BIG DECISION: Should I Invest In Gold Or Silver, Coins vs. Rounds?

One the biggest decisions precious metals investors make is deciding on whether to purchase gold or silver.  Some analysts recommend gold over silver because it is the king monetary metal, while other analysts believe silver is the better choice because its upside potential will be much greater in percentage terms than gold.

Many of the emails I receive from readers is on this very question.  I don’t like to give out investment advice because I am not a licensed professional, but I can tell you what I and other analysts are doing.

Before I explain how I invest in the precious metals, I wanted to provide some interesting videos on the subject of gold and silver investing.  In the first video three analysts, Ed Steer (GATA), Mike Maloney (GoldSilver.com) and Peter Spina (Goldseek.com) discuss how they invest in the precious metals.  Here is the link:  BUY SILVER OR GOLD?

Maloney Gold or Silver

Ed Steer from GATA prefers silver over gold, while Mike Maloney describes how he buys each metal depending on the gold-silver ratio at the time.  I’ve heard of analysts who trade the precious metals by the gold-silver ratio, but it was interesting to find out how Mike purchases more silver when the gold-silver ratio is high and more gold when its low.

Furthermore, the next video explains the difference between buying “Official Coins” compared to “Private Rounds.”  If someone purchases a coin, it’s a government produced legal tender, whereas a private mint sells rounds.  This is an excellent video that discusses the pros and cons of owning each.

In addition, Mike Maloney shows how the GoldSilver.com Pegasus is produced and gives a history of the symbol on the coin going back to Ancient Greece when the original Pegasus was minted during 300-400 B.C.  You can watch this video at the link: Silver Investing: A Game Of Ounces:

Game of Ounces

Mike believes if you buy silver , you should purchase it as cheap as possible.  He calls it the “Game Of Ounces.”  I agree.

As I mentioned in past articles, I started buying silver in 2002 at $4.52 an ounce.  The best way to add gold and silver to your holdings is by purchasing some each month or quarter.  This way, you don’t fall into the trap of buying at just the HIGHS.

Peak Oil Will Push The Value Of Silver Higher In Percentage Terms Than Gold

Gold & Siilver Coins

(courtesy of ChristmasStockImages.com)

The reason I discuss energy on my site is due to how it will IMPACT in a BIG WAY the precious metals, mining and overall economy in the years ahead.  Very few analysts pay attention to this energy connection.

For example, I don’t believe the Junior Mining Sector will ever recover.  While some junior stocks may become commercial mining operations, the overwhelming majority will not.  If you are going to investing in mining shares, it’s best to focus on the producers as peak oil becomes more of an issue.

Furthermore, I prefer bullion over stocks due to the inherent leverage in the Online trading markets.  If there is a market crash with bank holiday, accounts may be frozen making it impossible to sell or liquidate stocks.  However, physical bullion during this hectic time will be a true safe haven.

That is why I believe its best to hold mostly physical metal with some surplus capital to invest in the mining shares.  I also like silver better than gold due to the fact that PEAK OIL will wreak havoc on paper and most physical assets.

As investors flock into the precious metals to protect wealth during this time, they will be in competition with Central Banks and wealthy investors for already tight gold supplies.  Thus, silver will be the next best alternative store of value or as Mike Maloney says, “ECONOMIC ENERGY.”

Silver is just as good of a store of Economic Energy as is gold… it’s just a smaller amount.  However, the rush into the precious metals will push the Economic Energy ratio up much higher in silver than gold.

Lastly, we must remember, investing in gold and silver is a test of patience.  If you believe you lost out on the broader stock market gains over the past few years, then maybe you don’t have the correct mindset to own the precious metals.  The stock and bond markets are being kept alive by Central Bank intervention.

It is impossible to know when the GAME OF MUSICAL PONZI’s finally ends.  Which means, the best bet is be conservative by investing in real stores of wealth such as gold and silver and not paper assets that derive their value from a growing energy supply… which is peaking.

