How has it been 25 episodes already?! The guys are back at it this week, on their silver anniversary, with a special episode on PRECIOUS METALS! Ever thought about investing in a precious metal? Josh and Austin discuss the idea of investing in gold or silver, while also mentioning the gold standard, the United States Reserve, and how to invest in gold if you are wanting to. Austin will also do his impression of Gollum and of course, the show would not be complete without the dad joke of the week. Listen now!
Main Talking Points
[1:16] – Gollum’s take on Precious Metal
[6:44] – Gold & Silver as Currency
[9:41] – The Gold Standard
[14:40] – The United States Reserve
[19:40] – Uses for Gold
[22:00] – Investing in Precious Metal
[26:17] – Dad Joke of the Week!
[26:42] – Warren Buffett & How to Invest in Gold
Links & Resources
Episode 019: What’s going on with Oil?
Free Guide: 8 Timeless Principles of Investing
Social Media
Full Transcript
Intro:
Welcome to The Invested Dads Podcast, simplifying financial topics so that you can take action and make your financial situation better. Helping you to understand the current world of financial planning and investments, here are your hosts, Josh Robb and Austin Wilson.
Josh Robb:
How long are my hairs getting?
Austin Wilson:
It’s getting long.
Josh Robb:
It is.
Austin Wilson:
It’s going to be longer. The longer this bear market-
Josh Robb:
This is gray. This is all gray.
Austin Wilson:
All right. Hey, hey, hey! Welcome back to the Invested Dads Podcast, a podcast where we take you on a journey to better your financial future. So Josh, we have a pretty special episode today. This is our 25th episode, and we’re going to celebrate. This is our silver anniversary, you and me.
Josh Robb:
That’s right, silver anniversary. So we thought we would talk about silver today, a precious metal, this being our silver anniversary. So let’s kick it off. Austin, what do you know about Lone Ranger’s horse?
Austin Wilson:
Whoa, Whoa, Whoa, Whoa. I actually never-
Josh Robb:
That’s what he said. That’s how you stop them. You’re right.
Austin Wilson:
I’ve never seen… That’s true. I’ve never seen the Lone Ranger.
Josh Robb:
Oh, his horse was named silver.
Austin Wilson:
Wasn’t there a Johnny Depp movie with the Lone Ranger?
Josh Robb:
Yeah.
Austin Wilson:
I’ve never seen that one either. So, never seen Lone Ranger, but we’re actually not talking about a horse.
Josh Robb:
Oh.
Austin Wilson:
So you can just take a break on that.
[1:16] – Gollum’s take on Precious Metal
Josh Robb:
That must mean then we’re talking about the precious metal, silver.
Austin Wilson:
Oh, it’s precious, all right. But what do we mean by precious metal, and what are some examples of precious metals?
Josh Robb:
Yeah. So I went right to the expert. So I asked Gollum from Lord of the Rings, and he had a very clear-
Austin Wilson:
Ooh, I do a really good Gollum voice.
Josh Robb:
Oh really? I don’t have one, let me hear yours.
Austin Wilson:
Gollum. Gollum. Gollum.
Austin Wilson:
Then he’s like-
Josh Robb:
Yeah, get closer to the mic.
Austin Wilson:
“Me wants it! My precious!”
Josh Robb:
Yes. And so he informed me of what precious metal is. So gold, silver, that’s kind of the go to, when you think precious metal. It’s a metal or some sort of element that is rare and has been assigned a value that we deem above other metals.
Austin Wilson:
It’s actually on the periodic table.
Josh Robb:
Yeah. It’s there.
Austin Wilson:
Gold, silver. They are precious metals.
Josh Robb:
Platinum.
Austin Wilson:
And, I think platinum might be a precious metal, too.
Josh Robb:
Yeah. And so that’s what precious metals are. So there’s something that is, again, scarcity, and that’s what gives them the value. So if you’re talking something less precious, like granite, that still costs money. So if I want a granite counter top, I got to pay for it because I want one that looks like it. But granite is in higher supply, so it has less of the demand pressure on it, compared to precious metals.
