There is more than one answer to this question. Also, physical metal ownership is not for everyone.
We won’t go into all the details about the physical gold market, the difference between bullion, rounds, and coins, etc. This post will only focus on the benefits of owning physical gold and silver (or other metal if one chooses).
If you’re looking for more information on how it all works or have any questions please just leave a comment and I’ll do my best to address requests for information in a timely manner.
Hedge Against Inflation
Owning gold or silver can be done in many ways, whether it be physical or on paper through ETFs, Certificates or any one of the multitudes of different ways to trade metal. That being said, the most common denominator among investors large and small, is that gold and silver act as a great hedge against inflation.
While the value of the dollar erodes, and more and more money is being BORROWED into existence through the Federal Reserve and foreign nations buying US bonds, gold cannot be printed. It’s quite simple; the more currency that exists, in relation to gold that is available on the market, the more money it will take to purchase any amount of the metal.
Think about a loaf of bread (we’ll use a simple example). If the price of bread rises (inflation), it will require more of your dollars to buy the same amount of bread as before. Same goes for anything that is subject to inflation, including precious metal. However, with precious metals, you can sell them at a later date for near fair market value.
Just to show how well gold will maintain value as prices rise throughout history, imagine buying a men’s 3 piece suit in 1932. A quality suit would run you about $20. The price of gold at that time was just under $21 per ounce so about 1 ounce of gold could buy the same suit. Fast forward to 2016.
Find yourself a nice, quality suit and expect to pay over $1,000. Prices vary, of course, I think it’s safe to say that you couldn’t get a nice suit for under a $1,000 (or, 1 ounce of gold). As of the time I wrote this the gold spot was $1,322.90.
Safe from Banks and Government
Many people prefer to own ETFs (Exchange Traded Funds) because they are very liquid and can be sold and bought in a matter of seconds, allowing investors to take advantage of short-term gains.
That’s all good and well, and lots of people make LOTS of money doing this. If you want to go this route, then physical metal is not for you. Physical ownership is a long term game. Now, that being said, my personal favorite aspect of having my gold and silver in my possession is that I am in complete control.
If I want to get it out, I open the safe and take it out. If my gold were on “paper” or in an electronic brokerage account, I would be subject to many things, such as cyber attacks, denial of service, government intervention or confiscation.
Not to mention the fact that anyone in the government or a slightly motivated amateur hacker will know exactly how much I have and where it is at any given point. Don’t get me wrong, I do trade and use online brokerage accounts, but when it comes to metals, they are with me always.
Universal Store of Value
We are going to get a little apocalyptic here, but that’s ok. Gold is worth something to everybody. The dollar may one day completely collapse, as has every other fiat currency that ever existed.
There may be another currency to replace it, or there may be hyperinflation and people just won’t take the dollar in exchange for goods and services any longer. In this worst case scenario, people will begin trading the same way they did before cash was king. In this case, having even a modest supply of gold and silver could make you a rich person.
Even when currencies fail, gold and silver are there to fall back on because they have intrinsic value that the entire world recognizes. Failed states and economies have gone back to gold and silver time and time again, it’s proven throughout history, look it up and see for yourself.