GOLD DOES NOT PAY INTEREST……..REALLY….YOU SURE ‘BOUT THAT?
It is often said that gold and silver are “dead ” investments because they do not pay interest or dividends.
To begin with, only a small portion of available investments pay any dividends . Gold and silver may not pay dividends in the traditional sense, but they can be ” ratio traded ” for extra gains that occur as the ratio of silver to gold fluctuates. You could keep the ounces gained, or cash in on them as a sort of dividend. If for example, the ratio of silver to gold is 70/1 and it drops to 35/1 you could trade silver for gold. If and when the ratio returns to say 50/1 you could trade back and increase your ounces of silver by 50% approximately. This is not an exact number but it is the concept I am trying to highlight not the exact numbers.
While I must admit that ratio trading is somewhat complex for the average investor, it is certain no more complex than understanding the entirety of the various positions one is suggested to own and manage (in order to offset market risk ) in paper investing .
You may have someone managing all those investments for you but keep in mind that they get paid no matter how well or how poorly a portfolio performs. Of course, those in charge of your wealth want to do well for their clients, I would never suggest otherwise but it behooves the individual to have a solid grasp of their own investments, don’t you think ?
Now let’s talk about gold/silver not paying interest. I disagree and here is why. True, is does not pay interest in the observable realm, but it does pay interest conceptually, and in reality depending on your point of view. I am a big fan of ” defining terms ” whenever I debate someone on a subject. Particularly when I am debating a subject that has many unfounded social biases attached to it. So let’s define the term ” nominal ” for the sake of this section of the article. Nominal means ” in name only “.( in number only in this case )
Let’s take a $100 paper investment vs a $100 physical silver purchase. Let’s say the paper gains 10%. So the naysayers of metals would say ” looky here …..I have $110….what do you have? “. Well…………..? Not sure until I look at the silver market. Oh well….let’s see here……….. silver is up 10% in the same timeframe. Looks like my silver is worth $110 as well.
Can someone please interject here and tell me what the difference between these two scenarios is, please . I am at a loss !!! It’s the same paper money market deciding these numbers and in this hypothetical case, they both have “nominal ” gains of 10%. I say nominal because until the owner of these investments ” marks to market ” ( go look that up ) the individual gains held , the whole numbering system which measures the gains is meaningless.
If every $100 item in the retail marketplace has gone up $10 in the same time frame we are measuring for the original $100 investments ,the whole point of a $10 gain is lost with all but one exception. That exception being ………that if either of the investors had done nothing but held cash during the allotted gain period they would only have $100 to spend for an inflation increased $110 item.
It’s pretty rudimentary economics, but it still amazes me how many people will argue that they gained $10 and that’s all that matters. Exasperating ! Gold pays interest the same way any investment does, through mark to market purchasing power. And this is an area where it has outlasted every paper accounting scheme on the planet. You can do your own research on that and you will come to find it true.
At this point, someone is surely objecting that I have not included the retail markup on physical silver and gold. Agreed . Everything has an entry and exit cost. Paper investments have an entry and/or exit cost too by the way !!!! Professionals that handle people’s investment decisions surely deserve to get paid a commission just as surely as metals dealers deserve the same. The difference is that many money management systems have hidden fees that can mount up to serious annual costs.
In a recent interview, and also outlined in his recent book on personal finance, Tony Robbins revealed that many of these fees add up to 3% per year or more.
The one positive benefit to physical metals over paper investments is that physical metals do not have an annual maintenance fee. You pay the premiums up front, and unless you pay to have the metals stored somewhere , there are no more fees.
In closing, I say silver and gold
pay interest. It matters not what the gurus of finance say!