Austin Wilson:
There you go.
Josh Robb:
Whereas gold is limited. We don’t find gold as much. That’s why you hear about gold mines and the gold rush that happened out West here in the United States is when you find a reserve, people flock to it to try to gather as much of the gold as possible because it’s limited. And so being limited, there’s a higher value. Precious metals also have nice properties. It tends to, gold at least, if we’re talking gold, not rust. So you can use it for certain elements.
With technology advances, now we use those type of precious metals because of their components, that they have more value. And that’s, again, why there’s a price applied to it. It’s not just some random thought, but just this idea that, hey, this thing is cool. It can be melted down and turned into all these really neat things.
Austin Wilson:
And it’s also shiny and pretty.
Josh Robb:
Shiny, pretty.
And so a precious metal is just a designation of certain elements that we deem to be of high value.
Austin Wilson:
Did you know that there was a gold rush in North Carolina in the late 1800s that I had never heard about?
Josh Robb:
I did not know that.
Austin Wilson:
It started because some 15 year old kid was walking through, and in a creek bed or something, he found a 17 pound block or hunk of gold.
Josh Robb:
That’s a big chunk of gold. 17 pounds.
Austin Wilson:
So it started a very little-known gold rush in North Carolina. And that’s all they found.
Josh Robb:
That one giant rock.
Austin Wilson:
Like 20,000 people moved there. And there’s towns that open up for nothing.
Josh Robb:
Crazy. So 1800s, is that when gold became popular?
Austin Wilson:
Oh, it’s much, much, much older than that. So actually archeologists have found gold flakes in caves of really ancient people. So thousands of years ago. But as far as firm evidence of gold, similar to what we think of today, we need to look around 3000 BC to Egypt.
So ancient Egypt, we’re thinking about here. And it was then when the demand for this shiny metal kind of began to pick up. Pharaohs and priests and other people kind of valued it really highly, and actually went as far as to make the tops of the Pyramids of Giza from solid gold.
Josh Robb:
Are they still there?
Austin Wilson:
I don’t know. I mean, I’ve never been to Egypt. I’ve seen some pyramids. I would imagine that that would have maybe not lasted.
Josh Robb:
Somebody borrowed that. Somebody just helped themselves.
Austin Wilson:
They borrowed that and the nose from the Sphinx.
Just made off like bandits.
Josh Robb:
Well, that’s how they got away. Because they needed the nose to run.
Austin Wilson:
It’s like that joke where you take someone’s nose. I saw a dad joke picture that was someone holding up their hand with their thumb in the middle of their fingers, like you stole someone’s nose, next to the Sphinx.
Josh Robb:
Nice.
Austin Wilson:
That was funny. So anyway, we can see from these ancient writings that these artifacts were highly valued by Egyptians, and Egypt was the center, really, of a lot of the world in technology and trade back then. So demand spread beyond the borders of Egypt. And a fun fact, it was around this time where the same thing happened to silver. So the other kind of precious metal that we’re focusing on here. There was actually an exchange rate for gold to silver, where gold was about two and a half times as valuable as silver in those days. And this is where the value levels for these two precious metals reportedly began. Because since then, even to today, an ounce of gold is worth more than an ounce of silver. And it’s really back then where the premium for gold, where it got started.
Fun fact also, they did not use gold for transacting. So Josh, you go to the store, and you’re an ancient Egyptian, obviously. You go to store-
Josh Robb:
That’s how I walk, too.
Austin Wilson:
You walked, yeah, you didn’t drive. You took your chariot to the store. Now it’s a Jeep Wrangler chariot, but it’s pretty cool.
Josh Robb:
Off road.
Austin Wilson:
Off road. You take it to the store, and you go and get your, what are you buying at the store, Josh?
Josh Robb:
Back in ancient Egypt? Probably like crocodile hide of something, the Nile crocodile.
