Paper Precious Metals vs. Physical

 

Paper silver & gold are digital products, securities, or derivatives that actually have little direct connection to physical silver & gold. It continues to be discussed that the ultimate purpose of paper precious metals is little more than for a few large corporations to control the market pricing mechanisms. The paper market is full of risks for individual investors, as you are not truly owning physical silver or gold. Many people do not understand this difference between paper and physical metals; this article will look at investing in paper markets vs. owning physical metals.

 

What are paper precious metals?

Paper precious metals are comprised of securities and/or derivatives of fractionally backed physical metals. It does not provide direct ownership of physical precious metals. Most investors buy paper metals as ETFs (Exchange Traded Funds). These funds trade similar to common stocks; the two most common ETFs for paper are GLD and SLV.

 

GLD

GLD is the ETF symbol for SPDR Gold Shares. GLD was originally listed on the New York Stock Exchange in November 2004 and now also trades on The Singapore Stock Exchange, The Tokyo Stock Exchange, The Stock Exchange of Hong Kong, and The Mexican Stock Exchange. GLD was created as an option to invest in gold without taking physical delivery of the gold. GLD is fractionally backed by 400-ounce gold bars held in London vaults. The share price closely follows the spot and futures pricing of gold, along with some fees.

 

SLV

SLV is the ETF symbol for iShares Silver Trust. This fund was created to offer investors a convenient option to invest in silver without the need for physical delivery. SLV began trading on the New York Stock exchange in April of 2006. SLV moves closely with spot and futures prices of silver and is fractionally backed by physical silver held in the fund’s vault.

 

Should you buy paper precious metals or physical precious metals?

The paper markets are much larger than the actual physical markets. The ratio of paper gold to physical gold is over 100 to 1, while the ratio of paper silver to physical silver is over 400 to 1. This means that for every 1 ounce of physical gold supply, there are over 100  ounces of paper gold supply, and for every 1 ounce of physical silver supply, there are over 400 ounces of paper silver supply. Since the supply ratios are so lopsided, a paper investor is buying gold and silver which may not actually exist. The paper market is not fully collateralized by the physical metal and is therefore at risk of manipulation and volatility. There is not enough supply of physical gold and silver to back up all the ETFs. With physical metals, you can hold the asset in your hand. It is tangible and verifiable, unlike paper metals, which could have no actual intrinsic value.

Another risk of ETFs is that the investments are controlled by third parties which involve a lot of trust and risk. The investors have virtually no direct access to the physical metals the fund holds in its vaults. An investment in paper relies on the fund’s structure, leverage, and honesty. As the fund use banks as custodians, the investment further relies not only on the fund’s actions but also on the bank’s actions. If the bank were involved in any fraudulent activities, the investment in the paper metal would be at risk. You do not actually own the gold or silver that is being held in the ETF’s vaults; you only own the share of a fund, whose price is only determined by a potentially manipulated market, not the actual price of the physical precious metal. 

Compared to paper metals, physical metals’ most important advantages are that they are tangible and have actual intrinsic value. An investor can realize the value of the asset in their personal possession. Although there are some added challenges of delivery and storage, the investor fully controls the asset and can decide what they want to ultimately do with it. Physical metals have no counterparty risk like paper metals and have the full upside potential in price. 

For a prospective investor, an ETF could be a possible investment because of its ease of entry and exit, straightforward monitorability, small minimum purchase requirement, and low storage fees. However, for an investor looking to possess physical ownership with zero counterparty risk and the ability to exchange the asset all over the world at current physical market prices, buying physical precious metals is the better decision. 

Paper metals and physical metals are vastly different products. If you are looking to buy actual physical bullion at the current low price, GoldClub Direct offers renowned products with very low premiums. Explore our website or call us at 1-800-700-4715.

 

All Updates and Market info are provided as a third party analysis and do not necessarily reflect the explicit views of GoldClubDirect LLC.. and should not be construed as financial advice.

Gold vs Bitcoin: 2022

What is Bitcoin?