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25 Comments on "BIG DECISION: Should I Invest In Gold Or Silver, Coins vs. Rounds?"

  1. I have been following your site for sometime now. I agree 100% with peak oil and also having PM in physical form. The only disagreement I have with this article is the stock market it not a good investment over PM.

    The market have made a nice return for me over the last few years. I use those gains to purchase more physical bullion. If it wasn’t for being in the market I would not have been able to acquire as much physical gold and silver.

    There will come a time when gold and silver are necessary to hold to maintain purchasing power, but that time hasn’t been the last few years. You would have missed out on the insane rally that is going on right now in the market.

    I just don’t think being so focused on gold and silver all the time is a good strategy. You need it in a portfolio, but the market is still a good option for returns for now.

    Thanks for another great article.

    Aaron

  2. I go mostly for the physical metal myself. I keep going back and forth from gold to silver, I just like gold more but hold both, silver might make more sense. I like to have some income producing assets also and am in SIL. that’s a good mix of miners and is up more by % in the last 2 weeks than the metal.

  3. Invest in coins because they tend to rise in value faster. For example, the 2009 Chinese Silver Panda is already commanding over $60 per one oz. coin according to Provident Metals. Whereas the generic rounds don’t appreciate anywhere close to that much in the same time period. I own about 20% generic silver bars and rounds, and 80% government issued coins.

  4. DaleFromCalgary | June 20, 2014 at 7:08 pm |

    I haven’t bought any physical bullion since 2009 because I am at my limit of 10% in gold, 10% silver, and 5% palladium. When I was buying, I bought a few coins at a time to dollar cost average. The best time to buy is near the end of the futures contract month because that is when JPMC shorts the price so they don’t have to cover their positions.

    Rounds may be cheaper but so will their price be when you try to sell them later. I never worried about the premium because it becomes insignificant over time. When silver goes to $100, it is unimportant whether you paid a 10-cent or a 12-cent premium back when it was $5.

    Also, stick to smaller sizes because they give you more flexibility to sell a little at a time. Dealers will insist on assaying big bars, plus they may refuse to buy them at all if the currency amount is too large for them during a cash crisis. My gold is all 1-ounce Maple Leafs. The silver is half 1-ounce MLs and half 10-ounce bars. My palladium is all 1-ounce MLs or Swiss bars.

    As I mention a few days ago in the comments section, I am also in physical petroleum, to 25% of my portfolio. This means mineral rights, limited-partnership units, preferred shares, and private equity. None of these will be bothered by any bank bail-ins a la Cyprus. For you paranoid Americans, even Roosevelt didn’t expropriate oil companies the way he did with gold.

  5. Steve, have you watche this video:

    http://www.peakprosperity.com/blog/85873/why-next-20-years-will-completely-unlike-last-20

    It mentions energy and the economy.

    I’d be interested to hear your thoughts on it! Its just under one hour in length…

    • At this time I’m writing this video won’t play on Chris’ web site, but I printed the transcript.

    • Stu,

      Good job in bringing this to the readers’ attention. I can’t get this video from Chris Martenson’s web site to work today but it plays here: https://www.youtube.com/watch?v=pYyugz5wcrI&feature=em-uploademail

      And I think it puts a lot of things into perspective.

    • Stu,

      Thanks for posting the link to Martenson’s video. Yes, I’ve seen all of Martenson’s CRASH COURSE series. He does an excellent job in making it easy to understand.

      Very few realize the ramifications of an EXPONENTIAL CHART. Which is why things will end badly. The collapse of the ROMAN EMPIRE was sown in its rise… same with the United States and most of the global economies.

      The one thing that Martenson fails to address (and I don’t blame him) is CLIMATE CHANGE. I think climate change will stump all other problems within the next few decades.

      steve

      • I can also recommend the video “Exponential Growth” by Dr. Albert A. Bartlett:

        https://www.youtube.com/watch?v=u5iFESMAU58

        Such a simple concept to grasp and yet most people don’t get it. This lecture makes it so easy to understand that a 6yr would get it!