Austin Wilson:
You’re buying and crocodile hide and crocodile steak.
Josh Robb:
Yep.
[6:44] – Gold & Silver as Currency
Austin Wilson:
So you’re buying it, and you would not use gold to buy for that. You would actually probably use grain. You would use grain to make transactions. You would use grain to trade, and you would use gold as a status symbol, as a wealth symbol, and as kind of a store, not necessarily something that you transact.
But gold transactions, as a currency, started a little bit later in what is now Turkey. And there’s a fascinating article about all of this on BeBusinessed.com, and we’ll throw that link in the show notes.
Josh Robb:
Okay.
Austin Wilson:
So Josh, I’ve heard that during some uncertain times. So let’s think about 2008, 2009. Let’s think about really what we just experienced in the first quarter, and really thus far in 2020, lots of volatility, lots of crazy stock market movements, and namely stock market drops. I hear that people flock to gold and silver, and kind of those sort of things in times of volatility. Why is that?
Josh Robb:
Yeah. So if you think about it, like you said, the stock market, being companies, can be volatile in their value. So we’ve talked about this in the past. Stocks trade based on kind of the perceived value of that company. And so each individual stocks ownership in the company, and that price fluctuates based on the outlook on how that company will do.
So if people are becoming less confident in our economy, and in turn the companies within our economy, those prices go down. So a lot of times the flock to gold is the thought process kind of like you said, gold has been around for centuries, all right, and has been valued as something precious, the precious metal, for centuries. And so as I’m losing my confidence in a company, or in the US economy in general, or any kind of thought process where those things are less valuable in my mind, where do I go? I’m going to go to something that has shown the ability to maintain a value for hundreds and hundreds of years.
Austin Wilson:
Right. Or thousands.
Josh Robb:
That’s really why people flock to gold in the long run. And the other reason is the thought process is people have been accepting that as some form of currency for ages and ages again.
Josh Robb:
So if things fall apart, and one of the main reasons why people own those types of precious metals, is they still have a value, so I can still trade it for food, whatever I need. And so if I own gold, now I’m holding kind of as a hedge against the uncertainty of the economy I’m in. So if things are falling apart, and people say the dollar is useless, well that’s okay, I have gold. Everybody knows gold is valuable. So can you give me some bread for this pile of gold, I have?
Austin Wilson:
It’s a real doomsday approach.
Josh Robb:
That is, but that’s the underlying thought process, though, is gold has shown its value for centuries. So then you have more confidence in that than, let’s say, a company that’s not been around for centuries. Empires have risen and fallen, and gold has still been of value throughout the whole time. So that’s the thought process.
[9:41] – The Gold Standard
Austin Wilson:
So Josh, I want to take you and listeners on a journey. Are you ready to buckle up?
Josh Robb:
I am.
Austin Wilson:
All right. So we’re going to talk about the gold standard. Ready?
Josh Robb:
Yes.
Austin Wilson:
This is pretty exciting stuff here. In 1792, even before Josh was born, the US Congress passed the Mint and Coinage Act that set a fixed price of gold in terms of dollars. So this effectively made gold and silver both legal tender, and silver was pegged about one 15th the value of gold at that time. So gold coins were created by the mint and used for purchases. Gold for large purchases, silver coins for small purchases. However, during the silver war, just getting, it’s not the silver war, Josh. See what I did there?
Josh Robb:
The silver war.
Austin Wilson:
The Civil War.
Josh Robb:
Civil War.
Austin Wilson:
The government couldn’t keep up with its debt payments using the gold or the silver in its reserves.
So in 1862, the paper dollar was deemed the currency of the land. And a bit later in 1873, silver was taken off the standard, and that drove a bunch of people crazy. People say that they were being robbed by silver not being coined of the land or whatever back then. But gold was still backing all of the dollars of the United States at that point, all the way through till 1944, during World War II.
Josh Robb:
So 1792?
Austin Wilson:
Yeah.
Josh Robb:
They started with having both gold and silver?
