People often want to buy up gold and silver when they think we are facing hyperinflation or other markets are volatile. Binvested founder Nathan Birch takes us through his thoughts on it.
Why invest in gold and silver?
Nathan has been investing in precious metals since age 15 years old, when he’d buy coins from a shop in Blacktown. He started buying it because he was too young to buy property, so wanted some kind of asset. Most bullion grade coins you would get from the Perth mint would have a $1 face value. A 1kg dinner plate sized coin would be $30 in value.
When the GFC happened, people like Robert Kiyosaki and Mike Maloney were talking about buying gold and silver and Nathan realised he owned a lot of it already.
Some commentators were expecting it to get to $500 or $1000 an ounce. For context, an ounce of silver in the Australian market is currently probably worth around $35 to $40 if you can get your hands on it. If you look at the paper contract price, it’s around $US19 at the time of this article, it fluctuates a bit, but it’s pretty boring and doesn’t move around a lot.
Why does Nathan have it in his portfolio?
It’s just a hedge against inflation, not as an investment. Nathan buys and stores them in different formats, in different locations. He doesn’t like some aspects of precious metals as an investment; they don’t bring a cashflow and you can’t leverage them (unlike a property or
vehicle that you can get a loan against). As a hedge against inflation, the metals are useful in that they would be relatively easy to dispose of for cash.
Beware the experts on YouTube
Most of the ‘experts’ spruiking gold and silver are in the business of selling them.
In 1980, the silver price was US$50, compared to US$19 today. If someone bought silver in 1980, it would still be worth less than half of what it was 40 years ago. Will it go to $500 an ounce like a lot of people say? It could one day, but what would the currency buy at that point in time?
You really need to look at how it would fit in with your portfolio, how it would improve your position, remembering it’s not an investment but a hedge against inflation.
The spruikers say the world is going to run out of silver and it’s going to become too expensive. It could well be that the cost of producing it and pulling it out of the ground will become too expensive and we will see the prices go up in the future. However, looking at these people that are out there, Nathan doesn’t know any of them that are successful, let alone have ‘made it’ using precious metals. So be careful of who is telling you to invest in these things.
Nathan is personally invested in precious metals. The storage of it is a difficult thing. It needs to be stored in different locations, it can’t just be put in one bank. You need to be very careful who you trust to hold and secure your precious metals if you go down the road of purchasing it.
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