      • I used to read the Oildrum.com but it was actually Martenson’s 3 E’s (energy, economy, environment) who put it all together for me. They should show the crash course in high school curricula, along with Maloney’s latest videos IMO.

        Richard Heinberg’s another guy who clearly links energy+economy in a legible format.

      • It is very difficult for an individual to get the truth of what is causing climate change, and I have a background in physical science.

        A lot of scientific data that doesn’t fit into the Democrat’s agenda of man made global climate change [and therefore what they want the green light to enact] can’t get published; that’s a fact.

        As a Geologist I studied some paleoclimatology. There exists evidence of rapid climate change long before mankind was making campfires.

        But regardless of whether due to mankind or solar activity [outright suppressed from discussion by the non-scientist agenda-driven politicians], I don’t think there is much we can do about it.

        One medium-size volcanic eruption puts out more greenhouse gasses than the entire output of C02 by mankind in their entire history.

  6. I have not owned ‘paper’ for the best part of 20 years. I own over 4000 oz of physical monetized silver. I own less than 1 oz of gold. Anything you buy with a high premium is stupid. When you need to cash in during a crisis, a proof eagle or a panda or kookaburra, etcetera, are not worth any more than circulation coins. I am NOT saying you cannot make money with them. But why screw around? Bullion will give you a decent %. Most of “us’ are not so wealthy that we can afford to risk much of anything. So stick with land and monetized circulation coins. Get them while they are still around. (coins)

  7. Steve, great analysis as always. Personally I do not think any of it matters. The banks have unlimited ability to suppress the price of gold and silver. I am convinced there will never be true price discovery in my life time. The last three years have taught me that fundamentals are completely irrelevant. 2011 provided a rare opportunity. Regretfully, i did not take advantage of it to convert my stack back to fiat. Furthermore if price suppression was ever to fail then confiscation in some form or another would prevail. Precious metals may be suitable for generational wealth preservation but they not appropriate for the average investor. There is no way to win. I have concluded that gold and silver are for trading only.

    • This seems unnecessarily pessimistic. The London Gold Pool failed because, in the end, the U.S. and its toady associate governments couldn’t keep supplying the physical gold required as they could see a complete exhaustion of official U.S. supplies in just a year or two more.

      So, for this round of price suppression, the means was switched to the utterly corrupt futures market. This method of manipulation will look invincible right up to the moment that it fails. Even with this fraudulent system the banksters still have to supply some actual gold. And that gold is being ravenously devoured by various asian countries. And we have some tidbits of information to show that the system if failing. Ken Hoffman of reuters says that he’s seen the big vaults in London and that they’re nearly empty. The U.S. can’t find more than 5 tons of gold in a year to pay back Germany. GOFO rates go negative half the time in the last year or so after being negative for only about 7 days total in the previous 20 years. Gold imported into Switzerland subsequently exported to China reaches a rate that is way above what is sustainable by the Fed et al.

      You are winning, John. You are winning but they’re keeping you from seeing the real score.

    • John,

      Thanks for your reply, however I don’t know how to take it…LOL. First you say, “Great Analysis” and then you end by saying, “Personal I don’t think any of it really matters.” Those two don’t compute… LOL.

      The problem with you analysis of the market over the past three years is that it doesn’t include the change in the price of oil, gold or silver since 2000. Furthermore, it only represents a tiny time period (2011-2014) in human history.

      John, if energy wasn’t a factor, then yes would be correct. However, the world is currently peaking in global oil production which will make the Central Banks game of increasing the money supply, debt and derivatives impossible as time goes by.

      Again, if this was 1980 all over again, I wouldn’t recommend owning the precious metals as it would take another 3+ decades to see a significant move higher.

      By the end of this decade… the world will be a much different place. If an investor placed his bets in the Biggest Ponzi Scheme in history (THAT NEEDS A GROWING ENERGY SUPPLY TO CONTINUE), they will be in big trouble by 2020.