Bitcoin is a decentralized digital currency started in 2009 that has gained major popularity. Bitcoin has a limited supply and can be traded through the bitcoin network without any intermediary like a bank. It can be bought on cryptocurrency exchanges and stored in digital wallets where the bitcoin could then be used for transactions.

Bitcoin has long been called digital gold. This is because of the idea it can provide a store of value similar to that of gold. People who want to diversify their portfolio in assets other than stocks have started to look at bitcoin as that option. Some buyers believe bitcoin is another safe haven option to protect their wealth. 

Price of Bitcoin

At the onset of the pandemic in 2020, stocks began to crumble. At first, bitcoin’s price dropped, but it quickly recovered as investors started pouring money into it. Within the next year, the price of bitcoin jumped from a low of $5,000 to a high of around $61,000. 

However, in 2022, with inflation at a historic high, bitcoin has underperformed. During this inflationary period, gold has outperformed bitcoin. The price of bitcoin is at ⅓ of its high of $69,000 since November 2021. The price has dropped due to geopolitical tensions like the Russia-Ukrainian conflict and climbing inflation. It has followed a similar path to the stock market. Although gold has also dropped in the past couple of months, it has retained its value much better than bitcoin.

Bitcoin is still too young of an asset to be considered a safe haven. As we have seen over the past couple of years, it is volatile and speculative. There are still a lot of risks associated with bitcoin. This has led to selloffs and fewer people holding bitcoin for the long term. As bitcoin grows and we see how it reacts to other economic events, we will continue to learn more about it and its use as a store of value. This could help its case as a competitor to gold.

 

Price of Gold

Gold’s history of maintaining its value during economic downturns makes it a safer bet than bitcoin. During the beginning of the covid-19 pandemic, the price of gold also had a quick drop. Its price quickly recovered, and by August 2020, it reached an all-time high of around $2,100. In 2022, we have seen a drop in the price of precious metals, mainly due to the risk of high-interest rates. Even with the drop, gold has continued to provide stability and has ensured investors gold is a valuable asset to have in their portfolio.

If you compare the price charts of gold and bitcoin, you will see some similarities. However, one main difference you can see is the price of gold has been steady, while bitcoin has fluctuated a lot more. A lot of risk-averse investors who are looking to store their wealth might look to gold instead of bitcoin for this reason.

 

Gold vs. Bitcoin

The physical nature of gold is a plus for many investors. There are very few investment-grade assets other than precious metals that you can hold in your hand. Although decentralized, bitcoin still relies on technology. An investor cannot touch bitcoin, as it is a virtual currency. If you are looking to find a tangible, real-world asset to add to your portfolio, precious metals would be a great addition.

Gold has also proved its stability for thousands of years, while bitcoin has barely been around for 10 years. Many investors are looking for reliability, which is where gold has the upper hand. The history of gold provides investors with a security blanket, knowing that its value will not disappear, even during some of the most difficult societal and economic crises. Bitcoin cannot provide the same, as it does not have enough history to look back on. It could still be considered an option for investments, but it does not live up to the nickname, “digital gold.” Bitcoin continues to be too speculative to ensure its value, whereas gold will continue to provide stability.

To find the best quality precious metal products from all over the world, check out GoldClub Direct’s wide array of bars and coins.

 

All Updates and Market info are provided as a third party analysis and do not necessarily reflect the explicit views of GoldClubDirect LLC.. and should not be construed as financial advice.

Government vs Private Mints

Precious metals have been mined for thousands of years all over the world. After being extracted from the earth, these metals must be refined and processed to separate any and all impurities. Once the precious metals have been processed, they can be taken to refineries and mints worldwide to produce bars, coins, or other variations of precious metal products. There are two main types of mints that investors should know about, government mints and private mints.

 

Government Mints

Government, or sovereign, mints are controlled by the national government in which they operate. The main product these mints produce is coinage. Coins produced at sovereign mints are considered legal tender or otherwise commemorative. Each coin has a face value, enabling its use as currency. For precious metals, the intrinsic precious metal value of the coin usually is more than the face value, so they are rarely used as actual currency. Coins minted at government mints come with guaranteed metal purity and specialized security measures to provide authenticity as needed.

