Bullion Investment Strategies

In last week’s guide, we gave you a primer on bullion and what it was all about. To recap that guide, we basically stated: Stick to gold and silver for maximum public recognitionStick with American bullion coins like American Silver and American Gold Eagles.Avoid rare or numismatic coins – go with straight bullion content.Dabble in at least some junk silver. In this guide, we are going to show you how to actually implement this strategy and get into some gold or silver based on your budget. So without further ado, here we go! EXCHANGE TRADED FUNDS AND PAPER GOLD First time bullion buyers are almost frightened of precious metals. The mere sight of them sends shivers down the spine – bullion is viewed as being worth lots of money, and that provides a level of fear. Consider that $100,000 worth of American Gold Eagles would fit within your average coffee can with room to spare. That’s an extremely compact form of wealth! We have been so conditioned to accept paper and digits as actual wealth that seeing the wealth in person, right in front of you, tangibly, is downright scary. They feel that actually possessing that wealth puts them at risk of robbery or worse, and thus they avoid it. Therefore, most novice bullion investors once again turn to paper for reassurance in the form of paper gold. Paper gold, otherwise known as Exchange Traded Funds (ETFs) or gold certificates are basically like bank notes all over again. They are nothing more than a piece of paper that allows the bearer to redeem the note or certificate for a certain amount of gold. In some cases, ETFs allow people who would otherwise not be able to invest in gold to purchase at least some of it – for example, if you can only afford $50 to spend on gold, and it normally trades for $1300 plus or minus per ounce, then clearly you can’t buy hardly any of it. What an ETF does is allow you to buy a tiny fractional share in gold, and then these funds are traded on the open market and their prices fluctuate. Here is why we hate ETFs and gold certificates: According to the banksters that sell paper gold, it is supposed to be backed by real gold at a ratio of 1:1. This means that in theory, they should only be allowed to sell shares of the gold they actually possess. If you believe that banks, hedge funds, and securities dealers are 100% honest 100% of the time, then we have some Arizona oceanfront property to sell you. Someone else actually holds the gold – not you!There is usually no way for you to actually redeem your paper for gold – only to get your money back. Remember - you are trying to avoid paper money!ETFs are paper or digital money, which can always be confiscated or forfeited with the stroke of a pen. The ETF turns out to be bogus? Poof – money gone. The hedge fund receive a government bail out? Poof – money gone. The bank fails? Poof – money gone. ETFs are traded like stocks on an exchange, and thus their value is not necessarily connected to the physical gold they are supposedly backed by.The custondianship of the gold has little accountability and is not audited. Basically, paper gold or ETFs are like cash money – except far riskier. Quite literally, holding cash money is far better than paper gold, and even that is risky. SAFETY DEPOSIT BOXES Okay, so we’ve convinced you to purchase physical precious metals. So you finally get the motivation to go buy some bullion, and after buying it, you promptly head to your local bank, open up a safe deposit box, drop the gold inside, lock the box, and head home. You sleep easy, knowing your gold is safe in the vault of your local neighborhood bank. It’s the same bank your father used to bank at and has been around for decades. What could go wrong? Consider that hundreds of banks have failed since 2010 alone! The Federal Deposit Insurance Commission(FDIC) keeps a list of exactly which ones have failed. To see the list for yourself, go to: http://www.fdic.gov/ bank/individual/failed/banklist.html. Many people wonder what happens to their safe deposit boxes when a bank fails. According to the FDIC, the contents of your safety deposit box are not insured. On the FDIC website, it states: “If the bank fails, you’ll still have quick access to your safe deposit box. In general, the full contents of your box should be available the first business day after the bank closes”. In reality, however, failed banks have a history of being closed for days – even weeks after failing. And there is no guarantee you will be granted the easy access the FDIC wants you to believe. Also, safe deposit boxes are subject to confiscation and this has happened in America before! For those too young to remember, keep this in mind: This has actually happened in the United States! It’s not one of those “what if ” scenarios – it was reality not even 100 years ago. Since something like this has been done in the past, it can easily be done in the future. Don’t risk your hard earned money on the promises of others. Take matters into your own hands! HOLD THE GOLD What we recommend with all bullion is that you actually hold the gold. Whether its buried in your back yard, hidden in your walls, stashed in a secure, undisclosed location – or whatever – the best person to protect your own