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Can new buyers hold gold and silver for decades?

The headlines this morning include many that say Venezuela has devalued the bolivar.

Five zeroes are being dropped from the printed currency.

The loss of purchasing power is said to be 95 percent.

I will bet that these headlines will inspire a few people to look into investing in gold and silver to protect their assets from such a catastrophe.

That is a good thing.

A well-run financial portfolio includes up to 10 percent in precious metals.

These newcomers will have to learn that bullion should be purchased outright, not on leverage.

Buyers should take delivery and arrange for their own safe storage.

They will also have to decide whether they want to wade into numismatics or stay strictly with the cheapest ways to buy metals in the form of bullion coins or bars.

These decisions, as important as they are, can be dealt with fairly rapidly.

Someone who wants to do this all today, starting with a zero position this morning, can have 10 percent in bullion by the end of the trading day and physical delivery before the end of the week.

For people used to doing things rapidly, there will then come the shock of just how slow movement occurs in precious metals.

Though we all tend to remember the fireworks of the Venezuelas and Zimbabwes of the world, as exciting as these are, they really do nothing for investors who are living and working day to day in U.S. dollars, European Union euros, British pounds or Chinese yuan.

In major currencies like these, precious metal movements are very slow.

Are new bullion buyers prepared to take a long view that lasts for decades?

The last peak for gold and silver came in 2011.

It has been more than eight years since silver topped out over $48 an ounce in April of that year.

It is slightly less than eight years since gold was trading (but not closing) at $1,900 an ounce in September 2011.

When I checked Kitco this morning, silver was at $14.70, and gold was $1,185.80.

These metals trade all day long. Up, down, gain, loss.

This gives the impression of speed.

However, looking back eight years, we can see that silver is down 70 percent from its most recent high.

Gold is down 38 percent.

But, in the 10 years before 2011, the percentages were hugely positive.

Both metals still show large gains from the lows of 2001.

Will buyers of precious metals who were inspired by today’s headlines about Venezuela stick it out for the long term?

That is the most important question for them to answer.

Buzz blogger Dave Harper won the Numismatic Literary Guild Award for Best Blog for the third time in 2017. He is editor of the weekly newspaper “Numismatic News.”

 

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