The United States Mint is one of the largest mints in the world. They have production facilities in Philadelphia, San Francisco, Denver, and West Point, with a bullion depository in Fort Knox and headquarters in Washington D.C. Products from the US Mint include mintmarks depicting where the coin was minted. A “P” is from Philadelphia, a ”S” is from San Francisco, a “D” is from Denver, and a “W” is from West Point. One of the US Mint’s most popular programs is the American Eagle, which includes gold, silver, platinum, and palladium coins. Other examples of sovereign mints include the Royal Canadian Mint, Perth Mint, Austrian Mint, Chinese Mint, and Royal Mint. Sovereign mints produce some of the most popular products, like the Canadian Maple Leaf, Austrian Philharmonic, Chinese Panda, UK Britannia, and South African Krugerrand. Sovereign coins usually carry a higher premium over spot price due to their collectibility. 

 

Private Mints

Private mints are owned by companies that produce non-governmental bullion products. The main two categories of products private mints create are bars and rounds. If you would like to learn more about the difference between coins and rounds, read our blog discussing this matter. Since there is no government directing their production, they are able to create products with their own branding and design. There are more variations with private mint products, as they can also be any weight, shape, purity, and metal content. There is still some regulation, as private mints must abide by the standards set by the London Bullion Market Association (LMBA) to be authorized for trading.

There are many prestigious private mints around the world. GoldClub Direct offers products from Credit Suisse, Valcambi, SilverTowne Mint, and others. These mints are well-renowned worldwide and offer great quality bullion at low prices. Private mint products tend to have a lower premium as their standards are not as strict as sovereign coinage. 

 

Should I buy from a government mint or a private mint?

Buying from a sovereign mint vs. a private mint is up to individual preference. Products from a sovereign mint will be a good addition to a portfolio for an investor that is looking for legal precious metal coinage backed by a national government. Products from private mints are well suited for investors who are looking to invest in precious metals with the lowest possible premium. GoldClub Direct stocks products from only the most respected government and private mints.

 

All Updates and Market info are provided as a third party analysis and do not necessarily reflect the explicit views of GoldClubDirect LLC.. and should not be construed as financial advice.

Why Buy Gold in 2022?

Whether you are new to gold or have been investing/collecting for years, there is always space for a new piece of gold in your portfolio. Gold has long been the most well-known asset to use as a store of wealth. Since gold was first discovered, it has held great importance to our society.  If we use history as an indication, gold will always hold this significance. 

The first record of gold being smelted down was in 3600 B.C. by Egyptian goldsmiths, mostly smelted for its value as a commodity. 1000 years later, we have the first records of gold being used as jewelry. Gold’s beauty caught humans’ eyes from the beginning of civilization and is still seen in the same light. 

In 560 B.C., the first gold coins were struck in Lydia, the Iron Age Kingdom in Western Asia Minor. This marked a pivotal moment for gold. Greek and Roman Empires followed suit and minted their own gold coins. Although gold held value before this moment, its value could now be realized in the form of currency. Although gold is no longer used as a mechanism for trade, its value as a store of wealth has stayed steady.

 

So, why should you buy gold? 

Gold has maintained its value better than any other financial holding. Let’s say you lived 2000 years ago; one ounce of gold would let you buy around 350 loaves of bread. Today, if you had one ounce of gold, that could buy you about 350 loaves.  2000 years have passed, yet gold still has been maintained in real purchasing power. 

This is a great sign for investors looking for a safe way to store their wealth. Despite the price of gold fluctuating in the near term, historically it has always returned to its real purchasing power. This trend will not disappear, as gold is still seen as a safe-haven asset, and will always have intrinsic value. 

During times of instability, gold prices tend to hold their value. During Germany’s inflation period from 1918 to 1924, its currency became severely diminished, but the purchasing power of gold remained virtually unchanged. In the United States, over the past century, we have seen inflation cause the dollar to lose much of its purchasing power. Over this same time, gold has not. 

Gold is a great asset to diversify your portfolio. Gold does not directly correlate to stocks or bonds, meaning that in an economic downturn, gold does not have to go down. This is why gold is seen as a hedge against the economy because, during a crisis, gold can become more valuable. 