assets is you. No one else will take care of your own best interests than you yourself. This guide isn’t about caching - we’ve given you plenty of material on that topic, and you should be well equipped to be able to cache items of value in a most professional manner. The main thrust of what we want to convey to you is to hold your own gold or silver (just as has been done for millennia), and keep it under your care, custody, and control. This way you have instant access to it should a disaster occur. HOW MUCH TO HOLD There are some pretty simple rules you need to adhere to when purchasing bullion. How much do you buy? What portion of your holdings should be in bullion? These are all questions we will answer momentarily. First, realize that the vast majority of Americans live paycheck to paycheck – some 70% by current accounting. Essentially, what this means is that even the most minor disruption in your average person’s pay cycle will cause catastrophe. So how do you buy things like gold when you can barely afford to live in the first place? Slowly, and methodically – that’s how. If you are on a tight budget, your first foray into bullion should be with silver. It is obviously priced lower than gold, but is still an excellent hedge against currency devaluation. Start with the one ounce size – preferably a 1 ounce American Silver Eagle. These retail for between $22 and $28 each as of this printing (April, 2014). Just one of these coins is within the reach of most everyone! Even if you bought only one per month, at the end of the year, you would still have 12 ounces of silver in your little stash – an excellent start. Looking to get into gold? You should be able to purchase a 1/10th ounce American Gold Eagle for around $150 or so. This will be approximately the size of a current dime. The point here is that bullion is within the reach of most everyone. You might have to eat in more often, or quit smoking, or even give up drinking for a week to free up some cash, but then again – all of those habits don’t pay off in the long run anyways. We have some pretty simple to follow ground rules when it comes to purchasing bullion: Make sure your other needs are met first: Bullion cannot be eaten, shot, or used to purify water. Before you venture into the world of gold and silver, make sure your proverbial house is in order. Note that we are mentioning this topic in Week 40 – not Week 1. Bullion is not the first thing you buy; first, you stockpile food, water, and first aid supplies – then you build up a defensive capability. In a crisis, these things are more important than bullion, at least initially. 50% of your savings should be in bullion: Holding massive cash reserves in banks that have no accountability in the form of a worthless currency is utter folly. You might think that you hold $10,000 in your bank account, but time has proven again and again that those funds are subject to bank failures, confiscations, bail outs, bail ins, and all sorts of other pitfalls. We recommend 50% of your entire savings be in bullion. This means 50% of stocks, bonds, mutual funds, cash, etc. This may sound extreme, but at the end of the day gold and silver are very stable in the long term, and you can always convert back to cash if you get into trouble – but cash cannot always be converted to bullion! Split your bullion holdings 50/50: Your bullion holdings should be 50% gold, 50% silver. Obviously, this means you will be holding a lot more physical silver than gold, since it costs far less. In practice, however, a 50/50 ratio will allow you to be diversified in both metals, and not subject to the ups and downs of either one fully. Gold and silver react differently on the markets, and by holding 50% of each, you will be insulated against drops on either side. Bullion is a long term thing: Bullion is not about a quick buck or instant gratification. What you want is a secure and safe place to keep your money, first and foremost. Profit is really not part of the picture we are trying to present. You are not an investor – you are merely using the metal to store wealth. Even so, bullion should be seen like real estate – a long term proposition. Don’t buy until you follow the spot price for a few days: Obviously, you want to buy when the spot price of gold and silver is at its lowest, but don’t take on a day trader mentality here. You basically want to get into the metal as soon as possible, and get out of cash as soon as possible. Monitor the spot price for a few days to a week, and then make your move. Remember, this is not about profit. It is about converting your cash into a more stable form. Buy only from a reputable dealer: The bulk of your homework when purchasing bullion should not be trying to find the lowest price – it should be trying to find the most reputable dealer, even if you have to pay a little more. Read testimonials and talk to people about the business. There are many reputable physical and online places to buy gold and silver – go with the one that has the best reputation, not the lowest prices. At the end of the day, you do not want to be cheated with counterfeit metals. That’s basically all there is to purchasing bullion. What are you waiting for? You May Also Like: Survival…..Baking?