      So, in that regards, gold and silver will be the GO TO ASSETS while the majority will continue to lose value.

      Mark my words,

      steve

      • Steve, I believe Johns comment opens a rich vein of heretofore untapped ‘gold’ for those who REALLY want to understand the position of a large percentage of those who currently hold the metals in the west… but whose voices stay buried in a miasma of frustration and disenchantment.

        This hidden seam is where you will ultimately find the most responsive audience to your theme – if and when that apparent paradox – ““Great Analysis” and then you end by saying, “Personal I don’t think any of it really matters.” – does indeed start to compute…

        this classic cri de coeur – usually snubbed, ignored, or answered in a formulaic fashion on pm bug sites… is actually an invitation of sorts from those who feel stuck in a quagmire of quackery and cheerleading, for some support – in the form of honest and forthright advice … a bit of handholding, to be sure… but essentially a request for relief from the usual bafflegab and bs that always goes wide of the mark in attempting to cover up for the failure of conventional ‘explanations’ to EXPLAIN THE REALITY of marketless markets, incessant manipulation(as in the true sources thereof!), increasing metals demand AND lower prices moving in counter-intuitive lockstep… and all the other ‘mysteries’ of the moment that booster bullionists try to sweep under the rug with their never ceasing high decibel cries of ‘never been a better time to buy’!!!!!!

        Exhibit A in above… the latest from “Mr Gold” …http://www.jsmineset.com/2014/06/21/30-reasons-the-bear-phase-in-gold-ends-this-summer/ … listing all the reasons that shiny should soar once more… Iin short order…in complete abeyance of any recognition of why all previous such manifestos of hype have fallen flat! I actually have a certain fondness and regard for the man – whose words did indeed serve to ‘hold my hand’ during the delicate goldbug phase of my metamorphosis to serious gulden houder! But I really think it’s time for a retirement party for the whole thesis built upon events from 3 decades past – that show zero recognition of shifts in geopolitcal and economic factors of huge import to the metals.

        C Martenson is a great place for people to start with the re-arrangment of their thinking towards getting real… but there’s a crying need for analysis that takes bold steps beyond that limited perspective… if a guy could build upon the simple premise contained in a url like this one: https://srsroccoreport.com/eroi-factor/ … [to quote – “pre-industrial farming methods that utilize manual labor or horse and plow provide between 1-5 calories of energy (food) for every calorie of energy consumed in planting and harvesting. On the other hand, the modern high-tech food production industry… consumes a staggering 10 calories of energy for every calorie of energy (food) delivered to the market.] … combining it with trenchant analysis of the true state of metals complex from a global perspective…

        there’s no telling what might come of it!

        ” Precious metals may be suitable for generational wealth preservation but they not appropriate for the average investor. There is no way to win.” Dynamite summation of the psychological torment of the metals holder in the west. Challenge for the rest of us…PROVE statement wrong!

  8. Silver Curious | June 21, 2014 at 10:11 am |

    From ABC News;

    “The battle for the refinery was in its fourth day today, although fighters for the radical Islamic militia ISIS have apparently taken control of much of the facility and are willing to keep the government forces isolated until they run out of food and ammunition, sources said.”….

    http://www.abc6onyourside.com/news/features/top-stories/stories/-international-troops-surrounded-trapped-iraqs-key-refinery-sources-say-32635.shtml

    • Silver Curious | June 21, 2014 at 10:55 am |

      My own opinion on the Military situation around the Baiji refinery is;

      Militarily, the Iraq Govt. and the US Govt. can’t rout the insurgents out of the Baiji refinery facility because the Baiji refinery is a huge sprawling complex that covers over 2,000 acres that’s all tightly occupied by important/expensive oil refinery infrastructure, so the Govt. can’t just go in there with the Helicopter Gunships & Jets with guns a blazzin and blow the insurgents to bits – because they’d cause extensive damage to the critical infrastructure of the refinery …… also, the insurgents apparently control the roads in/out of the region, so the Govt. can’t send in new troops for support.

