5 Big Lies About Precious Metals Investing Exposed / Commodities / Gold & Silver 2019

Physicalprecious metals serve a unique role in an investment portfolio. Unlike stocksand bonds, gold and silver coins can be held entirelyoutside of the financial system. They carry zero counterparty risk. They arethe ultimate “buy and hold” safe-haven assets.

Unfortunately,investors must often navigate through a barrage of fake news, myths,misinformation, and fraudulent pitches surrounding precious metals beforearriving at the simple truth.

Investingin metals isn’t complicated; nor are the reasons for doing so. Gold and silverare hard money with centuries’ long track records.

Youdon’t buy bullion to get rich quick. Youbuy it to preserve wealth over time against the threats of currencydepreciation and financial crisis. Opting for common, low-premium bullionproducts that sell close to spot prices is the most efficient way to invest.

That’s precious metals investing in a nutshell. But ifyou listen to financial and monetary establishment mouthpieces, you’ll likelybe misled.

Lie#1: Gold Isn’t Money

Neitherbrokers, bankers, nor central bankers particularly want the investing public toview precious metals as a core holding. They prefer we think of gold as a“barbarous relic” of the past that no longer serves as money.

Inan infamous exchange in 2011 between then Federal Reserve Chairman Ben Bernankeand pro-gold Congressman Ron Paul, Bernanke stated flatly that gold is “notmoney.”  This is the big lie of fiatmoney pushers and their ideological allies.

Itflies not only in the face of history, but also of the fact that centralbankers themselves continue to hold and accumulate gold as monetaryreserves.  In 2018, central banks aroundthe world, led by Russia and China, added hundreds of tons of gold to theirreserves.  In the first quarter of 2019,Russia boosted its pace of gold buying by a whopping 68%.

Goldisn’t a “barbarous relic” to major world powers seeking to divest themselvesfrom U.S. dollars and insulate themselves from perceived threats out ofWashington, D.C.

Lie#2: Silver Isn’t Money

Somemisinformers will concede that gold is money… but claim silver isn’t. 

TheFounding Fathers of the United States would disagree strongly.  They originally defined a “dollar” in termsof grains of silver (Coinage Act of 1792) which simply codified what was nearlyuniversally in practice. 

Specifically,a dollar was to be 371.25 grains (equivalent to about three-fourths of anounce) of silver, in harmony with the Spanish milled dollar.  Thus, the true foundation for U.S.circulating currency was silver.

OnWednesday, the central bank’s “Open Market Committee” released the minutes fromits March meeting.  Participants decidedthe Fed will soon stop selling Treasuries and other paper assets on its $4trillion balance sheet and stand pat on rates.

It’strue that silver has since been removed from circulating coins and replacedwith cheaper metals.  It’s also true thatsilver generally isn’t held in monetary reserves by central banks.

Silver,however, remains the go-to tangible money of the masses.  In the event of a currency collapse thatcauses the public to ditch fiat dollars, silver is more likely than gold to beused as barter money in everyday transactions.

Lie#3: Precious Metals Are Too Risky for the Typical Investor

Thislie is propagated by Wall Street and by Main Street financial advisors who havebought into anti-gold propaganda.  Theirconflict of interest is obvious.  Thefinancial industry loses out on commissions and fees when investors park wealthin hard assets.  So they portray gold andsilver as “exotic” and “risky” investments.

Or,as in a recent documentary financed and distributed by The Financial Times,they deride gold as “shiny poo.”

Itwould indeed be risky to bet everything on gold and silver. But no responsiblevoices in the precious metals community advocate that for the typicalinvestor.  Instead, they advocate aprudent allocation to the precious metals sector – from around 10%, perhaps upto 25% of a portfolio.

Astudy by Ibbotson Associates found that investors who put 7.1% to 15.7% oftheir portfolios in precious metals enjoy superior risk-adjusted returns. Goldshows virtually no correlation to stocks and bonds, meaning it can rise whenpaper assets fall.

Yetthe average investor has nowhere near even the bare minimum suggested byIbbotson Associates to hedge against risks in financial assets.

Whenthe stock market crashed in 2002, precious metals shined.  When the financial sector melted down in2008, gold finished the year with a modest gain.  When the U.S. suffers a debt-driven currencycrisis, as many economic forecasters think is inevitable, the biggest risk ofall will be not having adequate exposure to precious metals.

Lie#4: Cryptocurrency Is More Valuable Than Hard Currency

Thecrypto coin craze has spawned a number of misconceptions, such as the notionthat Bitcoin is “digital gold.”  Whatevertheir merits (and there are certainly some), cryptocurrencies backed only by digitscannot be equated to gold and will never replace it.

Unfortunately,some cryptocurrency promoters are trying to sell their digital storylines bybashing gold.

GrayscaleInvestments, which runs an exchange-traded Bitcoin product, recently launched a“drop gold” campaign.  It even produced an anti-gold TV commercial,portraying gold buyers as “living in the past” and out of step with the“digital world.”  The commercial’snarrator states, “Digital currencies like Bitcoin are the future… and unlikegold, they actually have utility.”

Thelie that gold lacks utility is an old one propagated by the financialestablishment.  It’s now beingregurgitated by overzealous Bitcoin bugs. 

Thetruth is that gold came to be recognized as money precisely because it hasutility outside of monetary use.  Gold isuseful not just to jewelers and artisans, but also to rocket scientists inspace technology applications.

Whatexactly would a Bitcoin be useful for outside of its own digitalecosystem?  Nothing.

Cryptocurrencyenthusiast James Altucher went so far as to claim in a recent interview, “Goldis just a rock. Bitcoin has real value.”

Cryptoscertainly have a role to play, and, in fact, Money Metals Exchange is leader inoffering customers the ability to using digital currencies when buying orselling the monetary metals.

Buthere’s a reality check: Bitcoin has market value, which can be fleeting.Bitcoin might be worthless 100 years from now if new technologies supplantit.  Gold’s value, on the other hand, isreal, immutable, and eternal. Its unique physical properties combined with itsrarity ensure it will always be worth something substantial.

Lie#5: “Collectible” Coins Are Better Investments than Bullion Coins

Sadly,some of the misinformation being spread about gold and silver investing comesfrom bad actors within the precious metals industry.

Thebiggest culprits are numismatic coin promoters who try to trick people intopaying huge markups for supposedly “rare” or “collectible” coins.  High-pressure salesmen will sometimes pitchnonsense about numismatics being “confiscation proof” or fantasies about howthey’ll appreciate more than ordinary coins.

Theyalmost certainly won’t after factoring in bid/ask spreads.  The truth is that these high-premium andrelatively illiquid products are suitable only for those with a particularinterest in, and knowledge of, numismatics.

Forthe vast majority of precious metals investors who are simply looking toacquire ounces of gold and silver, common, low-premium bullion products arebetter investments.

Stefan Gleason isPresident of Money Metals Exchange, the national precious metals company named 2015"Dealer of the Year" in the United States by an independent globalratings group. A graduate of the University of Florida, Gleason is a seasonedbusiness leader, investor, political strategist, and grassroots activist.Gleason has frequently appeared on national television networks such as CNN, FoxNews,and CNBC, and his writings have appeared in hundreds of publications such asthe Wall Street Journal, Detroit News, Washington Times, and National Review.

© 2019 Stefan Gleason - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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