Austin Wilson:
Yep.
Josh Robb:
Which, crazy, was only 300 years after Columbus first landed in the United States.
Austin Wilson:
When he sailed the ocean blue.
Josh Robb:
Which wasn’t the United States at that point. But when he first landed in America, 300 years later, they established gold and silver as the currency.
Austin Wilson:
Yeah.
Josh Robb:
And then less than a hundred years later, they got rid of silver, but kept gold.
Austin Wilson:
Correct.
Josh Robb:
Okay. I’m on track. Keep going.
Austin Wilson:
You’re on track. So skip ahead. So then you’re after the civil war, 1873, silver’s taken off. Skip ahead. Gold is still what’s going on as currency until 1944. So jump ahead to 1944, during World War II, world leaders came together to form kind of an agreement where gold, worldwide, was pegged to the US dollar. And it was pegged to the US dollar at a fixed rate of $35 an ounce.
That sounds really low considering where gold is trading right now. But $35 an ounce. And this is because coming out of World War II, the US was in much, much, much better economic footing than most of the rest of the world and would end up becoming, and was at that point, an emerging economic leader of the world. They had a lot less damage and things to repair than Europe did at that time. And they were on a much better footing coming out.
So this was a turning point for America in terms of economic leadership around the world. So then that’s 1944, gold’s $35 an ounce. 1970 happens. President Nixon ran into budget issues largely due to the very, very expensive Vietnam war. And then he eliminated the gold standard so that essentially the country could do whatever it took to pay for the war. This is why you rarely see a gold chart before 1970, because it was flat.
Josh Robb:
So people weren’t investing in gold prior to 1970 as an investment like they do now?
Austin Wilson:
Right, because you would get the same amount, you’d get $35 an ounce.
Josh Robb:
Yeah, so from an inflation standpoint, it was not helping.
Austin Wilson:
It was useless.
Josh Robb:
But they were still seeing that, even with a set price, it was still a precious metal, the value of it being gold?
Austin Wilson:
Well, it backed every single dollar in the United States economy. So that is-
Josh Robb:
There was value there?
Austin Wilson:
There was a lot of value there. And thus by extension, by the, what was it called? I’m drawing a blank on what the agreement, the Bretton Woods Agreement is what happened in 1944 in World War II. By extension, then all of the world’s economies and currencies were then essentially pegged to gold and the dollar. It was all interconnected because of that union.
Josh Robb:
The goal and the dollar? Yeah.
Austin Wilson:
So that’s why we don’t really see and talk about gold as moving much before 1970. So the US at this point, it’s 2020, has not used the gold standard for 50 years. And in fact, no country in the world actually uses the gold standard. So no one’s currency is fully backed by, or at all even backed by gold at this point. Switzerland abandoned that. They were the last one to do it in 2000. Even at that-
Josh Robb:
Somebody was using the gold standard 20-
Austin Wilson:
20 years ago. But even that, I think that they were only like 40% pegged to gold on their currency at that point. But at least it was backed somewhat by gold. And since 2000, no one has.
Josh Robb:
Okay.
Austin Wilson:
So that is kind of a brief history on the gold standard. And so since 1970, gold has not been tied to the US dollar. And thus the prices have fluctuated wildly since then. Because they could. So that’s kind of how we got to be where we are today. But Josh, I have been wondering…
Josh Robb:
Yes.
[14:40] – The United States Reserve
Austin Wilson:
Where is a crap ton of gold stored? Where is the United States reserve.
Josh Robb:
It’s buried in my backyard. I won’t tell you where.
Austin Wilson:
Ooh, don’t tell me that. I know where you live.
Josh Robb:
Here in the US it is in Fort Knox.
Knox with a K, just to confuse people so they can’t find it. So if they’re looking, they’re looking in the wrong spot.
But Fort Knox, which actually was built in the late 1930s, 1935-36 is when it started with the land being first transferred over. So shortly before your 1944, when they were pegging it, they had started building this to store it.
