Investment pools sell an undivided interest in a big pile of gold and silver somewhere. Avoid investment pools like you would a rabid bull dog. I can’t tell you how many mornings I have come to work to discover that yet another investment pool evaporated, taking the customers’ money with it. It doesn’t matter which Big-Name company runs the pool, don’t buy in. The same goes for people who want to sell you silver and gold and hold it for you — absolutely not.
Exchange Traded Funds
ETFs are investment pools that trade like a stock on an exchange. ETFs own a large pile of gold or silver, so ETF shares rise and fall with the metals’ price.
Owning ETF shares confers no right whatsoever to cash them in for physical silver or gold. They are only a paper investment whose price is related to gold or silver. ETFs are concerning for two reasons…
- Having carefully read the terms of several ETFs, I concluded that they may not possess the gold they claim to own. ETFs are allowed to own claims subrogated several times.
- An ETF is a paper investment, and its value depends on the company and a long chain of suppliers and depositories – counter-parties – to make good on their promises.
Futures & Options
Futures are contracts to buy a specified amount of gold at a locked in price at a specified time, for instance, a 100-ounce gold contract for December 2019 at $1,510/ounce. For this contract you put up good faith money or “margin.” On 100 oz of gold for December 2019, the margin is $4,500 or about 3%. If the contract’s value falls, you have to pony up more margin money, but for $4,500 you control $150,000 worth of gold – The leverage is enormous.
Options are options to buy or sell a futures contract at a specified price for a specified time. If you are not a professional trader, futures and options are a bad idea. You will lose every time – buckets and barrels of money.
Gold and silver stocks are NOT an investment in silver or gold, but rather, an investment in a company that produces silver or gold. Those aren’t the same thing. Metals may soar while a minning company may experience all sorts of production failures. That adds a whole new layer of risk to your investment. The advantage of minning shares is that they offer leverage to the gold or silver price because they own metal in the ground which they can produce at some price under the prevailing spot price.
Getting help picking gold and silver stocks is essential. Here are two great services for that:
- David Morgan at http://themorganreport.com/join
- Steve Saville a http://speculative-investor.com/new/subscribe.htmlhttp://speculative-investor.com/new/subscribe.html
For a good minning stock broker (if you want to invest at least $50,000) you can contact us and we will recommend a broker we have known for thirty years and trust. We have no financial interest in and receive no kickback for making these recommendations.
Physical Gold And Silver
Physical gold and silver are the only financial asset that is not simultaneously somebody’s liability. They are simply the ultimate form of cash, and have been for 4,500 years. They require no counter-party to perform, to deliver the goods, to pay a dividend, to pay a bond coupon, to make a profit. They are valued for what they are at market price, no contingencies, no liabilities. Owning silver and gold that somebody else holds for you is like sitting down to lunch in Tennessee to eat a hamburger stored in New Jersey — it’s useless. You want your gold and silver in a place where you can get your hands on it 24/7*. No other investment is like gold and silver, which is why paper versions of “ownership” do not bring the same benefits as physicals.
*The only exception to the “no distant storage” rule is if you have a very large trading position, especially in silver. Then you can store it in one of our recommended depositories.