Category Archives: Diversification

An Introduction to Buying Silver 101

This article is a follow-up to our last blog which discussed the merits of owning physical gold. Both novices and long-time investors stand to benefit from a review of the basics of owning physical silver. The following list contains some, but not all, of the reasons to buy tangible silver. Some items on the list hold true for any precious metal, others are unique to silver.

  1. The most obvious reason to own silver is its comparative affordability. As I write this it?s possible to own physical silver for less than $20.00 per troy ounce. As a point of reference, gold is currently 80 times more expensive than silver. We frequently mention to our customers that it?s far more likely for silver to double in value to $37.00 than it would be for gold to double in value to $3000.00 per ounce. Simply put, if your primary motivation for buying precious metals is profit, silver offers you the best opportunity for appreciation.
  2. Silver is more of a commodity than gold. It has numerous practical uses in the fields of technology and medicine amongst others. Whereas virtually all of the gold mined throughout history is above ground and accessible, most of the silver ever mined is gone, much of it inaccessible in landfills, too expensive to recycle. Estimates of the above ground quantities of gold and silver vary wildly but all agree the accessible silver on this planet is far less than the current silver to gold 80:1 price ratio suggests. Based on supply considerations only, gold is either obscenely over valued or silver is grossly undervalued. We tend to believe the latter is true.
  3. If gold, platinum and palladium continue to trend higher many investors will choose to buy silver simply because the other metals are no longer in the average buyer?s budget. This point was touched on in our first pro silver argument. However, in this scenario silver would likely rise due to higher demand. In a precious metals bull market silver could become or already is ?the only affordable game in town? for many precious metal buyers.
  4. Readily available smaller units of silver would be far more useful in an unlikely but possible currency devaluation or financial collapse as well as during, God forbid, a natural disaster or war. Along the same lines, silver?s liquidity during a short-term financial crisis, whether it be unexpected bills or a medical emergency, makes it far more practical than its more expensive counterparts, gold, palladium and platinum.

Jack Hunt Gold and Silver, 2017 1oz US Silver Eagles Coin

There are numerous other reasons to own tangible silver, but many of these reasons apply to all precious metals, not just silver. I?ll review a few of them:

  1. Purchasing and owning tangible silver can be legally anonymous, especially if purchased through Jack Hunt Gold & Silver.
  2. Unlike bank deposits, equities, Treasuries and other paper investments, physical silver cannot default, go broke or file for bankruptcy.
  3. Physical silver is real?it is tangible. Currency, equities, Treasuries, etc., are just paper and promises from the issuer.

In conclusion it should be said that asset diversification is more important than ever in our turbulent and confusing times. We believe that a balanced portfolio should contain some traditional assets such as real estate, equities, bank accounts and cash. However, we strongly believe that a moderate percentage of one?s liquid assets be in precious metals. The non-commissioned professionals at Jack Hunt Gold & Silver would be happy to assist you in any form of precious metal related transactions. 


Why Cryptocurrencies Shouldn’t Replace Gold in Your Portfolio

The cryptocurrency phenomenon continues with its mind-boggling volatility and millions of dollars gained and lost on a minute by minute basis.

Despite recent setbacks, Bitcoin and other cryptocurrencies have enjoyed significant appreciation since their initial offerings. But is this sudden rise a true indication of crypto’s value?

The Advantages Of Gold Over Bitcoin

Although with luck you may pick a “crypto winner,” I believe gold is a far more useful asset than cryptocurrency.

Here are a few reasons why:

1) A vast majority of cryptocurrencies will fail.

The current rise in cryptocurrencies can be compared to the stock market’s dot.com bubble that burst in the year 2000.

A few internet companies like Amazon and Google survived; the rest failed. It is probable the same is true of cryptocurrencies.

Assuming governments don?t eventually create their own digital currencies, only a few, if any, current crypto offerings have a chance to survive and be profitable.

2) Cryptocurrencies have a lack of security.

Security is a major issue facing the cryptocurrency industry.

There are all too frequent major hacks involving a crypto exchange. With security issues surrounding cryptocurrencies not fully resolved, their ability to compete with gold or traditional investments is limited.

3) Speculation and hype are driving the value of cryptocurrencies.

Since the beginning of 2017 cryptocurrency values have skyrocketed. But this irrational spike in crypto prices suggests this is no more than a bubble.

Most individuals buy them for the sole reason of selling them in the future at a profit. This is pure speculation, not hedging.

Cryptocurrencies vs Gold price volatility

Compared to gold, the price of cryptocurrencies is much more volatile, making them a shaky financial hedge. [Chart: Valuewalk]

It’s a dubious bet to use such a volatile form of currency as a hedge against fiat currencies or inflation.

4) Cryptocurrencies are surprisingly similar to fiat money.

The definition of fiat money is a currency that is legal tender but not backed by a tangible commodity.

