With all the turmoil in the stock market, the uncertainty about foreign government stability, the Greek economic situation and the American economy – is there a good place to put your money to hedge against major inflation that doesn’t have a huge risk associated with it? In fact, there is.
Precious metals have long been a hedge against inflation and are looking like a solid investment. So, what options are there? Most investment companies would like to sell futures or other paper money products. Avoid these. The only real safe investment is in physical gold. For serious investors, there are two different routes to go with physical gold, rare collector coins and modern bullion.
Rare collector coins are sold with a premium price tag because of their value to numismatists (coin collectors). They usually trade high above the spot price of gold or silver and recouping the premium cost could take several years. However, there will always be a market for rare coins. The only time that prices may fall, is if you buy a particularly rare coin and then a large volume of the same mintage appears from a previously unknown source. This is rare, but it has happened in the past.
Many investors mistakenly believe that rare coins are the only one protected from government seizure. This is not true. All gold and silver bullion coins produced by the U.S. Mint are considered collectible and fall into the same category as rare collectors coins. Buying silver collector coins from the government allows you to get the most metal for your money. These bullion coins sell at just above spot price and will trade at market value. So, if silver spikes, you’ll see a good profit. Gold bullion can be bought in the same way, but doesn’t show quite as much upside as silver.
Why is silver such a good choice? Look at the past performance of gold and silver prices and you’ll see that there has always been about an 8 to 1 ratio, gold trading at eight times the price of silver. Currently, gold is trading at around $1600 an ounce and silver is hovering at $30 an ounce. That’s about ten times too low for silver, based on historic trends. Either the bottom will fall out of the gold market or the silver market will catch up – either way, silver is the best choice for investments.
About 90% of all the silver that has ever been mined no longer exists. This is because it gets used up in several of the applications it is used for. Global usage and production have remained the same for the past 20 years. With no net gain in silver, there is a better chance for it to appreciate in value as the natural stores become depleted.This is different that gold. Every ounce of gold ever mined is still in existence today.
As an inflationary hedge, precious metals help you maintain your buying power because they trade inversely to the paper currency of your country. So, if you happen to be in a place that has 5% or more inflation, you can hold your buying power for much longer if it is invested in a stable precious metal.