Rosland Capital advertises heavily on television, encouraging people to purchase gold and silver coins as well as gold and silver ingots.
With the current turmoil in the stock markets, this may sound tempting.
The question that is often asked is whether it is a good idea to purchase precious metals, either as an investment, as a way to preserve what wealth you have, or as an investment to be held in an Individual Retirement Account.
Below, we’ll go over what precious metals are, their worth, and the risk of buying gold.
How much does gold cost?
The price of precious metals varies over time. Gold is valued above $1,600 per ounce as of this writing (April 2020), but it was down as low as $1,125 mid-December 2016 and as high as $1,300 early November 2016. (1)
Silver is trading at $14.62 per ounce now (2), but was as low as $15.75 in mid-December 2016 and as high as $18.50 in early November 2016. As can be seen, the price varies of these metals go up and down, and often react to political events rather than market forces.
Gold does seem to be going up during the market turmoil brought on by the coronavirus.
It is important to realize what one is purchasing from Rosland Capital, or any other precious metals merchant. One usually purchases coins, and it is coins that are featured in the ads on television. If one buys a one-ounce gold coin, it will cost much more than the current price of gold.
Coins are sold at a great premium over the weight of gold contained.
Certain coins that might be rare or somewhat rare can sell for many times their weight in the metal. Add to that a commission for the seller and it costs even more. One would be essentially collecting coins and investing in coins, rather than investing in gold or silver.
How valuable are coins?
Interest in collecting items increases and wanes over time. In past years, sports trading cards commanded high prices, but interest waned, especially as everyone went through their closets to find their old cards and the market was flooded.
The same thing happened to stamps and coins as collectibles. While rare stamps and rare coins can be quite valuable, the usual stamps and coins found in collections are not worth their cost. Thus, if one purchases gold or silver coins from Rosland Capital, rarely will the coins be worth their cost even after several years. One purchaser of $60,000 in coins from Rosland reported that after he had them evaluated by a coin expert, he found that he had $38,000 worth of coins.
While an IRA cannot contain collectible coins, it can contain raw gold and raw silver. If one were to consider these metals for IRAs, it would be smart to find out the spot price for gold on the internet and compare that to the actual price being paid for the metal, which would be the price of the metal plus the commission. Also, it would be necessary to store the metal, and usually purchasers of metals store the gold with the company they buy the metal from. How much is the monthly cost of storing the metal? It might take a while for the metal to increase in value enough to cover both the commission and storage costs.
What is the risk in investing in precious metals?
On top of all of that, one has to come to terms with their tolerance for risk. Precious metals go up and down in value, sometimes markedly so. Very few people have ever predicted the future price of precious metals accurately. When a television advertisement says some unnamed experts predict the price of a metal may double or triple, there are probably as many experts predicting the price going the other way.
Sellers of precious metals make money not because the value of the metals goes up, but by marking up the coins over what the dealer paid for them and by charging the purchaser a commission. Another thing to consider is the sheer volume of advertising one sees from these companies. One always wonders what kind of prices they charge to justify the tremendous expense of all of that advertising, including paying the celebrity who does the talking.
What is the best way to invest?
Finally, it should be said that no one can predict the future. If we were able to do so, we would all be at the nearest race track or casino. Since the future is unpredictable, one has to do research to decide how to invest for the future. It may be that metals are the best investment. It may be that mutual funds are. It may be that index funds are.
No one knows the future, but it does seem that many questions must be asked before an investment in precious metals, or for that matter, any other investment. Not knowing how to handle an investment or doing proper research beforehand could lead to dangerous consequences, including racking up debt.