If you are concerned about the volatility of the stock market, you’re not alone. The extreme highs and lows of the stock market often lead investors towards safe-haven assets, like bullion. Historically, the Precious Metals market has an inverse relationship with the stock market, meaning that when stocks are up, bullion is down and vice versa. This inverse correlation holds firm even when the stock market has crashed. Though Gold and Silver don’t automatically rise with every fall in the stock market, history points to bullion as a hedge during stock market declines. Bullion allows you to be prepared for such catastrophes, providing you with a hedge against economic uncertainty.
A common question asked when buying gold or silver is, “How much should I have”? And there is a complex answer that is very personal for each person or family putting resources into gold and silver. Many factors play into the decision to own precious metals, and there may be multiple goals for the metals to achieve. Someone may invest a portion of a portfolio into metals for diversification, another for speculation, and yet another as a store of value. Or there may be some combination of factors. Our goal with this article is to leave you with the tools and the mindset to determine how much of your resources to allocate to physical metals in a way that is right for you. What do Experts Recommend? The typical recommendation for how much gold an investor should hold in a portfolio ranges between 5% and 20%, depending on who you ask. This means if you have $100,000, you should allocate somewhere between $5,000 and $20,000 into gold. The justifications for the ranges analysts provide vary, but the recommendations are rarely nuanced enough for the average investor. To make matters worse, there’s a lack of rigorous analysis or transparency about where that recommendation comes from. This can leave investors feeling somewhat lost because the recommendation does not work for their situation. For example, many investors who diversify into gold also have some holdings in silver. And for good reason. Silver has many of the same benefits as gold but is more affordable and has a higher rate of return. Does a recommendation of 5%-20% of holdings in gold include your silver holdings, or is it in addition to a silver allocation? And is 5-20% the right number? The Efficient Frontier of Gold There’s a concept in investing called the efficient frontier. The idea is to create a diversified portfolio that provides insulation from risk while maintaining your returns on investment – and this can be charted for a visual representation. By plotting out the expected returns and variance, investors can gain an idea of what allocation their optimal portfolio should have.
In a world of economic uncertainties and volatile markets, investors seek stability and security in their portfolios. Precious metals like gold and silver have stood the test of time as reliable assets that hedge against inflation and economic downturns. Whether you’re a seasoned investor or just starting on your investment journey, deciding to invest in gold or silver comes after careful consideration. This guide will navigate you through the landscape of gold and silver bars, coins, and rounds, helping you make informed choices that align with your investment goals. There are thousands of options in the marketplace today, and it can be confusing trying to understand their differences. By the end of this guide, you should have a grasp of the criteria used to categorize the different types of gold, silver, and platinum products in the market. Selecting the right product for your goals will be simplified when you understand what kinds of products best align with your preferred strategy. Bars, Coins, and Rounds: What’s the Difference? When investing in precious metals, there are three primary forms: bars, coins, and rounds. Each has its own unique advantages and considerations. Bars Sovereign mints and private refiners typically produce gold and silver bars. They offer simplicity and purity, making them a popular choice for serious investors. Bars come in various sizes, from small increments to larger denominations, catering to various budgets and investment strategies. Bars are best for those who want to store a large amount of wealth in a dense format. Some options to consider include the 5 ounce Silver Bar from APMEX, which boasts a low premium over spot. For those interested in something a bit more unique and collectible, the 1 kilogram Cast Poured Silver Bar from Pioneer Metals is also an excellent choice. Coins Coins hold historical significance and can be both a collectible and a bullion investment. Sovereign-minted coins, like the American Gold Eagle and Canadian Maple Leaf, are backed by governments and carry legal tender status. These coins often command higher premiums due to their recognized quality and origin. Coins are best for those who want to keep their investing strategy simple and reliable. Rounds Rounds are like coins but lack legal tender status. They are often produced by private mints and offer a more cost-effective way to invest in precious metals without the associated premium of sovereign coins. However, in recent years, the premiums on rounds have increased to the point where many sovereign coins have price parity with rounds. With careful purchasing, however, investors can get lower premiums on rounds, making this an ideal choice for investors seeking a price advantage.
When is the best time to buy precious metals? This is a conundrum that investors strive to decipher. Is there a better month to buy gold? Or quarter or a season? Should I buy during economic strife or when the market is booming? Should I try to time the market or stick to a dollar-cost-averaging strategy? And what about silver? December’s average gold price over the past ten years was $1,411, while June’s average was $1,501. On average, there is about a $90 difference between December’s and June’s prices. When gold is priced at approximately $2,000 per troy ounce, $90 is about a 4.5% difference. There is a vast range of price movements in any given month, so we also looked at the highest highs and the lowest lows. Over the past ten years, the lowest price did occur in December, but August had the highest gold price. The goal of any asset or investment should be to buy low and sell high. Does this mean you are guaranteed to profit if you purchase in December and sell in June or August? Unfortunately, no, because the variance within a month is an overriding factor. The lowest recorded closing price in June was $1,168, while the highest was $1978. Every month, there is a difference between the highest and lowest recorded prices of $800 – $1000. For example, if you bought gold in December 2020, the average close price was $1862. And in June 2021, the average comparable price was $1835, but the prices varied throughout the month. You would have made money if you had sold at the start of June. You would have lost money if you sold at the end of June. If you buy in December every year, you theoretically will get a better price on average. But the truth is more complex. When you break the data down and look at the numbers closer, you see the variance in each month is too large for this to be a reliable strategy. Similarly, we do not find there is one quarter or season of the year where you will have an advantage. Is there a Better Month to Buy Silver? We performed a similar analysis on silver using the past ten years of silver prices and found that December and June had the lowest average prices at $21.24 per ounce. The highest average price was in February, at $22.27 per ounce. This difference is $1.03 between the highest and lowest average prices, less than the premium on most silver products. Like our prior analysis, the difference between the lowest and highest prices in each month is significant. This negates using a particular month as a buy or sell indicator for silver, like gold.
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