People concerned with fluctuating markets and the stability of US currency have been investing in precious metals for years. While the price of gold and silver also fluctuates, investing in precious metals is usually a safe venture. Even investing in small amount of gold and silver can pay off down the road. If you get in a tight spot or lose unexpected money in other investments, you can sell gold and other precious metals or stones in order to help you get through. Even jewelry can be an investment, as buyers are always looking for quality pieces. If you’re looking to invest in gold or see a return on gold you already own, it’s important to understand the common myths that are out there. Here are five common myths that you should ignore.
Rising Interest Rates Hurt Precious Metals Prices
Rising interest rates really don’t have a lot to do with the price of precious metals. In fact, in the 1970’s when interest rates were rushing upwards, gold and silver prices went soaring. Real interest rates do have a bearing on the price of precious metals, but what matters is if the interest rates are positive or negative. If interest rates are still staying below the rate of inflation, then that’ll work in favor of precious metal prices. Rate surges need to stay behind the curve, but if they do, then prices for gold and silver will be favorable.
The Government Might Confiscate Your Gold
This myth comes from an executive order given in the 1930s by then-president Franklin Roosevelt. The order prohibited people from stashing large amounts of gold away and required them to exchange their gold for cash. However, the order didn’t authorize government agents to randomly sweep safe deposit boxes and bank vaults. For the most part, people voluntarily surrendered their gold in exchange for cash and in only a few rare cases were bank vaults raided after the banks had failed. It’s very unlikely that the government would ever ask for the surrender of gold assets today, especially since the dollar is no longer on a gold standard. The government also has no way to keep tabs on who owns gold bullion if you buy it from a dealer and keep it in your own home.
Rare Coins Cannot be Confiscated
Be wary of rare coin dealers who mark up their prices claiming that collectible coins made from precious metals cannot be confiscated. Your price will be higher than the amount of metal in the coin is worth, and there is no guarantee that coin collectors will always value the coin as highly. Since there is little chance of the government confiscating your gold in the first place, it doesn’t make a lot of sense to buy numismatic coins solely because of the idea that they won’t be confiscated.
Gold Stocks Offer a Much Higher Return
You might’ve heard that gold stocks are a safer option than gold bullion, but records show that long-term investors actually saw a better rate of return with gold bullion. From 2000-2014, gold saw a 309% gain, whereas gold stocks saw only a 122% gain. While in the short term a rise in the market my see you a better return on gold stocks, when the market falls, stocks in gold and silver plummet much lower than the actual metals. If you’re looking for a longtime safe investment, bullion is a better choice.
Price Manipulation Makes Gold a Poor Investment
Unfortunately price manipulation does take place, which can make things hard for the average investor. However, price manipulation is going to affect all investment assets, not just precious metals. Price manipulation starts to matter when prices are set artificially high. In some cases they are set low, which is actually helpful for buyers. Precious metals can actually be safer than other assets in fighting price manipulation because it is a hard product instead of a mere representation. Prices are determined by supply and demand. If you have hard product in your possession, when demand outstrips supply, prices are going to rise, protecting your investment.