Gold is also a beautiful, natural metal that holds emotional value in our society. Gold possesses stunning colors that make people turn their heads when they see it. This is the reason the highest nobility has worn gold as jewelry for thousands of years. It also does not rust or tarnish, letting the elegance last for lifetimes. Gold is a meaningful aspect of our society because of the way we view the precious metal. 

Gold is a tangible way to store your wealth, and will always have value, both in good times and in bad times. If you are looking for a new investment opportunity, gold is a low-risk asset that will be a great addition to your portfolio.

 

What type of gold should you buy?

There are two main varieties of gold bullion investment, gold coins and gold bars. Both bars and coins are easily transportable, liquid, and stable. Gold bars are great because they usually have less of a premium than gold coins, meaning you can get more gold for every dollar you spend. There are usually higher weights with bars, also leading to a lower price per ounce of gold. Gold bars are also easy to store because of their compact nature, and high value for low weight. Many high-volume gold investors tend to buy gold bars to increase their position, as it is the most economical way to add gold to your collection.

Gold coins are also a great choice for investors or collectors. The allure of gold coins has been around for thousands of years. There is a much larger variety of gold coins than gold bars. There are many different sizes, rarities, and designs among coins, making it so there is something for everyone. Many coins are minted by governments, guaranteeing their quality. Gold coins also have great liquidity due to their high demand. Part of this reason is because of their collectability. Like art, many gold coins are collectibles due to their rarity, design, condition, and demand.

When looking to buy gold coins, here are some of the most popular: 

The South African Krugerrand was the first modern investment-quality coin created by a national government in 1967. At one point, it accounted for 90% of the gold bullion coin market. It depicts President Paul Kruger on the obverse and a springbok antelope, the country’s national animal, on the reverse.

The American Gold Eagle is the US Mint’s most popular gold coin and is one of the most popular gold coins internationally. The 2022 coin features a new design, first released in mid-2021. The obverse features a rendition of Lady Liberty, and the reverse shows a profile depiction of the American Bald Eagle.

The Candian Gold Maple Leaf is another popular choice among gold coins. Known for the symbolic maple leaf on the reverse of the coin, the Gold Maple Leaf is highly sought-after by investors and collectors. The obverse face displays a portrait of Queen Elizabeth II.

The British Gold Britannia is the staple coin of the Royal Mint.  This classic coin is highly recognized across the industry for its craftsmanship and beauty. It also includes many detailed security features to ensure you receive the correct coin. The obverse depicts an effigy of Queen Elizabeth II and the reverse depicts Britannia defending her country.

The Austrian Gold Philharmonic is another excellent series of gold coins. These coins are minted in commemoration of the Vienna Philharmonic Orchestra. These high-quality coins highlight instruments such as violins, harps, and Viennese horns on the reverse, and feature the pipe organ found in the Musikverein on the obverse.

The Chinese Gold Panda is a favorite for many investors and collectors around the world. Each year, with the exception of 2001 and 2002, the reverse face of the coin changes to highlight the panda species in a different light. This makes each year’s design unique. The obverse displays an image of the Temple of Heaven.

All of these coins are highly respected gold coins that have extremely high standards. This has made these coins valuable commodities and very liquid assets. There will always be a market for these coins, which has led them to become the most prominent coins on the market.

GoldClub Direct offers all of the coins listed above, as well as others, on their website. They also offer gold bars and gold rounds from various reputable private mints around the world. If you are looking for any gold products to add to your collection, look no further than GoldClub Direct to find the best available products for the most competitive prices on the internet.

 

All Updates and Market info are provided as a third party analysis and do not necessarily reflect the explicit views of GoldClubDirect LLC.. and should not be construed as financial advice.

Inflation and Precious Metals: 2022

Inflation has been on the mind of investors as governments decide how they should battle the inflationary pressures. Around the world, central banks are seeing large amounts of inflation. In the United States, Consumer Price Inflation reached a new decade high of 9.1% in June, which is the largest annual inflation rate increase since November 1981. Over the past 10 years, we have seen annual inflation rates of around 2%, so a jump to 9.1% is very large. 

