There are many good reasons to invest in physical gold and silver. Unfortunately, many gold dealers spend a lot of time emphasizing the not-so-good reasons to make a precious metals purchase. They think that scaring you into buying gold and silver might be the most effective approach to making a sale.
The sad thing is that it works. But it also misleads investors, and many of them may end up regretting their purchase. Perhaps they would rather not have bought gold and silver, or perhaps they bought too large a position. In the end, such fear rhetoric erodes the integrity of the industry.
Investing in gold and silver ought to be an affirmative (not negative) choice. You have to do your due diligence. Never make a decision based on fear. With that said, here are a number of bad reasons to purchase gold. If you hear any of these reasons being advanced by a dealer, you will be able to discern right away who may or may not be a trustworthy source,
Failing Banks Can Seize Your Deposits
What gold dealers are saying: Article II of the Dodd-Frank Reform Act includes provisions in which certain banks, experiencing financial distress, are allowed to convert some of their deposits into equity in order to fulfill capital requirements.
The BS: This is a favorite fear tactic among unscrupulous gold dealers. It doesn’t paint the entire picture in which the Federal government has various protections in place for its depositors. If such a thing were to occur, it would destabilize not only the integrity of the banking system but also that of the government's role in regulating the banking system.
Closer to reality: If such a thing were to occur, the event would indeed be rare, and the government would likely do everything in its power to make sure depositors get the full value of their money back ASAP.
The verdict: If any gold dealer tries to use this BS to get your business, consider them untrustworthy.
Government Can Confiscate Certain Gold Coins
What some gold dealers are saying: There are a number of highly-unscrupulous dealers out there who are stoking the fear that the government may one day confiscate your gold. In addition to this, they point you in the direction of certain gold coins that they claim are non-confiscatable.
The BS: There is no way that anyone can possibly predict whether the government will one day confiscate gold from Americans or prohibit its ownership. And in the exceedingly rare circumstance that such a thing does happen, no gold expert can ever know which coins are confiscatable and which ones are not.
Closer to reality: A repeat of the Executive Order 6102, wherein in 1933, the government forbade “the hoarding of gold coin, gold bullion, and gold certificates within the continental United States,” is extremely unlikely. Aside from its occurrence nearly a century ago, there is no way to substantiate this claim. It’s a gross fear tactic—not only to get you to buy gold, but to trick you into buying specific coins that may prove more favorable to the dealer than to you.
The verdict: The claim the government may one day attempt to confiscate certain “confiscatable” gold coins from Americans is almost pure fiction designed to fool the gullible. It’s one of the least smartest reasons to buy gold.
The Market Is About to Collapse
What gold dealers are saying: The economy is in shambles and the market is about to collapse, so you should take most of your assets and use it to buy gold and silver.
The BS: This is another fear tactic in which dealers will conflate today’s economy with that of the 2008 financial crisis. If you remember, gold rose around 240% and silver skyrocketed by an astounding 500%, finding its peak in 2011. Although these figures are true, the way gold dealers use this statistic is complete BS.
Closer to reality: The market and economy always go through cyclical downturns, whether its a correction, bear market, or recession. What goes up also goes down. Thanks to the resilience of the American economy, it has gone up higher much longer than any time it experienced a downturn.
The verdict: Choosing to hedge your portfolio with some gold and silver allocations is a calculated choice you should make on your own terms. Also, any dealer who tries to scare you into buying gold and silver is probably violating state or federal security laws. Remember, your hedge is your choice. And it’s a decision that shouldn’t be made out of fear.
What some gold dealers are saying: It’s in your best interest to sell your equities and debt securities and convert them to gold before they, along with your cash, lose all their value.
The BS: Not only would no self-respecting investment advisor say such a thing, but hardly any gold sellers are licensed financial advisors.
Closer to reality: Beyond their specific industry knowledge, fueled by the pressure to make a sale, many dealers/brokers don’t know much about the broader market or economy. Besides, any individual who gives investment advice without proper licenses and registrations is violating securities laws.
The verdict: Don’t trust anyone who gives you financial advice but lacks the proper licenses and registrations. This especially applies to precious metals salespeople (most are not investment advisors).
Gold and Silver Values Will Rise Over Time
What gold dealers are saying: Gold and silver will guarantee positive returns over time, boosting portfolio growth.
The BS: Although both gold and silver prices have risen over the last 50 or 100 and more years, that’s a moot point. Nobody can guarantee you anything.
Closer to reality: There’s a chance that gold and silver may continue rising in value, considering that both have been used as monetary metals spanning over a couple of millennia. But the truth is that predicting the future is something humans simply can’t do. And if anyone is trying to convince you otherwise, then it’s time to walk away.
