“Everything has a life cycle…and currencies are no different” according to Lynette Zang, who is currently the Chief Market Analyst at ITM Trading and has been studying currencies and the stock market since the 1980’s. Economies, businesses, and even currencies have a life cycle and follow patterns. It’s important, especially as an investor, to understand where we are in that cycle and the different strategies you should consider employing as things change. Because they will change. 

We interviewed Lynette to learn more about how and why you should consider buying gold and silver as part of your wealth management strategy. If you’d like to watch the full interview, you can find it on our Youtube channel here. She has a wealth of experience to share (quite literally) based on her background as a stock broker for 20 years and then being in the precious metals trading business for another 20+ years. In this article, we will recap the top 5 questions investors like you asked about precious metals investing.

Why buy gold and silver in the first place when we have the US dollar (but especially now)?

It’s important to understand that the US dollar value (and all fiat currency) is actually based on debt and is not backed by a commodity. Dollars can be printed and therefore money “created.” The more money that is created, the less value it inherently has. Gold and silver on the other hand are not unlimited, they are a finite resource. You cannot print gold. Therefore, it holds its value over time. 

While our current economy operates on trading goods and services for dollars, it is important to note that when you strictly hold dollars, you are losing purchasing power over time. Take a look at the FRED chart below to see the purchasing power of the US dollar over time. 

It would make sense then to hold a portion of your wealth in a commodity like gold and silver that will hold their value over time. “The reason why it’s critically important to hold real physical gold in your possession and silver as well, is because we are now at the end of this fiat money government based, debt based system,” according to Lynette.

How do we know that? One is that the purchasing power of the dollar is down to three cents (based on the FRED chart mentioned above). The second is rapid inflation. We are seeing this in the real estate world with the fact that there are rent moratoriums in place and rental caps, yet property taxes and interest rates are continuing to rise. Currently, gold is undervalued and real estate is overvalued. We are likely to see a reversal of that in the coming years. The best way to cover yourself is to hold precious metals that will retain their value to cover your expenses. “You need the gold to make sure you can always pay your property taxes, that if there is a loss of income, the strategy is that gold will recoup that for you,” says Lynette. 

How do you actually buy gold and silver?

“If you don’t hold it, you don’t own it,” Lynette states. That is the first key guideline to follow when looking to purchase gold and silver assets. You will need to work with a precious metals trader to actually purchase gold and silver. The precious metals trading industry does not actually require extensive licensing and as such, there are about 3,000 gold and silver dealers in the country, many of which may not have the expertise you will want when diving into this asset class.

You have to do your due diligence just like you would if you were vetting a multifamily real estate syndicator as a passive investor. Start by researching the company and look for key information such as how long they have been in business, how much experience they have, what are past clients saying about them, and what focus they put on education vs just selling you their services. 

What will help you be successful in building a solid precious metals investing strategy is a partner that will help you not only understand how to buy and sell but how to properly utilize your precious metals once you have obtained them. This requires a focus on building long term relationships instead of short term transactions.

How do you know how much you need to invest in gold and silver?

First off, there is no one size fits all strategy. A proper partner in this space should be evaluating all aspects of you as a client in order to come up with a strategy that makes sense. Factors to consider are how much wealth you currently need to protect, your age, current cost of living including what your fixed debt is each month, and your growth goals. 

Lynette recommends using that information to then determine how much gold and silver you would need to sustain your current standard of living for 10 years, as this is a more conservative approach. Your balance of gold vs silver will also depend on the factors mentioned above. Silver is good for day to day “barterability” and can be used for smaller purchases like buying groceries or gas. Gold helps you fund larger expenses in your life and allows you to carry “a lot of wealth in a tiny package,” according to Lynette. Each play a role and the amount you need will be determined by your lifestyle and lifecycle.

Is buying a gold ETF the same as buying gold?

The short answer is no. When you buy an Gold ETF you are not actually buying gold itself. Remember, if you don’t hold it, you don’t own it. You are simply purchasing shares in a stock that buys gold. The managers of that company decide what type of gold and how much to hold on to or sell off each day. You do not get a say in that decision making process.

The other main difference between owning gold yourself vs through an ETF is that ETF’s can only be converted into dollars (which, as was mentioned before, is losing value). This does not help you protect your wealth any more than just holding on to dollars. If you own real gold and silver, you can exchange them for any currency, not just dollars. This is the inherent value of having precious metals as a part of your wealth strategy.

How does the strategy change once we are in a different part of the lifecycle? 

As we discussed previously, everything has a life cycle, including you. Where you are in your current stage of life will change as well as the life cycle of the economy and therefore your strategy should change as well. A valuable aspect of owning gold and silver is that you can exchange it for any currency when needed. There are times when it makes sense to hold on to more gold and silver and times when it will make sense to exchange it for actual currency. 

Working with a trusted advisor who is in it with you for the long run will allow you to know when it’s time to change your strategy and help you through the process. When vetting vendors, be sure to look out for indications that this is how they operate and be wary of anyone just trying to help you buy and sell at this moment in time. Investing in precious metals should be a lifelong component of your wealth strategy.