Due to recent financial events-in particular, the recent downgrade of America’s credit rating and the debt ceiling debacle-investors are scrambling to swap other types of investments for bullion products such as silver. However, is precious metal a good investment? For me, yes it is. The very best reason behind me is that the value of gold does not depreciate even when the worthiness of fiat currency does. It really is a secure asset that is easily converted to cash and performs well over the board. If you opt for a physical gold product such as coins, or bars rather than gold stocks or ETF’s, you have liquidity better, but all bullion products are liquidated.
Now, there is a caveat in this. There is little risk in holding bars or coins because they are kept in physical form either by the owner or by a storage service on the owner’s behalf. However, other precious metal investments such as gold futures or exchange exchanged funds (ETFs) are typically held by means of a certificate (paper) issued with a third-party.
If the issuing party goes broke, figure who just lost their investment? That’s my estimation on buying gold products, but what do the experts say? Let’s examine three perspectives with this topic and discuss other explanations why gold is a favorite investment vehicle. If you’re interested in investing in gold, get to know David Morgan, who is a well-known consultant and expert on valuable metals.
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Bright Hub (BH): Why do you take into account it to be the best downturn investment? David Morgan (DM): Gold was proven the best downturn investment under a report done by Dr. Roy W. Jastram. In The Golden Constant, he demonstrated that gold does best in a deflation not inflation actually. What we know from history is gold is a great investment in deflationary or recessionary times. What Jastram found is gold’s purchasing power increases in real terms and we have found that to be true as well.
A quick example that everyone can understand easily is that if you looked at the Dow Jones Industrial Average (DJIA) in conditions of platinum what you’d find is the Dow is going down. In other words, it requires fewer ounces of gold to buy the DJIA than it took to buy it 10 years ago. You are measuring the goods and services you could buy with gold.
In real conditions, you are increasing your purchasing power as housing prices are deflating actually, the Dow Jones is deflating and each one of these assets ‘re going down in cost. Gold increases your purchasing power. So that’s the idea, gold’s purchasing power is increasing while you are getting a recessionary environment with housing and the stock market.
BH: What portion of their investment collection do you claim that they hold in gold or other bullion products? DM: For many people, 10% is enough. If you’re super-worried, you could go to 20-25 %. I’m not advocating that anyone put all their money in precious metals. BH: Could you explain immediate versus future delivery? DM: Well, it’s fairly self-explanatory. Immediate delivery is also called spot market or over the counter-top (OTC) market, which when you can picture walking up to a pub and buying a drink, that’s a good example of OTC.
Future delivery is dependent on an agreement made between two parties or two entities to provide a certain amount of metallic at a certain price at a certain time in the future. That’s all it is. BH: What other types of bullion products are trending? DM: All the metals are trending up in the long term.