Investing in Precious Metals

Max Smith, CFP®, CIMA® | Kent Forsey, CFP® Client Education, Investing, Precious Metals

Precious Metals PhoenixInvesting in Precious Metals
November 11, 2016

With the constant barrage of commercials, talk-show hosts and unsolicited emails etc. touting the virtues of investing in gold or silver, we are often asked whether it would make sense for them.

The question we have to ask ourselves is what would be the purpose of our investment in precious metals.  First of all, we must consider that there are no dividends or earnings paid on precious metals; therefore no income potential.  Thus the pricing of precious metals is left up to whatever price a buyer is willing to pay for it.  In other words, the pricing is based on speculation.

Savvy buyers of precious metals realize the extreme volatility of such an investment, hence they will only allocate a very small portion, if any, to their long-term portfolios, and then only for a short period of time when a price increase is anticipated.

Another objective may be to use it for barter in the event of a severe economic or currency collapse.  We must also consider what we would be able to use for barter in the event of such a calamity.  Gold itself may be a little impractical if such a need arose.  I can just picture myself approaching the checkout stand at the local market with a $1300 Gold Eagle in my pocket to pay for it.  An $18 Silver Eagle may be more practical for bartering during such a time.

I have always felt it may be practical to have a comfortable amount of silver coins on hand for any upcoming emergencies.  The key is to be careful not to overindulge in it.

The bottom line for investing in precious metals or any other speculative investment, is to use good judgement and to be sure you are using it for the right reason.

Max W. Smith, CFP®, CIMA®