Investing in Gold & Silver 101


Nothing has captivated civilizations as much as the allure and beauty of gold. Gold represented wealth when Alexander the Great conquered and united lands, when Christopher Columbus explored the New World, and when our Founding Fathers forged the Constitution of Canada. As the Greek poet Pindar wrote more than 2,000 years ago, “Gold is the child of Zeus, neither moth nor rust devoureth it.” Individuals have owned gold coins for a wide variety of reasons: as a storehouse of wealth, a proven method of passing savings to the next generation, a shield against tyranny, and as a beautiful memorial of past civilizations and accomplishments. Our Founding Fathers understood both the inflationary and deflationary dangers of paper money and believed a solid financial footing to be crucial to the success of Canada


Gold coins circulated as everyday money in Canada until 1914 and in the United States until 1933. Then, at the depth of the Depression, President Roosevelt chose to devalue the dollar by approximately 43% and raise the price of gold by approximately 75%. Gold owners profited more following the abandonment of the gold standard in 1971 when the government ran the printing presses and inflated the nation’s money supply. The purchasing power of the dollar plummeted — and the public turned to gold assets as a hedge against rising inflation. The 1990s proved to be the decade of paper assets as stocks spiraled upward. Precious metal assets completed their bear market with gold reaching a low of $252 per ounce. A new precious metals bull market began in 2001. In the first decade of the new millennium, gold prices increased every year. In 2011, gold prices reached a new record high though, on an inflation-adjusted basis, gold remained below the record set in 1980. Time and again, investors and collectors shift their attention to assets like gold when currencies and economies falter. Acquiring these metals at any level provides portfolio diversity with a tangible and recognized “safe haven” asset. With the uncertainties we face today, it is even more important to diversify your portfolio. Governments and their paper currencies rise and fall, but gold always has intrinsic value.

Diversification: According to the U.S. Mint, “investment experts believe that adding gold to your portfolio may improve its performance. That is because the forces that determine gold prices usually differ from, and in many cases counter, the forces that determine the price of many financial assets.” Gold often moves independently from stocks and bonds and the World Gold Council believes that “portfolios containing gold are generally more robust and less volatile than those that do not.” Further, in contrast to some other financial assets, physical gold is not a counterparty’s liability. Individuals and institutions are often attracted to gold as a potential hedge against inflation or fluctuations in currencies. A study by Oxford Economics concluded “gold performs relatively strongly in a high inflation scenario and also does comparatively well in a deflation scenario… This is because such a deflation scenario includes a sharp rise in financial stress.”

Divisibility: Gold coins of less than one ounce, known as fractional coins, offer a lower price point than one ounce coins along with greater flexibility when it comes to liquidating or distributing them.

Gold Prices: A number of analysts believe that gold prices may reach new highs in the coming years. Among the factors which may affect gold prices are: inflation, currency devaluation, growing demand from emerging economies in countries such as China and India, industrial use of gold, and increased demand from central banks.


Silver was first mined more than 5,000 years ago and became an essential element in trading among early civilizations. By 700 B.C., the ancient Greeks began using silver as currency. The famed “pieces of eight” referred to the eight reales Spanish coin which was an international currency during the 16th and 17th centuries. The United Kingdom’s “pound sterling” received its name from the fact that the currency was equal to one pound of “sterling silver” (92.5% silver). Canada embraced silver as part of its currency soon after its formation. In 1870, the first Canadian silver coin was minted. Throughout the years, Canada minted and melted thousands of silver coins as it reacted to the supply and demand of this precious metal. The U.S. Mint continued to produce 80% silver coins for general circulation through 1966. Between 1967 and 1968, the last circulating silver coins of 50% silver were minted.


Silver has a number of properties which make it ideal for industrial applications. These properties include its strength, malleability, electrical and thermal conductivity, natural antibacterial properties, and silver’s ability to endure extreme temperature ranges. These unique properties make silver generally irreplaceable with less expensive alternatives. Nearly 75% of the world’s supply of silver is used to manufacture a range of products including chemical reagents, medical instruments, solar panels and plasma televisions. Despite its critical role in technology and industrial production, global silver mining is limited. In contrast to other metals, it is difficult for mining companies to increase their silver production because two-thirds of silver produced by mines is a by-product of other metals.


On a per ounce basis, silver is the most affordable precious metal. Investors acquire silver for many of the reasons they acquire gold: as a store of wealth, a potential hedge against inflation, and to diversify their portfolios with a tangible asset. Silver’s performance during the current bull market has been impressive. Between 2001 and 2011, silver prices grew over 500%. Today’s silver prices are driven by a number of factors which may support future record prices: strong industrial demand, increasing jewelry purchases, and growing investor demand set against a limited amount of annual production.

Reasons to Invest in Precious Metals

Precious Metals are the safest way to ensure financial reserves: Despite the fact paper money can inflate, stocks can go up and down, banks can go bankrupt; Precious metals pretty much have held their value throughout history. Precious metals have never gone bankrupt, and have gained prominence than rather than lost throughout time.

Hedge against any economic disasters: Suitable amounts of precious metals ensure financial safety during economically challenging periods (for instance during the current economic crisis, it's ideal to reduce paper money holdings and buy gold silver or other investment metals).

Hedge against fiat money: Regardless whether there is an economic crisis or not, paper money is not a good idea to hold your wealth in. Paper money can lose its value; there have been several severe cases of hyperinflation in history, where in a matter of day’s money's value dropped so much that a wheelbarrow full of banknotes couldn't buy a single piece of bread, but the value of silver or gold remained rather stable.

Guarantee financial safety to your children, family, loved ones: The best example is to look at gold. It has been highly valued 3,000 years ago, 500 years ago, 50 years ago, today and it will be highly valued 100 years and beyond, into the future.

Precious metals are a physical holding: Stocks, paper money, bank accounts are either subject to value change or they are just virtual numbers, titles that can easily be taken away from you. As opposed to values that you can hold physically, in your hand; it's always best holding precious values in your hand.

Buying Physical Silver & Gold: Direct ownership of physical silver & gold bullion is a means of preserving your wealth in assets with an intrinsic value that has been well established by thousands of years of history.

Who’s Purchasing Precious Metals?

Here are a few that are investing in precious metals right now:

  • Central Banks
  • Commercial Banks
  • Countries
  • Hedge Funds
  • Corporations
  • Private Individuals
  • Investors
  • Businesses

These are some of the groups and people investing in precious metals, please note: Anyone can invest in precious metals!

© Barrie Gold Buyer