Given the high inflation rate, we should expect the Federal Reserve to try to restore stability and lower the inflation rate. Before the inflation rate was released, the Fed was expected to release a half-point interest rate hike, but instead, they released a 75 basis point hike. Now, there are some expectations that the Fed could release a 1 percentage point rate hike during their meeting at the end of July. This would be the highest increase since the Fed started using overnight interest rates in the early 1990s. 

With the aggressive interest rate hikes comes an increased chance of recession. Many economists say there is a high risk of a recession within the next year. 

What does this mean for precious metals?

Precious metals have long been a hedge against inflation. They have intrinsic value, meaning inflation cannot change their real value as you cannot print more precious metals. Most precious metals drive their value from scarcity, as well as some industrial uses. Throughout history, we have also seen the symbolic value of gold remain high, as royalty use gold and other precious metals as jewelry, commemorations, and other meaningful purposes. There is no reason to think that its value will change anytime soon.

In times of unprecedented volatility, many investors choose to invest in precious metals for this reason. Physical gold, silver, and platinum will not feel the same type of shock from inflation or a recession, making these assets an important addition to an investor’s portfolio. For those looking to keep their wealth in a stable and secure fashion, precious metals are a safe, alternative investment.

Precious metals are tangible, meaning you can hold their value in your hand. Unlike stocks or other similar assets, physical metals are controlled by their holder.  If the economy and financial systems collapsed, the precious metals would still hold value. Although a true financial collapse is unlikely, investors have historically flocked to invest in precious metals as a safeguard. Since there is more demand, precious metal prices will increase and become a strong hedge against the devaluation of the dollar. 

In times like this where there is high inflation, along with the possibility of a recession, it is very smart for investors to diversify their portfolios with precious metals. They have the ability to protect wealth from unforeseen financial shocks. The prices are also expected to continue to climb, providing not only safe storage of wealth, but also a possibility to grow your wealth. 

Although gold and silver are considered safe-haven assets, the Fed’s decision to increase interest rates will keep pressure on their prices.  This is because the US dollar and gold prices have a negative correlation. As interest rates are pushed higher, it will increase the value of the US dollar, therefore decreasing the price of gold. This is why we have seen the price of precious metals drop in the past couple of months, and are now reaching 2-year lows. These price changes are partly due to consumer sentiment regarding investing in gold vs. other investment-yielding opportunities. A higher interest rate would lead to bonds and money market funds being more attractive. There are other factors that will affect the price of precious metals, so don’t expect this downturn to last forever.  

Diversification is key for every investor as it will help to keep assets immune from volatility. If you are considering buying precious metals to add to your portfolio, check out GoldClub Direct’s selection of the best gold, silver, and platinum bars on the market.

 

 

 

All Updates and Market info are provided as a third party analysis and do not necessarily reflect the explicit views of GoldClubDirect LLC.. and should not be construed as financial advice.

Why Silver: A Condensed History

Silver has long been an essential asset as a store of wealth. It can be traced back to the start of silver mining in 3000 B.C., in Turkey and Greece.  After mining the raw silver ore, they were then able to create a process for refining the ore, by heating the ore to a high temperature and blowing air over it.  This process is called cupellation and helped to separate the pure silver from other base metals. 

When Europeans first came over to the New World, they found rich deposits of silver running through all of modern South America. These explorers decided to mine all of the silver they could and sell their newly minted products to the entire world.  From 1500 to 1800, around 85% of the silver produced worldwide came from South America.

 

The Start of Silver Coinage

Silver was not used as currency until 600 BC in the kingdom of Lydia in Asia Minor. Their currency was made of electrum, a naturally occurring alloy of silver and gold. Their idea of coinage quickly spread to neighboring kingdoms and soon came pure silver coins, with the introduction of the silver drachma in Aegina, an island inhabited by Greeks. 

