Although I am not an economist, I am still asked, “Should I buy gold or silver as an investment for the future?” The short answer is, “Yes,” you should buy both. However, if you’re like many Americans, you simply don’t have enough disposable income to buy both. If you’re in this boat, here is the advice I would offer you.
If you have a big chunk of money to invest, say $100,000, then buy some of both. If you have a windfall of say, $2,000, as in a tax refund, company bonus, or a small inheritance, here’s what I’d do: buy silver!
Here’s why I’d buy silver. In January, 1919, after WWI, gold cost 170 marks an ounce in Germany. Then, Germany suffered 4 years of “hyperinflation.” Now, we’ve all heard of inflation, and if you’re 50 years old, you probably remember some tough rates of inflation in this country. Does anyone besides me recall the 14% interest rate on a home? Hyperinflation is regular inflation on steroids, doubled and then doubled again. For example, by November, 1923, gold in Germany was 87 trillion marks! That’s 87 followed by 12 zeroes. In effect, with this kind of inflation, paper money is absolutely worthless. If you were lucky then, a merchant would exchange a wheelbarrow full of paper marks for a loaf of bread!
In the U.S., our paper money is backed by nothing except the promise of the U.S. government. How have those worked for you lately? You are buying and selling everything with the hope that the paper money is honored. Inflation is worsened by the wild and irresponsible printing of more and more paper money, as is going on now. (Or currently minted coins are worthless, too, because there is no precious metal in them.) If hyperinflation sets in, in this country, what are you going to do?
Gold and silver are the answer. For the small investor, I believe silver is the answer. Take the $2,000 windfall. That will buy an ounce and a half of gold or so. That same $2,000 will buy you about 1,000 silver dimes, or 250 silver half dollars, or 500 silver quarters, or some combination of all of these. Then, suddenly, the Federal Reserve collapses and your paper money is worthless. You need bread to feed the family. Would you want to trade a half ounce gold coin for a loaf of bread, or 3 silver dimes? You need a tank of gas. An ounce of gold, or 8 silver half dollars? Precious metals will always have value in our society.
In what form should you buy your silver? First rule: buyonly physical silver. Don’t invest in Exchange Trade Funds for silver! You would have bought ownership rights into funds in which you probably could never take delivery of your equity. They say that there are about ten times the world supply of silver in these silver investment funds now.
That leaves us junk silver coins and silver bullion. Junk silver coins are generally 90% silver. A junk coin is not one that is bent up with a hole in it. Junk coins are those whose value as a collectible coin will never be higher than their silver value. A 1916 D Mercury dime in Good condition is worth $600. It is not junk silver—its collectible value is too high. An uncirculated 1964 Roosevelt dime is junk silver. Hundreds of millions were made and their silver value will always be higher than its collectible value. U.S. junk silver is a great investment because they were made by the U.S. government and their composition is easily verified. Junk silver usually doesn’t sell for much of a premium over melt value. (There is junk silver from other countries, but it might not be as easily tradable.)
Bullion silver is silver that is produced and sold for investors. The American Silver Eagle one ounce (.999) silver coins are excellent examples of this. They sell for about $5 an ounce premium over melt. Canadian Maple Leafs and Chinese Pandas are examples of foreign silver bullion.
Then there are silver round and silver bars made by various companies. They usually have their composition and weight on them, but one is never sure how accurate these are, unless it’s a reputable company like Eberhardt or Silvertowne.
Now is an excellent time to buy silver. It is right around the $19 an ounce mark. That makes a silver half dollar worth about $7.25 in silver. If hyperinflation doesn’t set in, both gold and silver will eventually go up in value. That half dollar is worth $15 when silver hits $38 an ounce. Just like the stock market, you may buy tomorrow and then the price of silver goes down some. It will increase, though, and come back up, making silver a very sound investment.
The Brown County Coin Club meets on the second Tuesday of each month, at 6:30 pm, at Principally Coins and Metal Detectors, at 3002 Early Blvd, in Early. Meetings provide a great opportunity to learn all about coin collecting. We hope to see you on May 13 for our next meeting. Call Bill Cooper at 325-642-2128 or Bob Turner at 325-217-4129 for more information.