It is a very secure place. All right? So I’m going to give you some facts about this place.
Austin Wilson:
Tell me more, because I’d like to visit.
Josh Robb:
Yep. You cannot, so that’s step one.
Austin Wilson:
See that’s what you should talk about.
Josh Robb:
…is they do not open up for visitors. In fact, the last person to visit Fort Knox outside of the people that work there was in 2017. So not too long ago, three years ago, it was visited by the Treasury Secretary Mnuchin, some congressmen and a couple other state senators and stuff.
They visited. They got to tour, they took some pictures to prove that there’s still some gold in there. And that, based on my research, is the main reason they ever let people in there, as you’ll get the rumors and the conspiracy theories that all the gold’s gone. It’s just empty warehouse.
Austin Wilson:
That is what I was just thinking, like they had to let someone in to prove that they have.
Maybe they staged a bunch of gold for the pictures.
Josh Robb:
Well, the one, the one rumor is they painted like tungsten bars or something with gold paint to hide that they don’t have any more gold.
Austin Wilson:
That is so funny.
Josh Robb:
Actually what they do, is they are audited every once in a while. And they take samples out to be tested, to test the purity of the gold being held there.
So there is that whole process that happens periodically. But 2017 was the last time any visitors were allowed in. Prior to that, 1974. So it’s rare.
Austin Wilson:
That’s a big gap.
Josh Robb:
And there’s only been one president that’s ever been allowed to visit. And so even the president doesn’t get access unless there’s special circumstances.
Austin Wilson:
Wow.
Josh Robb:
The crazy thing about it is that there is really not a lot known about the inner workings, because of the secrecy. Now it’s for a reason. They hold 147.3 million ounces of gold.
Austin Wilson:
Is that an estimate?
Josh Robb:
Half of the Treasury’s stored gold is there, anything else is spread out all over. All right?
They also hold other things there from other federal agencies. They’ve also been the housing spot for other countries items during crazy situations. So like during World War II, they held the crown of the Hungarian royalty or something because they were worried it would fall into Nazi hands.
So they shipped it over. We held in Fort Knox for a while.
Austin Wilson:
So you’ve seen Indiana Jones?
Josh Robb:
Yeah.
Austin Wilson:
Is that scene at the end of, maybe it was the third movie, or the Holy Grail.
Josh Robb:
Where everything’s stored?
Austin Wilson:
Yeah.
Josh Robb:
I don’t think that’s Fort Knox, but it’s similar to that, though, because they’ve held, in fact, during certain crises, they’ve even held the US, the original constitution that was written, the declaration of independence.
Austin Wilson:
Wait, Nick Cage didn’t take it?
Josh Robb:
Nicholas Cage was unable to get access there. He had to wait for it to get back to Congress.
Austin Wilson:
He was so convincing in the movie.
Josh Robb:
It’s so secure, in fact, that the main vault door is, you cannot breach it with explosives.
Austin Wilson:
Wow.
Josh Robb:
Or blow torches or drills. It’s 21 inches thick and weighs more than 20 tons, a door.
Austin Wilson:
That’s a big door.
Josh Robb:
The door. It has never been robbed. And in fact, there’s never even been an attempt to rob Fort Knox.
Austin Wilson:
I’m sure you can’t even get close enough to-
Josh Robb:
That’s a funny thing. You can see it from the highway.
Austin Wilson:
Really?
Josh Robb:
Yeah. It’s not out in the middle of nowhere. They’re just so confident in what they built, they’re like, you can’t touch.
Austin Wilson:
Like, here’s Fort Knox. Give me your best shot.
Josh Robb:
But to get in, there’s a whole protocol to get to these secure doors that, the big door told you about?
Austin Wilson:
Yeah.
Josh Robb:
No one person knows the whole protocol to get into Fort Knox.
Austin Wilson:
Wow.
Josh Robb:
It’s actually divided up among a group of people, that each of them only knows a portion of the combination procedure to get through all the different locks.