As silver currency spread, many different standards for the coinage system came around. The Attic standard, Corinthian standard, and Aiginetic standard used systems that defined the silver coinage based on weight.  Silver coins continued to evolve as time went on, and began to be used internationally to facilitate trade with coins such as the Spanish dollar. Although silver has been used as a monetary standard for thousands of years, it is no longer used. Germany was the last country to stop using the Silver standard in 1873.

 

The Price of Silver – 1960s-Present

With the use of silver for thousands of years, the price has continued to steadily increase. Demand for silver has always been strong, which has kept the price steady.

In the United States, Silver had long been used in the governmental currency. The U.S. had 90 percent silver in all of its circulated coins. However, as seen in the 1960s, this standard was not able to hold up to the demand in the 1960s.

Silver was being used in high demand for industrial output and coinage. The $1.29 per ounce of silver was facing demand stress, and soon the amount of silver in the coins became worth more than the coin itself. The U.S. Mint tried to increase production, but the silver supply could not keep up. President Lyndon B. Johnson decided it was time for Congress to pass legislation to remove silver from U.S. coinage. There was some opposition, but the legislation went through and became known as the Coinage Act of 1965. 

This act removed all silver from dimes and quarters and decreased the amount of silver in half dollars from 90% to 40%. The Coinage Act of 1965 also shut down all production of silver dollars until 1970. Silver half-dollar production was also banned in 1970.

In the years after the act was passed, the silver coins were still being circulated, however, collectors started gathering up pre-1965 coins for their silver value. In 1967, the United States Department of Treasury stopped its intention of keeping the price of silver low.  These events started the quick increase of the price of silver for the next 15 years. 

In the early 1970s, the price of silver hit a low just below $1.30.  By 1974 that price reached above $6.50. That number exploded to $49.45 in 1980. This extreme price did not last long, as by 1981 it dropped below $10 and by the end of the 1980s, the price hovered below $5.

The price of silver jumped so high so quickly mostly due to the efforts of the Hunt brothers from the well-known oil tycoon family. They believed the value of the dollar would plummet, which would lead to a dramatic increase in the price of silver. They began buying a large amount of physical silver as well as futures contracts, where they took delivery on the silver instead of cash settlements.

 This triggered the rise to almost $50, as the Hunt brothers continued to borrow money to buy more futures. As the short squeeze developed, the U.S. government decided to step in and prevent any more long position contracts from being written or sold. This led to the start of the price of silver falling. 

With the price continuing to fall, there was doubt the Hunt brothers could meet margins with new loans. This all led to March 27, 1980, when the Hunt brothers missed a margin call and the price of silver dropped to below $11. This day became known as “Silver Thursday.” 

The price of silver stayed around $5 up until 2004, when we started to see another rise. The price of silver steadily rose, except in 2008 during the financial crisis, up until 2011. In 2011, silver reached a high of $48.70. Due to economic instability silver prices have been very volatile in the past 20 years. Very soon after its high in 2011, silver shot right back down to under $20 an ounce. This was mainly due to the economy recovering and less need to hedge against a crisis in the economy.

Prices stayed pretty constant from 2015-2019 at around $15 to $20 an ounce. With the onset of the Covid-19 pandemic, we saw extreme highs and lows in the price of silver. In early 2020, we saw the price crash as the coronavirus spread to a low of $12. But by August of the same year, the price had shot up to over $29. 

The price continued to fluctuate with the risks of the pandemic, stimulus talks, inflation, unemployment, etc. Silver has hovered around $25 for the past year. This year, however, Silver has dipped below the important $20 mark. It has now reached a two-year low, down more than 5.8%. Silver has had a more severe drop than other precious metals like gold. This is because of rising interest rates as well as silver’s use in industrial production of energy alternatives, which has slowed in other countries. 

Silver is seen as both an industrial metal and a precious metal, so it can see the downsides of both.  However, with this, one can also see the upsides of both. Although silver is dropping in the near term, there is a bright future in the long term due to its intrinsic strength in holding value over time, as well as its importance in the renewable energy industry.

 

All Updates and Market info are provided as a third party analysis and do not necessarily reflect the explicit views of GoldClubDirect LLC.. and should not be construed as financial advice.