  9. Silver Curious | June 21, 2014 at 11:10 am |

    Aeriel view of the Baiji refinery …. note the massive amount of refinery infrastructure spread over the 2,000 plus acre facility …. lots of places for the insurgents to dig in and hide where they cannot be taken out by Helicopter Gunships without causing extensive damage to the facility ….

    https://maps.google.ca/maps?q=Baiji+Refinery+132Kv+Substation%2c+Baiji%2c+Salah+Al-Din%2c+Iraq&hl=en&ie=UTF8&ll=35.010245%2c43.501825&spn=0.041125%2c0.055189&sll=49.111178%2c-122.800665&sspn=0.262941%2c0.441513&oq=baiji+refinery&hq=Baiji+Refinery+132Kv+Substation%2c&hnear=Baiji%2c+Tikr%C4%ABt%2c+Salah+Al-Din%2c+Iraq&t=h&z=14

    • Nice link. It would take months or years to winkle them out of there and that’s if you had skilled, motivated troops to do it.

      So, unless they can find qualified Sunnis to operate it it looks like its going to stop production pretty soon.

      • Silver Curious | June 21, 2014 at 5:21 pm |

        This whole Baijio refinery thing reminds me of the Deepwater Horizon Rig disaster in the Gulf of Mexico about 3 years ago; For aprox. the first week the insiders & media downplayed the seriousness of the disaster, but after aprox. a week or 2, they could no longer hide the scale of the disaster from the Sheeple, then BP’s stock was brutally hammered.

  10. Silver Curious | June 21, 2014 at 10:13 pm |

    Google maps can’t quite show the complex nature of the Baiji Refinery infrastructure …. here’s some picts that better illustrate how intricate the refinery infrastructure is, and how the Govt. cannot bring in the Helicopter Gunships without a high risk of destroying vital infrastructure of the refinery ….

    https://www.google.ca/search?hl=en&site=imghp&tbm=isch&source=hp&biw=1024&bih=646&q=baiji+oil+refinery&oq=Baiji+Oil+Refinery

  11. Hello SRSrocco,

    Yesterday I watched Martenson’s video. Somewhere in the Energy section, he’s saying that to produce 1% GDP growth, we need to increase our oil consomption by 0.25% (“based on 4 decades of economics data” or something like that). I was surprised to hear that. Letting sink the lecture of your writtings, I was pretty sure it would be much more nearer to 1 to 1: 1% GDP increase would need 1% energy increase.

    Ok, there are other energy sources then oil but it’s the biggest part by far. Productivity increase? Well, I suppose it makes prices go down to close the door to competition and then reduce GDP.

    At the limit, if we are forced to reduce our energy consumption by 25% to 60Mb/d (80Mb/d X 75% = 60Mb/d) we would reduce our GDP to zero. So obviously, at one point before that it would become 1:1

    What are your thougths on this 0.25% energy consumption increase to make the GDP 1% bigger?

    Thinks for your time.

    Yannick

    • Yannick,

      I like Martenson’s work very much. However, if we apply some logic to his figures, I do believe energy consumption to increase Global GDP is higher than 0.25%. Here are my reasons:

      1) The EROI-Energy Returned On Invested continues to decline over the past 4 decades.

      2) The Governments of the world are propping up domestic & global GDP by monetary printing and Bond Purchases.

      3) The increased spending on CAPEX for the Oil & Gas Industry increases Global GDP but we receive less energy in return for it.

      Those are the major points where I believe I may differ from Martenson. Yes, Martenson does understand NET ENERGY via the falling EROI, however he seems to forget a larger piece of global GDP when we factor in Oil, Gas, Coal, Hydro, Nuclear & Renewables is the increased cost of CAPEX, while net energy declines.

      I really don’t believe there has been much Global GDP growth if we subtract out all the Government monetary printing and Bond purchases.

      steve

      • Thanks Steve for your reply. I’m looking forward to your next energy article.

        Yannick

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