible industrial uses, and popularity at publication.

At the time this article was written, its most recent monthly consumer price index (CPI) reading was .9%, bringing the year-over-year inflation rate to 6.2%. The original article described that as the highest reported inflation rate in 31 years and said the public had understandably noticed. It reported that investors were then beginning to shift wealth toward inflation-protected assets such as gold and silver, which it said had steadily lifted precious-metals prices.

Public Trust Supports Gold’s Value

Later, the original article said Ramsey mentioned that paying for goods with dollars is an exchange grounded in trust. It interpreted this as a suggestion that people did not trust gold’s value. The article also asked what assurance exists that value is part of a dollar transaction if those transactions are supported by “trust”.

The article posed a comparison: given a lump of gravel and an equal-sized lump of gold, who would select the gravel? It said gold’s substantial value has generally been accepted worldwide and throughout history. As support, it pointed to the sizable portion of people who invest in precious metals in one form or another.

The original article also cited an Investopedia piece by Carla Tardi, Why Has Gold Always Been Valuable?. It reported Tardi’s statement that gold’s value rests on the social understanding that people agree it is, and will remain, valuable.

Precious Metals Differ From Other Commodities

The article added that Ramsey made clear he saw no distinction between gold and other commodities. It asked whether purchasing a silo filled with wheat would be as sensible as investing in precious metals.

The original article argued that gold should be considered differently from other commodities because it functions as both an investment and a consumer good. It said gold had historically produced higher returns and lower volatility than most commodities and had served as a store of value. It further stated that central banks then held 35,000 tons of physical gold in reserves, approximately one-fifth of all gold ever mined. The article suggested that central banks’ emphasis on gold was worth noting.

It also explained that gold, unlike many commodities, has numerous uses because of its distinctive properties. In addition to its investment use in gold coins and bars, the article said it was used in jewelry, dental work, computer chips, and various medical treatments, among other applications.

Put simply, the article argued, gold is not merely any commodity. It observed that Atlanta Gold & Coin could not recall seeing anyone keep grain or oil in a home safe or safe-deposit box…

Every Investment Type Has Price Fluctuations

On nearly any Dave Ramsey radio-show broadcast, listeners would hear criticism of the price swings, or volatility, in precious-metals markets. He recommended placing money in real estate or your 401k. Although that may be reasonable guidance, other investment types can also have value. The difficulty arises when it is assumed that every other investment is necessarily better than precious metals.

In practice, every investment can move in price, with some experiencing larger swings than others. For instance, during the Covid crisis in March of 30%, the stock market fell nearly 2020. By comparison, gold’s price stayed fairly stable during that month. That was one unusually volatile stock-market example, but over the years stocks and gold have generally shown comparable levels of volatility.

Price volatility is part of every investment category. Keeping all holdings in cash is the only way to avoid it. Even so, cash loses purchasing power through inflation, which, at the time this article was written, was in the 6% range. Without accepting some risk, growth in holdings over time could not reasonably be expected.

From the investment view presented when this article was originally published, gold had recently been rising while stocks stayed relatively flat. At the same time, stock-market volatility had increased. Using the “Buffet Indicator,” a measure comparing total stock-market capitalization with GDP, the market stood at its highest valuation ever. That condition increased the possibility of a substantial correction and greater volatility ahead.

Regarding real estate, it has historically been a dependable long-term investment, but housing prices were also near record highs when this article was published. That did not mean prices could not keep climbing. It did, however, indicate a highly valued market with a greater possibility of a correction.

As with any investment type, the article advised preparing for precious-metals price changes by studying trends and consulting an expert rather than abandoning metals. At the time of publication, Atlanta Gold & Coin Buyers’ precious-metals advisors were described as able to help people navigate changes in the gold, silver, and platinum markets.

What Ramsey Got Right

Ramsey did make several sound points in his article, especially about investing generally. The Dave Ramsey Show was consistent in its investment guidance across the radio program, Ramsey’s book Financial Peace, and Dave Ramsey’s: Total Money Makeover.

First, major decisions should not be made from emotional reactions such as fear or greed. Second, before committing fully, it is important to examine an investment category’s history. The article also recognized that the country’s emotional climate can influence precious-metals prices. Finally, investing in something that is well understood is always preferable.

At the time of original publication, the article described the following: Even if those arguments are valid, they do not answer whether precious metals should be part of an investment decision. A person can still make thoughtful choices, study and weigh an investment’s history, account for the emotional climate, and build as much understanding of precious metals as possible.

How could readers do that when this article was originally published? Get in touch with the precious-metals experts at Atlanta Gold & Coin Buyers was presented as a way to have a safe, secure, discreet experience investing in gold and silver. At publication, the article said the company could provide resources, instructions, insight, and recommendations tailored to specific investment needs. When Atlanta Gold & Coin Buyers was not buying and selling precious metals, the original article said it also produced useful, up-to-date, and relevant blog posts.