Ever wonder why people invest in bullion?
There are many forms of investments out there:
- The most popular form of investment in this era is stock exchange. Remember how your friend(s) or your kid(s) or you play the ASX game to learn how it works? That is where most people start, because it is a game that does not require real money, it often seems easy when you do make a profit and you think to yourself, “oh my, how easy!”. And when they do rack up a substantial amount of life savings, they invest in a company in hope for the company CEO and its board of directors to have enough visionary skills to grow the company year by year, or invent a process or product that will revolutionize their industry.
- Investment in currency. Gamble their money on the productivity, unemployment rates, exports-imports of the country, and many more factors.
- Sit their money in the bank, and earn interest rate governed mostly by the bank that makes billions of dollars annually from their valued customers. Go figure!
- Buy an investment property. Honestly, it is one of the best ways of investment. But do most of us have the money for that? By the way, this is eBay!
- THE investment that is increasingly popular in recent times is stacking bullion. Here I shall elaborate.
During this decade, how many international economic downfalls are there? I can name a few, DotCom bubble burst, 911 terrorists attack, SARS virus breakout, 2008-2009 financial crisis, etc.
People who have invested in the currency or the stock exchange would have had a severe impact during these events. If you had these investments, you would know. But during the last decade if the same amount of money was invested in bullion, you would have at least retained the original value of your investment, hedging against inflation, currency collapse, simply because bullion is a form of physical investment where you can touch and adore at the hard work you have gone through in obtaining those. In saying that, if you have a look at the history of bullion values, in January 2000, gold was worth around USD$280, now it is worth around USD$1365. That is nearly 5 fold! And in January 2000, silver was valued around USD$5.20, and now it is worth around USD$24.25. 4.6 times of your original investment! Not as much as gold but, if you picked a company in the share market and end up with 4 times of you original investment, you should be very proud of yourself.
If you ask the question, “Will I make money by investing in bullion?”. Answer is “Most probably yes”. Now you wonder why the answer is not so convincing. The reason is, by investing in bullion you hold the present value of your investment, so when an economic collapse occurs it will retain its value unlike other forms of investments. And when the years go by, technology will improve, therefore more uses of gold and silver will increase, thus the increase of precious metal value. Like most other commodity trades, they will eventually run out. So by retaining your value during an economic downturn, you have already made profit. With the increasing value of precious metal, it is more of a bonus.
In addition to everything I’ve mention above, with everyone starting to get on the bandwagon. Silver and gold have increased dramatically in the last two years. Also, since the Australian dollar has been its strongest position against the US dollar in 25 years, buying precious metal now is the best time. For example, if you were to buy an ounce of gold which is worth AUD$1600 while the Australian dollar is 1 to 1 with the US dollar, as long as gold value hold its ground and US dollar slowly find its way regaining its value you have already made a profit. Let’s say AUD$1 now buy USD$0.80, the original investment of AUD$1600 is now AUD$2000 without the gold market value increasing. If you are thinking of buying some US dollar, why not buy precious metal, this way, you will be buying the currency and precious metal at the same time.
Hopefully up until now, you have nearly caught up to the page I am on.
So if you have decided to invest in precious metal after you have read this, welcome!
Now you might have another question. “Should I be buying gold or silver?”. To answer that correctly, it is really up to you. But as a generalized answer, mix it up. Before I start explaining, you would have to understand the word premium. In bullion talk, premium means the cost of manufacturing your bullion, the smaller the denomination the more costly your bullion is.
If you want to keep the investment for a very long time (10-20 years), buy more gold than silver, or buy larger denominations of silver instead of smaller denominations of gold. This way you pay less premium on the bullion purchased. If you want to keep your investments for a short time (1-2 years), buy silver more than gold, in smaller denominations. Even though you would pay more money per ounce compare to the larger denominations it is easier to off load your investment, since more people can afford to buy smaller denomination. You would also like to consider this, smaller denominations meaning you are able to sell your investment in portions, and if you only have a small amount of money and you would like to make a start, buy silver, simply because silver is cheaper.
For the more confident investors in bullion, they would consider converting their super funds to bullion. During the 2008-2009 financial crisis most people’s super funds were halved. If the super funds where bullion, this would not have happened.
There are plenty more details to talk about. But hopefully this guide has cleared up most of your unanswered questions. Happy stacking to all you new investors!!!