Austin Wilson:
Checks and balances.
Josh Robb:
That’s it. And so that’s Fort Knox, the concept, even the roof is so thick, it’s considered bomb proof. You just can’t get there.
Austin Wilson:
I want to throw this out there as a disclaimer for our listeners, that if you hear anything, it’s rain on the window of my office.
Josh Robb:
Yes, it is pouring.
Austin Wilson:
It’s raining pretty hard right now.
Josh Robb:
It is pouring.
[19:40] – Uses for Gold & Precious Metal
Austin Wilson:
So disregard if it comes through. Okay. So gold has a lot of uses, its store value, currency, all of these things. It’s a hedge against volatility, people view it as, when they get scared. It’s also used in technology, you mentioned earlier. So a couple things, when you think about new, so new gold is still being mined every day. Note that China produces or mines the most gold in the world at this point, per year, even.
Josh Robb:
Even more than people standing in the river on the Discovery Channel, doing the little shake?
Austin Wilson:
That’s exactly it, yeah. So about 50% of newly mined gold is used in jewelry, 37% for electronics, and only 8% for official coins.
So that 37% they use for technology is actually because gold has great conductive properties, it dissipates heat very well. A lot of computers and smartphones, like Josh mentioned, use it on a lot of teeny tiny parts. Silver also is used in very, very similar ways. A lot of good properties for technology come from both of these, of these metals, aside from just looking really good.
Josh Robb:
Now, is it true everybody’s car has some gold in it?
Austin Wilson:
Really?
Josh Robb:
Isn’t it the catalytic converter, I believe has gold in it.
Austin Wilson:
Oh, is that gold? I didn’t know what was in there that people like so much.
Josh Robb:
I Think so. I’ve never looked inside.
Austin Wilson:
Speaking cars. So you know of the car called the McLaren F1, right?
Josh Robb:
Yes.
Austin Wilson:
In the nineties, that was the fastest car in the world, 240 mile an hour, or whatever. Well, it has three seats by the way. One in the middle, and then two flanking it as passengers.
Josh Robb:
Makes a lot of sense. That’s how I like to sit in mine.
Austin Wilson:
So then you can sell your car around the world. It doesn’t matter if it’s left hand drive or right hand drive. They were made in Britain. So that, not so related, but they did use gold foil to line the inside of the engine Bay to dissipate heat. And a lot of race cars and stuff have actually used that. So that’s a nerdy, fun fact in my interest that has gold. But I probably can’t afford the million plus dollar price tag that they’re going for these days.
Josh Robb:
I was wrong. There is no gold in the catalytic converter.
Austin Wilson:
What is in it that people-
Josh Robb:
It does have platinum.
Austin Wilson:
Oh, platinum. That’s a precious metal.
Josh Robb:
Yeah.
Austin Wilson:
Josh, do you own, do you invest in any gold? Do you have any gold? My only gold holding right now is a wedding ring.
Josh Robb:
Yeah. Yeah. When you talk about jewelry yet I do own. Yeah, but I don’t have it as an investment piece.
[22:00] – Investing in Precious Metal
Austin Wilson:
Yeah, same. So speaking of investing in precious metals, so let’s talk about historical performance. So really going back as far as we really can, as to 1970, when prices started to move. So since 1970, gold has returned a total of 4855%, that’s a lot.
Josh Robb:
Big number.
Austin Wilson:
Or 8% annualized over the past 50 years. To be consistent with the timeframe. So looking at again, 1970, silver has returned 778%, which is about half of that, or about 4% annualized, half of that in terms of annualized numbers, the compounding is what makes the difference in the grand total number. The S&P 500, on the other hand, has returned 3061%. So in between gold and silver, or about 7% annualized, excluding dividends, mind you, which actually make up a large portion of an investor’s total return over a lifetime.
