Protect Your Wealth With
Precious Metals

Most people have at one point heard that gold and precious metals are a hedge against inflation, devalued currency, and global economic problems. The question — "Are precious metals right for you?" — can only be answered by you, your goals, concerns, and reasons for owning them.

Gold has been a valuable commodity dating as far back as 4,000 B.C. For over 2,500 years, gold and silver have been the main medium of exchange around the globe. It wasn't until the 20th century that paper money became "legal tender."

In the United States, "currency" was originally nothing more than a receipt for gold and silver — the old silver and gold certificates were redeemable for an equivalent dollar's worth of the actual metal. At one point, the Philadelphia Mint had approximately 500 million silver dollars stored to "back" the silver certificates in circulation.

Today's dollar is not backed by gold or silver. It is backed solely on faith in the U.S. government — which means politicians and the Federal Reserve can print more and more as they wish. This unbridled printing is responsible for inflation and an ever-expanding money supply.

While the cost of a home rose about 20 times since 1971, the value of gold rose nearly 100 times. The long-term trend is for the dollar to continue to drop over time — there is no reason to believe this will change.

Gold is considered real money — the metal that has been accepted for payments for thousands of years and tends to hold its buying power across centuries. Gold is bought both as a hedge and as an investment. Simply put, gold is a currency that the government does not control.

Most financial experts recommend that 10%–20% of an average portfolio be held in gold or silver. As the dollar goes down in value, the price of gold tends to go up — so gold moves inversely to many traditional investments, making it an effective hedge.

Nearly 1/3 of all gold mined every year goes directly to investors. Central banks worldwide buy thousands of tons of gold as reserve — even though their own currencies are NOT backed by gold. These same central banks control our paper money supply while quietly hoarding the very metal they tell the public is a relic.

Gold provides the perfect hedge against negative events in the stock market or world crises. During the 2008 financial crisis (Oct 2007–March 2009), the stock market fell as much as 55% — trillions were lost. During that same period, gold was up 26% and continued to a new high in 2011 of $1,908/oz — a 154% increase from the pre-crisis level.

Many people don't realize that gold was illegal for Americans to own from 1933 to 1974, when it was finally legalized again by President Gerald Ford. Gold was completely disconnected from the dollar in 1971 by President Nixon — after which inflation ravaged the U.S. economy.

Gold or silver bullion can come in coin or bar form. To be considered a bullion item, the coins or bars trade based on the price of the metal — not on a collector's premium or rarity. Examples of popular bullion gold coins include American Gold Eagles, Canadian Maple Leafs, South African Krugerrands, and Austrian Philharmonics.

Coins such as $20 St. Gaudens and $20 Liberty coins are affected by the price of gold but also carry collector value. As of this writing, most of these have completely lost their collector value — and are usually a poor choice for anyone interested simply in owning gold.

With the internet, hundreds of "dealers" are competing to sell you gold. Going for the absolute lowest price is not always the best strategy. Many dealers offer gold "at cost" but delay delivery for up to a year. Others sell too cheaply simply for cash flow — and you risk never getting your metals. There are dozens of stories of dealers going bankrupt while owing millions in gold to clients.

Also be cautious about counterfeits. There are hundreds of fake bars and coins coming from overseas — particularly 1 oz bars and popular bullion coins. Deal with someone who has been in business for a long time. Four decades of experience are worth more than saving a few dollars from a novice dealer.

Old high-grade collectible coins are fascinating — the history and stories they tell are remarkable. But there was a time when it was fairly easy to make money in rare coins. Those days are largely gone.

AmFed does not recommend rare coins to most investors, simply because it's very hard to make a profit. The best-performing coins start in the six figures and go into the tens of millions. The average investor buying coins for $1,000, $5,000, or even $30,000 is not likely to see substantial profits.

If you own coins, send us your list — we'll evaluate your investment for free.

Graded or Certified Coins

The latest trend involves coins certified by PCGS or NGC. The rule of thumb: don't pay much more for a certified coin than an uncertified one. Most high-grade certified coins are little more than bullion coins worth only a few percent above the metal's actual value.

Later-date Gold and Silver Eagles are very common even in MS-70 or PR-70 condition. Many dealers charge $5,000 to $12,000 for 1-ounce gold coins in certified holders. Those high prices are mostly extra dealer profit — and you are unlikely to recover that money when you sell.

Silver is often called the poor man's gold. It has been used as money more extensively throughout history than gold, and many people like the fact that you can buy many more ounces of silver for the same amount of money. A single silver dime is worth around $2.00–$3.00 today.

Silver is also more of an industrial metal than gold, so its price can be more directly affected by the global economy. It also gets heavy quickly — $100,000 in silver will weigh approximately 200 lbs, while $100,000 in gold fits in your pocket.

Silver-to-Gold Ratio

The silver-to-gold ratio is a useful tool for gauging relative value. The average ratio over the past 40 years has been approximately 60–65 ounces of silver to 1 ounce of gold. When the ratio is higher than that, silver is undervalued relative to gold; when lower, gold is the better value.

Many dealers claim the ratio is 30:1 or even 15:1 in order to sell more silver — but the real historical ratio has been closer to 60:1. Silver tends to go up as much or more than gold in a bull market, but falls much more quickly in a down market.

Pre-1965 90% Silver Coins

These include half dollars, quarters, and dimes minted in 1964 and earlier — commonly called "junk silver" or 90% silver. They trade as a commodity based on the daily spot price of silver.

Silver Bullion Coins

Many countries produce 1-ounce silver coins — including the U.S., Australia, Canada, Austria, China, England, and Mexico. Any of these accomplish the goal of owning silver in an easily tradable, liquid form. The U.S. Silver Eagle is generally recommended.

Premiums on silver bullion coins can shift dramatically. The U.S. Silver Eagle has sold anywhere from $4.50 over spot in normal markets to $6–$15 over spot during supply crunches. This is one reason it always pays to consult with AmFed before purchasing.

Generally, you'll get the best price by buying a mint box (monster box) of 500 coins. Buying individual coins or small rolls typically costs slightly more per ounce.

Silver Bars

Silver bars are mostly privately minted and come in a wide variety of sizes: 1 oz, 10 oz, 100 oz, and 1,000 oz. Bars are typically slightly less expensive than government-issued coins since they're privately produced.

Key trusted refiners include Engelhard, Johnson Matthey, Sunshine, and the Royal Mint of Canada. Buy only from reputable, well-known dealers — there are many fake bars on the market, particularly counterfeit bars filled with base metals.

The Fundamentals Favor Platinum

Platinum is a lesser-known precious metal — only about 10% of annual production goes to investment purposes; the rest goes to industrial uses and jewelry. This makes it both a precious and industrial metal, much like silver, but with far greater rarity and portability.

Platinum vs. Gold

Although platinum is 30 times rarer than gold, the price ratio can fluctuate wildly. At one point platinum hit $2,300/oz while gold was under $1,000. At other extremes, platinum has traded at 70% less than gold.

Whenever platinum is priced at less than gold — or up to 10% more than gold — the market is indicating it is underpriced relative to its true fundamentals.

Platinum vs. Silver

Platinum is a compelling alternative to silver for investors who want an industrial + precious metal combination without the weight and storage challenges of silver.

There are other precious metals — including palladium and rhodium — that could be considered for some portfolios. These metals are traded less frequently and should only be considered after you have a core position in the three primary metals: gold, silver, and platinum.

Whether you're new to precious metals or a seasoned buyer, call AmFed at (800) 221-7694 and let our experts educate you, answer your questions, and guide you to the best options for your specific needs. We can review your current holdings and help you decide if precious metals are right for you.