Written by Olivier Garret May 01, 2018
A customer of mine who is 55 years old recently asked if it was not too late for him to get into precious metals.
The answer is no—it is not too late to invest in gold and make a profit at any age. Quite the contrary, with the market showing the early signs of a correction, it is, in my humble opinion, a perfect time to invest in precious metals.
The first rule of successful investing is to buy assets on the cheap, not when they are peaking. Yet, most investors would rather buy Bitcoin when it hits $19,000…
The reality is that stocks and bonds have been in a major uptrend for 9 years and 20+ years respectively, and so are overdue for a correction. Gold, on the other hand, peaked in 2011 at $1,900 and has only recovered part of its loss so far.
It’s ironic that people were bullish on gold when it hit $1,900 and turned bearish when it dropped to $1,100.
That’s behavioral economics in action…
A Question You Should Ask Yourself
I believe a recession is due within the next year. As soon as the markets tumble, the Fed will resume quantitative easing. In turn, precious metals will continue the rally that was halted after the end of QE3 in 2010.
A more important question you should ask yourself, especially if you are close to retirement, is this: Can I afford to lose 30% or more of my retirement savings if the stock market crashes? Do I have a hedge or Plan B in such a scenario?
That’s where gold comes in handy….
Most investors, including myself, buy physical gold not to make a profit, but to hedge against inflation, stock market crashes, currency devaluation, and all sorts of financial crises.
The reason is that gold has retained its value for 5,000 years. It has been a unit of exchange and a store of value since the dawn of humanity.
Another advantage is that gold is not correlated to the stock market. Put simply, when stocks zig, gold zags. And don’t take my word for it, just look at the data:
What Gold Is the Best Investment?
There are many types of to choose from. And if you are new to gold, you might get quickly lost in the options. So, here’s a quick guide on picking the best bullion as a long-term investment.
As far as choosing between gold coins vs. gold bars, both are good investments. Bars are usually a bit cheaper but they also tend to sell at a smaller premium. What really matters is the spread between the selling and buying price of bullion.
Many investors are willing to pay a premium for well-known sovereign coins like American Gold Eagles which can often be resold at higher prices than lesser-known coins or bars.
Speaking of which, don’t let dealers sell you on semi-numismatic or commemorative proof coins. These are terrible investments that many dealers push because they are high-margin products.
They will often cost you 10% or 15% more than standard Gold Eagles and will resell for far less than Eagles if you ever need to sell them.
As for smaller coins and bars, I wouldn’t generally recommend fractional coins (1/2 oz, 1/4 oz or 1/10 oz) as they come with higher premiums. That said, unlike semi-numismatic coins, they generally resell at a premium.
Ideally, you should stick to 1-oz gold coins (such as American Gold Eagles, Canadian Gold Maple Leafs) or 1 oz gold bars. They are the most liquid and cost-effective bullion for most individual investors.
If you don’t have a budget for a 1-oz bar or coin, simply use bullion savings programs such as MetalStream® or save that amount yourself. Over the years, you can build up a nice nest egg of gold without having to compromise your returns by opting for higher-premium gold products.
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