Humans have been putting value on the sundry baubles and items that make up our world since the beginning of time. We put value on land, on water, on animals, and, of course, on those little glittering things we call precious metals. Everyone knows gold and silver, but even the likes of platinum and palladium have made names for themselves as some of the most valuable pieces of earth in the world. Since the US formally terminated the Gold Standard in 1971, the value of these metals has only risen. In 1971 the price of gold was $35 per ounce. Adjusting for inflation, that’s about $295.86 per ounce in today’s money. As you can see on the chart above, it’s gone up considerably since then. But even with such high numbers, is the precious metal market one worth investing in?
With inflation rates on a steady rise, it can be enticing to want to invest in gold and its shiny siblings. According to Fat Prophets analyst David Lennox in a 2021 interview, “the higher inflation goes, that’s good for physical assets.” After all, gold is a dependable asset and has been for years. No matter where you go or what currency you trade in, gold has undeniable value. In times of political instability, when a government’s fiat currency might not be of much use, gold will remain valuable and sought-after. The same is true of silver. Though much cheaper at $22.54 per ounce, silver’s lower cost means it’s also easier to acquire and accrue. Silver also has a number of practical applications, such as in the creation of batteries, that makes it a sought-after commodity. Investing in these metals also diversifies one’s portfolio, a must if you’re a serious investor.
That said, investing in precious metals is not without its pitfalls. Warren Buffett, for example, has long railed against gold and its value, saying in a 1998 speech at hard, “It has no utility.” Unlike, say, stocks, gold doesn’t produce any passive income. When you have gold, it just sits and accrues value until you sell it off, but until you sell it off, all you have is the gold itself. Any investment in gold is speculation, a bet that gold’s value will increase to a point where you can eventually profit off of it, similar to Bitcoin and other cryptocurrencies. And like those, gold will do nothing for you until you sell it. It should be noted that silver, on the other hand, has quite a bit of practical utility, and Buffett bought nearly 130 million ounces of silver in 1998.
Whether gold’s benefits outweigh its risks or vice versa is up to you. However, the aforementioned Warren Buffett has seemingly changed his tune on the metal with “no utility.” In August 2020, his holding company Berkshire Hathaway acquired nearly 21 million shares in mining company Barrick Gold with the shares’ value coming to a total of $563 million. If the notoriously gold-averse Buffett can change his tune, perhaps gold is a safer bet than people think. Regardless, investing in anything is a gamble. Even the safest bets are still bets, and it’s up to you to decide where and how your money ought to be spent. Investment is one of the great paths to financial independence, and in some cases, one’s path might be paved with gold.
Bellevue Rare Coins has been a trusted, family-owned business serving the greater Seattle since 1979. Specializing in buying and selling gold, silver, diamonds, watches and jewelry. We are your precious metals dealers of the Pacific Northwest.