Right now, we have seen the stock market for the most part crash as never before. We are in the middle of a global pandemic fighting COVID-19. Oil has gone negative in its pricing in recent weeks. The interest rates on US Treasuries are at an extremely low level and like oil have been negative. The yield curve has been inverted several times in recent months, meaning short-term bonds are paying higher interest rates than long-term bonds. And precious metals are fluctuating and are volatile as ever. Nothing in the realm of economics is making sense as, despite millions of Americans losing their jobs, the stock market seems to be in a mini-rally. A potential client talked to me the other day about investing in gold and silver instead of buying well run companies on sale due to the pandemic. Here is what I advised them.
Stock Prices
The price of many well-run companies are at multi-year lows due to the global pandemic. What does not make sense is the small comeback in the markets despite rising unemployment figures, the fact the most companies will be missing their earnings estimates or adjusting them due to the situation, and the massive levels of debt that the country has added to its balance sheet.
Are all companies worth buying right now? No, you still need to do your homework on the companies you decide to purchase. You need to buy them while they are low, as many are now, but with a margin of safety to protect your capital. By doing this, you will be able to achieve massive returns on these investments when they rebound after we have better control over the pandemic.
There are blue-chip, medium-sized, small capitalized companies, as well as many foreign companies that deserve your attention. If you do your homework before purchasing any of these companies that are basically on sale, you will have the potential to make excellent returns on your investments. Much more so than if you were to purchase precious metals.
Gold and Silver
In times of uncertainty, people tend to flock to the safe haven that are precious metals, gold, and silver. The problem is gold and silver are incredibly volatile and right now are not acting as the safe haven people think that they are. Gold has seen modest increases while silver has actually gone down and then back to where it started.
I collect coins, and some silver bullion is the price is advantageous. The problem with collecting gold and silver bullion is finding someone willing to pay spot prices for your actual metals. Many generic silver producers make 99.9% pure silver rounds and bars, and then some governments make silver and gold bullion coins for purchase at a premium. Again, the problem with these coins is that a buyer will pay below spot on most occasions, meaning you need to buy when the price is depressed, or you run the risk of not doing well on these purchases.
If you want to buy gold and silver, which I think can be a wise investment if done correctly, is to buy graded coins. While I am not advocating the purchase of ungraded coins from the Internet and sites such as eBay, an ungraded coin purchased from a legitimate coin dealer is a better option. But the best option is to buy a coin graded by an independent third party such as NGC or PCGS. These companies ensure that the coin you are purchasing is real and will give it a grade on its condition.
The reason I advocate buying precious metals as coins is two-fold. First, you are buying gold and silver that has value. And second, you are buying a coin that also has value in addition to the gold and silver content it has. Recently I purchased a 1924 $20 Gold Double Eagle or also known as a Saint Gaudens. This coin was last produced for the public in 1932 and contained almost an ounce of gold. The coin I bought was for about $100 over spot at the time, but it was graded a Mint State 65 by NGC with a current value of about $2,200. Gold is currently around $1,700 an ounce. If you look, you can find coins such as these available at or near spot that also have tremendous value as a coin. Other options are the silver Morgan and Peace dollars that are made of 90% silver and like the gold coins have about an ounce of silver in them.
While I do not recommend gold and silver bullion as long-term investments when compared to stocks, they are an option for those who need to be more conservative in nature. But if you are determined to purchase gold and silver, I highly recommend buying these precious metals as graded coins instead of just bullion.
If you have any questions or need any additional information, please feel free to reach out to me directly. As always seek the help of a Registered Financial Consultant if you need assistance. To join our email newsletter, please fill out the form below.