The verdict: There are no guarantees for anything concerning financial returns.
There Are Short-Term Trading Opportunities in Gold and Silver
What some financial experts are saying: Gold and silver are about to jump in the near term and you don’t want to miss the boat on this trade.
The BS: First, most brokers and dealers are not skilled short-term traders, and chances are that neither are you. Second, most skilled traders have a plan to exploit both the upside and downside, as either outcome is possible in the near term (e.g. they’re not just looking to buy but also go short).
Closer to reality: If you’re an active trader, then you’re well aware of the various financial instruments you can use (in addition to the metals) to place short-term trades. But if you’re an investor, then this is not your domain. There’s so much more to short-term trading than you may think, and unless you’re willing to assume the time and costs it takes to gain skill in this area, then it’s probably not for you.
The verdict: Gold and silver are investments, and investments imply a long-term hold. Don’t let the allure of exploiting short-term volatility distract you from the principles behind holding “sound money,” which is to diversify and stabilize your retirement savings, investment portfolio, and long-term wealth.
Gold and Silver Can Provide Portfolio Income
What some people believe: There’s this term you’ll hear about in certain investment circles called “homegrown dividends.” It essentially means you can take partial profits from certain assets that appreciate in value. Not all of these assets are yield-bearing, and they refer mostly to equities. Some gold investors and dealers claim that gold is among these assets.
The BS: Any advice that tells you to sell your interest-bearing assets for gold is either deceptive or idiotic.
Closer to reality: If you rely on interest-bearing securities to pay for your retirement and have very little money to buy gold, then think twice about precious metals. It might have served you at one point early on, but now it might be too late.
The verdict: Gold and silver are not substitutes for interest income. If you hadn’t already purchased the metals early on, enough for them to appreciate, then it won’t help you if you have very little discretionary funds to invest.
Fear, and Doom & Gloom
What fear merchants are saying: The economy is going to shambles; the dollar is going to lose all its value; the dollar’s reserve currency status is being threatened; the Federal Reserve is transferring wealth from the poor and middle class to the wealthy elite; etc.
The BS: Many of these are partial truths, and partial truths are very dangerous.
Closer to reality: The dollar is not infallible. The Federal Reserve is not always right in their monetary actions. The dollar, as with every fiat currency, loses value over time. And yes, there are geopolitical developments that indicate a move away from the US dollar, considering the dollar’s dominance and monetary hegemony in the global economy. But none of these reasons constitute primary reasons to buy gold, believe it or not.
The verdict: Don’t buy physical gold and silver because you are fearful of the economy. Generally, it’s never a good thing to take action solely based on fear. Buy gold and silver only because you’ve determined how they can empower certain aspects of your financial well-being. There are many ways in which gold and silver can be powerful assets to own. You have to figure out which ones may work best for you.
What unscrupulous salespeople do: Sales people have a quota to meet. That’s pressure on them, not the buyer. Still, some salespeople use tactics to get people to buy things quickly without spending enough time to do their due diligence. Such high-pressure tactics are very much alive and well in the precious metals industry.
Closer to reality: Making a physical gold and silver purchase is a big decision. There are thousands of other investments you can make, so choosing gold and silver over numerous other possibilities requires plenty of thought and time. Not only must you weigh the pros and cons of holding precious metals in a portfolio, but you have to decide between coins and bullion, and the various numismatic types available to you. There are others, too, that require research, such as the price of premiums between different gold dealers and the quality of the dealers themselves.
The verdict: Pressure tactics may work in favor of the seller but hardly will they ever work in favor of the buyer. If a dealer tries to pressure you into purchasing anything, just walk away.
Gold Price Predictions and Targets
What experts are saying: You've probably read that Bank of America predicts gold prices to reach $3,000 an ounce. As of early summer, Goldman Sachs analysts held a more modest price prediction of $2,100 to $2,300 an ounce. Some experts, like Nick Barisheff, CEO of Bullion Management Group Inc. believe it will go as high as $10,000 an ounce.
Closer to reality: There are thousands of predictions out there. Some analysts tend to be right more often than they’re wrong, but still, there’s no guarantee that the predictions will materialize, especially in a dynamic economic environment where things are changing constantly.
The verdict: Do your own homework and decide for yourself which prediction might be most reasonable. Don’t buy gold just because an expert says it’s going to rise in value. Buy it because you firmly believe the probability that it may rise based on your own research.
The Bottom Line
As we said at the top of this article, investing in physical gold and silver should be an affirmative choice. It requires time and due diligence. Such a decision should never be made out of fear. There are many good reasons to purchase gold and silver. Do your own research and find if any of the better and smarter reasons match your financial goals and means.