Gold is perhaps one of the most misunderstood physical assets out there. Below are seven common misconceptions we gathered about gold.
1. The United States Dollar is backed by gold.
The U.S. dollar was backed by gold for some time, but is not anymore. After President William McKinley signed the Gold Standard Act in 1900, the U.S. went on a gold standard in which one dollar was convertible to 1.5 g (23.22 grains) of gold. In early 1933, President Franklin D. Roosevelt suspended the gold standard with the exception of foreign exchange. In 1971, in the most well-known of the “Nixon Shock” series of actions, President Richard Nixon severed all ties between the U.S. dollar and gold, effectively abolishing the gold standard.
2. Buying, selling, and storing physical gold is difficult.
Gold is a highly liquid asset, meaning it’s easy to buy and easy to sell. Simply call your precious metals broker and order the coin and bar products you’d like, wire the necessary funds, and wait to receive the metals at the address you specified. The process could take as little as three business days.
Liquidating your gold is simple as well. Call a precious metals broker and agree on a buyback price, return the metals via mail or in person, and receive your funds via wire transfer. You may also liquidate at a pawn shop, coin shop, etc. but the buyback price may not be as reasonable. Depending on shipping speeds, liquidation usually takes no longer than three business days.
There are a few options for storing your gold and they are all easy. Gold obtained through cash purchase can be stored at home in a safe or with your bank in a safe deposit box. If you opt to add gold to your retirement account, your precious metals broker and your custodian will handle all the shipping and storage details for you, which usually involves having the metals stored in an IRS-approved depository.
3. Gold is just for coin collectors.
Some gold owners are also numismatists – people who collect and study coins and other forms of currency as a hobby – but knowledge of coin collecting is certainly not required to purchase gold. Your gold broker will educate you on the different coins available to purchase and help you decide which ones best fit your needs. Owning physical gold or silver is not just for hobbyists.
4. Gold mining stocks are a comparable alternative to owning physical gold.
Unlike owning gold mining stocks, owning gold means having a physical asset that can be touched, felt, and held. Physical gold is purchased for the long term and can be used to store wealth, while mining stocks are purchased for their profit potential in the shorter term. Mining company stocks are just like any other stocks that are affected by credit conditions and market volatility, and they carry risks associated with that fact. Mining stocks also do not mimic the price of gold, nor do they claim to. You own the performance of that specific mining company, which can stay flat or decline when gold prices rise.
Kevin O’Leary, Canadian business mogul and investor on ABC’s hit show Shark Tank, told Kitco News in 2011: “You’d rather own gold. Never own the miner, own the gold.”
5. Gold is a store of value, but otherwise it’s not useful.
Gold is one of the most efficient conductors of electricity and never tarnishes, making it highly useful in many industries. It has wide applications in dentistry, technology, electronics, medicine, photography, and more.
6. Gold is an investment meant to make you money.
The primary purpose of buying physical gold is not to speculate and profit from it. Gold is a long-term investment meant for storing value, diversifying your portfolio, protecting purchasing power, and safeguarding your wealth from economic or geopolitical crisis. Although gold certainly has profit potential over the long term, those who buy gold solely in hopes of striking it rich are likely to be disappointed.
7. There is only one way to own physical gold: through a cash purchase for direct delivery.
There are actually two ways to own physical gold: by purchasing coins or bars with cash and having them delivered to your address, or by having it in your IRA. With a Gold IRA, you purchase physical gold coins and bars using funds from your IRA, 401(k), or other qualified retirement plan and then own the metals as part of your retirement account.
American Bullion can assist you with owning gold through either of these methods. Call us today at 1-800-326-9598 and discover how simple it is to own gold.
“Piece of gold, peace of mind.”