Since the beginning of the new millennium, So 1/1/2000, gold, silver, and the S&P 500 returned, 523% for gold, 229% for silver and 89% for the S&P 500. Now, if you annualize those, gold has returned an annualized figure of 9.5%, silver 6%, and the S&P 500, excluding dividends, 3.2%. Now, it’s very important that we consider the fact that, A, no dividends in there. So that is going to increase performance over time for equities in general. But B, there have been coming out of 2000, really three huge stock market turn downs. You had the tech bubble right at the beginning, you had 08-09, which was huge. And then we just had one more in the last half of the year.
Josh Robb:
So I need to sell everything and buy gold because that’s the best investment ever-
Austin Wilson:
Obviously.
Josh Robb:
Is what you’re telling me?
Austin Wilson:
That’s exactly what I’m saying.
No, it’s not what I’m saying, listeners. I’m not saying go buy gold.
Josh Robb:
But the case for investing is there is a longterm track record of precious metals growing above inflation, which is what you look for in investing, is I need my money to grow faster than inflation. So I have more money to spend in the future. So a case for buying a precious metal in your investment platform is historically they have a track record, as soon, as again, 1970 is a good starting point because prior to that, it was stuck at a set rate.
Austin Wilson:
Exactly.
Josh Robb:
It’s irrelevant. So at 1970, going on, it’s done a very good job of providing returns for people who hold it longterm.
Austin Wilson:
Yes. So in a perfect-
Josh Robb:
A case for not owning a precious metal would be the idea that there needs to be a buyer on the other end, the same with any investment.
But when I hold a physical item like gold, I have to store somewhere, for one. And gold is not light, by the way. And so if you’re holding physical gold, it’s heavy. And so I need a place to store it. And if you’re talking larger quantities, then you need security. Because if somebody takes my gold, there is no FDIC insurance or anything like that that backs the fact that my gold was stolen.
Austin Wilson:
Or if you hire someone to store it for you, as a lot of people do, there are costs associated, large costs associated with that.
Josh Robb:
And then the other idea too, is, for the transaction to work, somebody also wants to take that physical gold and use it for something as well. So in the long run, I think gold can be a very integral part of a diversified portfolio. There’s nothing wrong with holding a precious metal for an investment purpose.
It needs to match your longterm plan. If you are in need of money, it is sometimes hard to get money from a physical item, whether it’s gold or silver or whatever. And you saw that a lot with a lot of places popped up, we buy gold, we buy silver, you saw those signs all over the place. Now there’s a cost to that. You weren’t getting the full price of whatever that gold or silver was on the market. You were getting a reduced spot for whoever’s taking it. Because they’re the middleman, in a sense, they’re going to take a cut. So if you need quick access, a precious metal can be a little harder to get cash from that.
[26:17] – Dad Joke of the Week!
Austin Wilson:
So Josh, before we go any further, I have got the dad joke of the week for you.
Josh Robb:
Oh Boy. I’m ready.
Austin Wilson:
I’ve been brewing this one up for some time. Are you ready?
Josh Robb:
I am ready.
Austin Wilson:
He takes a drink. He’s going to spit it out, it’s so funny.
Josh Robb:
I wanted to swallow the drink before you said anything so I didn’t shoot it across all my computer.
Austin Wilson:
So Josh, what did the baby find at the end of the rainbow?
Josh Robb:
What did the baby find at the end of the rainbow? I don’t know.
Austin Wilson:
A potty gold.
Josh Robb:
Potty gold? Nice.
[26:42] – Warren Buffett & How to Invest in a Precious Metal
Austin Wilson:
Pretty good. Okay, so we, as investors, as Invested Dads, we’ve been following one of the greatest investors of all time for a long time. His name’s Warren Buffett. So Josh, what does Warren buffet have to say about investing in gold?
Josh Robb:
So for gold, he says it doesn’t do anything but sit there and look at you.
Austin Wilson:
That’s pretty close.
Josh Robb:
He says gold has less value than silver to him, as far as what the commodity actually does.
And he actually does in fact own some silver within his vast fortune that he actually invested and holds.
