The American people are being bombarded with advertisements and tv commercials urging everyone to invest in gold and silver. They parade a few people who claim to have bought gold (usually in the form of coins) at least 20-30 years or more ago. They claim that their investment in gold has quadrupled, making it sound like the same thing will happen to everyone who invests in gold.
If you listen carefully or read carefully, you will see that they also push investing in silver.
So, is investing in precious metals like gold and silver a good idea?
According to one source, silver sold for around $5 an ounce in 1999. It held constant until around 2004 when it saw a small increase followed by a decrease and then a steady increase.
In 2008, silver had risen to about $20 an ounce, which means that anyone who invested in 1999, would have quadrupled their investment.
If you recall, the recession began around the end of 2007 and early 2008 and the value of the dollar fell. The more the dollar fell, the more the price of silver increased.
In 2011, silver reached the price of around $48 an ounce. In 1012, a friend convinced us to invest a small amount into silver. We purchased $235 in silver coin, which at the time went for just over $42 an ounce. It was all we could scrap up at the time.
By the end of 2012, there were signs the recession was ending and the value of the dollar rose, meaning the value of silver and gold decreased.
So, how has our small investment of silver panned out? Has it been profitable?
On Nov. 13, 2018, silver was selling for $14.03 an ounce and our $235 investment was worth a total of $75.38, for a net loss of $159.62 or 67.92%.
Okay, that’s silver, but what about gold?
On Aug. 11, 1999, gold sold for $256.50 per ounce. By Jan. 10, 2006, gold had risen to $543.50 an ounce. Then the recession went into full swing and as the value of the dollar fell, gold skyrocketed to a high of $1,826.00 an ounce on Sept. 1, 2011.
Had you invested in gold in 1999 and sold it on Sept. 1, 2011, your investment would have increased by 711.9%. that sounds great and seems like a great incentive to invest in gold.
However, the current price of gold is about $1,221.30 an ounce. If one had purchased an ounce of gold on Sept. 1, 2011, they would have lost $604.70 or 33.1% of their investment. Longer-term, had one invested in gold back in 1999, that investment would still be worth 476% more, meaning it would still have quadrupled.
Before investing in gold silver or other precious metals, understand one basic truth – the value of gold, silver and precious metals is inversely equal to the value of the dollar. As the dollar goes up, gold, silver and precious metals go down, but if the dollar falls, they tend to go up.
I recall hearing one investment broker say that investing in gold, silver and other precious metals equates to betting against the US dollar.