Jeff Clark, Senior Precious Metals Analyst, GoldSilver
SEP 14, 2018
GoldSilver’s Senior Precious Metals Analyst Jeff Clark gets all sorts of questions from our customers and others curious about the unique world of precious metals investment. Jeff, having grown up in an active precious metals mining family and as a lifelong precious metals investor, is uniquely qualified to provide answers born of his experience and decades of industry study.
Today, we introduce The Jeff Clark Mailbag, an ongoing series that will feature some of the most frequently asked and interesting inquiries Jeff has received, along with his answers.
Every Mailbag will always include just one thing: real, unsolicited questions from real people and Jeff’s honest answers to those questions.
A: In most cases, you can’t. Some allow for delivery but in those cases it is designed for institutional investors, which entails high minimums and being approved (meaning the request could be denied). There are a couple ETFs that allow for retail investors to request delivery, but the costs are high—you have to pay a fabrication fee and then also delivery charges. It is much more cost-effective to buy bullion outright, not to mention safe since you have it in your possession instead of having to wait for delivery. ETFs are designed to play the price direction, not to use a personal gold depository.
A: I like your thinking, because that’s how one invests successfully, by buying when things are out of favor and selling when they get too popular. Gold fits that criteria now. Contrary to the answer to “never” buy (he misunderstands gold’s role), there are clearly times to be overweight certain asset classes and times to be underweight them.
I just happened to write on this topic and here are some of the charts that show gold is an ideal contrary investment right now:Wanna Be a Contrarian Investor and Buy Low? Here’s Your Chance.
Clearly, gold is out of favor and is thus an ideal contrarian investment. Contrast that with how overvalued stocks, bonds, real estate, cannabis stocks, artwork are. Gold and silver are the only asset class out there (along with maybe commodities in general) where you can find strong value.
Not to mention the numerous financial risks embedded in the system right now.
I definitely wouldn’t be buying common stocks here — we’re at historic extremes.
Add it all up and it is clearly time to buy some gold.
A: Yes. While it is certainly more than just an inflation hedge, this is the most-cited reason as to why investors buy gold.
Gold even hedges hyperinflation.
The chart doesn’t show it, but over the 5-year period that included hyperinflation in Weimar Germany, the gold price increased 1.8 times faster than the inflation rate.
[See more here: Gold as a Hedge Against Hyperinflation: Does It Really Work?]
The actions central bankers are taking now are inflationary. And if we get deflation at some point their actions will be even more inflationary. It is clearly a time to hold gold to protect against future inflation.
But gold is about more than inflation. Check out all the risks right now in the tables of this article.
A: Prices for numismatic coins are based on rarity, condition and demand, and don’t really fluctuate all that much with the gold price. They would likely rise in high inflation, though collector value will still come into play. For example, I owned a numismatic coin and after the gold price had doubled I found out my coin was still priced the same! I sold at break even in spite of a raging bull market in gold.
Gold bullion coins, on the other hand, will directly correlate with the gold price. If gold goes up, they do; if gold falls, they fall.
Fair question about numismatic coins offsetting a drop in the price of gold. But the catch is, if gold falls, they’re likely to fall as well, since their demand would also likely decline.
My advice is, if one is bullish on gold, buy gold. If one wishes to be a collector, then buy collector coins (after you educate yourself in the field).
I’ve written on this very topic: see the 3 risks of rare coins here.
Thanks for joining us or the inaugural Jeff Clark Mailbag; Volume 2 coming soon!