This has been the case with all major currencies, including the U.S. Dollar, since the United States abandoned the gold standard in 1971.

It?s clear that cryptocurrencies partially fit the definition of fiat money. They may not be legal tender yet, but they?re also not backed by any sort of physical commodity.

Logic suggests that you can?t hedge against a fiat currency with another form of fiat currency.

5) Gold is liquid; cryptocurrencies are not.

Gold is one of the most liquid assets available. It is easily converted to cash and its value is not restricted by national borders.

The same cannot be said about cryptocurrencies. It’s ironic–as speculation in cryptocurrenices skyrockets, so have the fees to transact in them or convert out of them.

For example, according to BitInfoCharts.com, Bitcoin’s transaction fees have vacillated wildly from a low of $0.68 per transaction this time last year to $55.00 per transaction in late December.

Currently, the rate is $5.00. The fee is fixed no matter how much you spend.

Obviously, these rates are not conclusive to retail transactions. As a result, retailers who were accepting Bitcoin are now backing away from it.

Liquid, Bitcoin is not.

6) Cryptocurrencies do not have gold?s history as a store of value.

While cryptocurrencies have been around for less than a decade, gold has been a store of value for thousands of years.

Over time we’ve seen that stocks and bonds have a minimal or negative correlation with gold, particularly during recessions, making gold a sound hedge against inflation, recession and fiat currencies.

In 2017 a rising stock market went hand in hand with rising cryptocurrency prices. In recent days, sharp drops in the stock market and crypto market were nearly simultaneous.

All this suggests a lack of hedging value in the cryptocurrency market.

Cryptocurrencies Are No Substitute For Gold

The purpose of this article has not necessarily been to criticize cryptocurrencies.

We suspect that a limited number will do very well over time as the technology they represent has a bright future.

This article is simply meant to dispel the notion that cryptocurrencies can somehow replace gold in a 21st century portfolio. The simple answer is they can?t.


Diversification is the Key to a 21st Century Portfolio

It?s no secret that here at Jack Hunt Gold & Silver our focus is on buying and selling precious metals. Being confirmed Capitalists we hope that those who read this consider putting a conservative percentage of their wealth into tangible gold, silver or platinum.

However, unlike many financial “advisors,” our non-commissioned brokers will never suggest that one place a majority of their wealth into precious metals. The truth is, contrary to many of our competitors, we?ve persuaded some overly zealous hard asset fans to spend less on metals than they initially planned.

We encourage our clients to be thoughtful, deliberate and well informed before making any decisions about asset allocation. Our belief is that a properly positioned portfolio for this day and age will contain a mix of equities and cash (both domestic and foreign) along with a healthy percentage of tangible assets such as real estate and precious metals.

Why Invest in Gold and Silver

Why precious metals? At some point higher interest rates and inflation will become an issue both in the U.S. and abroad. In a rising interest rate environment, all dollar denominated assets (stocks, bonds, annuities, whole life insurance) could be at risk. That?s where precious metals come in.

Gold and silver are not correlated to conventional financial assets. Historically precious metals tend to gain, or at least retain, value during times when other asset classes are in bear markets. In fact, gold prices often move inversely to investor confidence.

gold silver diversification portfolio

Investing in gold and other precious metals as part of diversified portfolio can help reduce your financial risk. [Image: Precious Metals IRA]

Despite the obvious advantages of including precious metals in a diversified portfolio, the financial industry has, in the past, been institutionally biased against precious metals. Bankers, stock brokers, insurance agents and financial planners had an inherent conflict of interest as they did not profit when investors diversified into hard assets.

That trend appears to be changing though. We have recently seen a significant uptick in financial advisors foregoing their own economic interests. They are now suggesting that their clients purchase precious metals (even if they do not profit from such a purchase) as a safety net to offset the unpredictable nature of the stock market. In essence, they are advocating that their clients purchase gold and silver as a form of wealth insurance.

Precious Metals Reduce Financial Risk

A recent study found that investors who put 7% to 15% of their assets in precious metals enjoy superior risk-adjusted returns. Yet the average investor has less than 1% of their assets in bullion. If the average investor started allocating 10% of their assets in precious metals, imagine the shock to the financial system!

How much an individual allocates to precious metals is ultimately a personal decision that depends upon one?s life circumstances, goals, risk tolerance and future expectations. If you expect a currency crisis within your lifetime you may want to consider boosting your metals allocation.

Don?t underestimate your current asset allocation. Consider all your financial assets, from brokerage and bank accounts to savings bonds and life insurance policies. In the event of a currency crisis, your investments with these counter-parties (whose liability is your asset) could be at risk. Do you own enough tangible assets to offset that risk?

Please consider Jack Hunt Gold & Silver for all your precious metal needs. We?re locally owned and have been in the same location for over 35 years. Our “no pressure” non-commissioned brokers are here to answer your questions and execute your orders.