Throughout our lifetimes, we can expect to see a number of ebbs and flows in the economy. Domestically, this can be felt through rising costs of living, higher gas prices, supply chain issues, a volatile housing market, rising interest rates, or mass unemployment. Internationally, significant economic change can be caused by conflict between nations, closed borders, natural disasters, or global pandemics.
Although these unstable times and down markets can be intimidating, they can also act as a reminder to review the allocation of your assets, perhaps even causing you to consider precious metals as a way to help in potentially protecting your financial stability.
Precious Metals Offer Distinct Opportunities and Solutions
Market volatility in the United States has a number of causes. When considering the opportunities precious metals may offer for helping protect against economic uncertainty, there are three broad patterns we can consider: weakening currencies, the rise and fall of changing asset classes, and inflation and deflation.
During difficult times, the Federal Reserve, or the Fed, has tried to tighten cycles to bring order and stability back. This has been done mainly through monetary policies, impacting the S&P 500 index and weakening the U.S. dollar. The lost value of currency is a pain point during difficult times. But, the numismatic industry has a long history of helping in protecting the public against inflationary impacts on currency buying power, with gold and silver moving pari-passu.
Changing Asset Classes
The rise and fall of changing asset classes can also contribute to market fluctuation. Some common asset classes are land or property, fixed income and cash. They are distinct classes because each is governed by separate laws, policies, rules and regulations. During uncertainty, stocks and bonds might fluctuate in value, but historically gold prices have remained more stable. This is because gold has generally operated as a non-correlated asset. This means its price movements are not correlated to other asset classes.
Inflation, Deflation and Recession
Inflation, deflation and recession are economic situations that most of us will witness during our lifetimes. While inflation is a spike in the price of goods and services, which decreases consumers’ buying power, deflation is the downward trajectory of prices. Furthermore, hyperinflation is described as accelerated, excessive, or uncontrollable price increases, or when inflation is “at least 50% per month.”
During times of inflation and deflation, paper money and dollar bills of all denominations rise and fall based on the actions of banking systems, the Federal Reserve and the government. Unlike paper currency, precious metals generally derive their value from scarcity and supply and demand. This, combined with their value as raw materials in manufacturing and industrial processes, helps in stabilizing their worth and has popularized their status as a potential hedge against inflation.
Precious Metal Ownership
If you’re concerned about weakening currencies, wavering asset-classes, or the price of goods and services, owning gold and silver may help in potentially protecting your financial stability. But, before you pursue precious metal ownership, it is important to note that the different types of precious metals come with their own distinctive set of characteristics and qualities.
Gold can be found in three different forms, including:
- Bars – There are two main types of gold bars. The first is a cast gold bar, a form of gold that has been around for over 6,000 years. To create a cast gold bar, liquid gold is heated up and then poured into a mold. Once it has dried, inscriptions, names, or logos are engraved onto it. This process refers to its nickname, “poured” or “molded” bars. While this forges uniform dimensions and weights, it can create imperfections on the surface. The second type of bar is the minted gold bar. To create a minted gold bar, a continuous casting machine cuts a long strip of pure metal down into smaller bars.
- Coins – There are several different types of gold coins. Bullion coins are coins made from precious metals. Gold bullion comes in a variety of weights, including 1/20, 1/10, ¼ and ½ troy ounces. There are also 1-troy ounces, 10 troy ounces and 1-kilogram formats. Professionals in the industry often refer to coins produced in 1965 and after as “modern” or “contemporary” coins. On the other hand, “vintage” or “historical” coins are from 1964 and earlier. Rarer coins are further specified as pre-1933 gold coins. Some renowned vintage coinage includes the Gold Indian Head, Saint Gaudens Double Eagle and Liberty Gold Double Eagle.
Silver is bought and sold in two different forms:
- Bars – Similar to poured gold bars, silver poured bars are created by putting silver into an open mold, most often made of graphite. Graphite molds are also durable enough to be molds for other metals such as platinum and copper. After the silver is poured, it is left to cool. A second type of silver bar is the cast silver bar, which is put into forms or molds that are closed. This decreases imperfections, such as bubbles or cooling marks that would be considered unattractive on products such as jewelry. A third type of silver bar is the pressed bar. Rather than reaching the 1,800 degrees Fahrenheit temperature required to liquify, the raw materials are “blank” bars that will be pressed and cut with a machine. This process can create fine lines and a high-gloss finish.
- Coins – The three main silver coins produced by the United States Mint are circulated, uncirculated and proof coins. Circulated coins are those that are produced specifically for daily exchange and do not include certificates of authenticity. Uncirculated or burnished coins refer to pieces struck on blanks with a matte surface. And proof coins are the finest quality of finish for a coin.
Before acquiring gold or silver, or deciding between coins versus bars, it is beneficial to set realistic expectations for yourself. Here are a few key components you may want to consider:
- The amount of precious metals you want to own. This mainly depends on the number of precious metals you are comfortable storing, shipping, insuring and owning. You can base this on your background in handling precious metals or how much time, energy and effort you have to learn more about precious metals.
- The price of precious metals and your purchasing time frame. Once you have decided how much you want to spend on obtaining precious metals, ask yourself if you want to spend it all at once or spread your purchases out across a period of time.
- Storage options available to you. Popular storage alternatives include retail banks, home storage, bullion bank vaults, bullion depositories, safety deposit boxes, or consumer banks. Research your options and make a decision before purchasing.
- Current gold and silver spot prices. Spot prices are the live and fluctuating prices for gold at a particular moment. They change based on industry news, current events and speculation from professionals like traders and holders.
Learning More During Economic Uncertainty
As previously mentioned, unsettled, erratic, or weak markets can serve as good reminders to learn more about precious metals. Whether you are completely new to the industry or you have been a numismatist for decades, there is always something more to discover. Educational guidebooks can be particularly informative. For example, Rosland Capital distributes its Gold Guide, Precious Metals IRA Guide, and Silver Guide for free on its website. Aside from guidebooks, there are also glossaries and encyclopedias available in digital formats. Again, Rosland Capital has created its own comprehensive glossary that can help readers wade through and understand industry jargon and terminology.
For a more general understanding of economics, consider turning to professionals and news media. There are a number of outlets and websites that provide a central location for staying on top of current events and headlines. Notable websites include U.S. News, the Economic Times, and Economy Watch. Many companies also have social media profiles, such as Facebook, that share breaking stories.
If you are more interested in learning through listening or need to be able to multitask during your day, podcasts offer a digestible way to brush up on concepts. Some helpful podcasts include NPR’s Planet Money, The Wall Street Journal’s Your Money Briefing, and FOX News’ free and premium podcasts. TED Talks and LinkedIn Learning videos are also engaging and informative.
Of course, if you’re looking for a more personalized approach, financial advisors or planners with knowledge in personal finances, estate planning, or retirement planning can help you work through your options relating to precious metals and market volatility.
When unpredictable or unprecedented times arise, it’s important to learn more about what is going on in the economy and how it can impact your future. Look to potentially protect yourself with gold and silver, and find out what you are comfortable buying, owning, and storing through a self-check-in. Ultimately, empower yourself with information and a strong support system that has your best interests in mind.
If you’re looking to navigate the ins and outs of the precious metal industry and could use a helping hand, don’t hesitate to reach out to Rosland Capital’s senior account representatives.
*Rosland Capital does not give investment, financial, or tax advice, and customers should consult their own advisors.