Austin Wilson:
Didn’t he make a comparison at one point? I think at one point he said, “What would you rather have?” I don’t know if he said a million or a billion, but he might’ve said, “Would you rather have a billion dollars of gold sitting there? Or would you rather have a billion dollars of ExxonMobil stock?” I think that was the comparison he made when he said this, but this was a while back, and considering the uncertainty around oil, which plug, go check out that episode. We did an episode about oil and what’s going on. Let’s not compare oil company to this. Let’s say, would you rather have a billion dollars of Apple stock or Amazon stock or a billion dollars of gold?
Austin Wilson:
And he said he would take the company every time because that company is going to grow, that company is going to innovate, that company is going to continue to change their product and try and become an increasingly important part of the US economy over time. And the world economy. So that’s what he says about investing in gold.
And I kind of agree with them. I think that, while investing in precious metals could have some value to some people, the growth aspect, and the fact that you can be an owner of something that is bigger than you, and that it’s growing and doing crazy, awesome things over time, is a really cool aspect of being an equity investor. And something you don’t really get with gold.
Josh Robb:
And there is volatility in a precious metal.
Austin Wilson:
There is.
Josh Robb:
They’re just different volatility than in the stock market.
Austin Wilson:
True.
Josh Robb:
In fact, in really good stock market years, You actually usually see the price of a certain precious metal go down, again, back to the it’s kind of inverse oppositely reacting to people who are positive with our economy. So own less of that precious metal. So there is volatility either direction you look, it’s just different types of volatility.
Austin Wilson:
So how can we invest in a precious metal? Well, first of all, I want to say, always talk with your financial advisor and make sure that if you are considering investing in a precious metal, that it fits your financial plan and will help you meet your financial goals. But that’s what a financial advisor is for. So I’m not advocating for anyone buying a precious metal.
Austin Wilson:
But some ways to get exposure to a precious metal ia, A, you can directly buy gold or silver coins. Make sure they’re from reputable sources. And hopefully you have a place to store them.
Josh Robb:
And how do you know if it’s real gold? You just bite it?
Austin Wilson:
That’s what I see on TV all the time. People are biting coins. I do that with the chocolate coins, that makes me look like a cool guy. So yeah, you can literally buy that. You can either store yourself or have someone store it, which that is a cost. You could also get this price movement and exposure without physically owning any gold physically. You can buy ETFs, exchange traded funds. Those tickers that come to mind, not sponsored in any way, but the iShares GLD and SLV, gold and silver. They track the movement of the prices of the underlying commodities there. And you can also get ETFs or even individual stocks for gold and silver mining companies that often have, not a perfect, but a strong correlation with the prices of gold and silver.
Josh Robb:
And so those are the companies pulling out of the ground?
Austin Wilson:
Yes, they are actively mining actual gold.
Josh Robb:
Okay.
Austin Wilson:
So the question is, should you invest in precious metal? And I think that that’s a difficult question to answer. But it’s a great question for your financial advisor. And my personal opinion is that it probably could be a small part of a diversified portfolio, but in most cases, maybe shouldn’t be what your entire nest egg should be invested in.
So, like Buffet said, it really doesn’t do much. It doesn’t grow. There’s no innovating, no growing, no improving, but again, talk to your advisor.
Josh Robb:
Would you argue with the growth of companies and technology, which was what we’ve seen a lot of recently, that’s actually increased the value of gold, even though it’s the opposite because of the need of the new gold and silver within that new technology, there’s been a higher demand, like you said, 37% of new gold is being used for that?
Austin Wilson:
Yeah. I mean, I would not, I wouldn’t say it hurts at all, but I would also say that with where technology is and where it’s going, that we will be able to make our own synthetic metals or whatever that do these same things before too long. And we will be less reliant on actual things that we have to mine that are really hard to come by.
Josh Robb:
All right. So we know that when we talked through some of these ideas, especially something like a precious metal, I mean, it could be tricky to navigate for an investor. So we always want to remind you that we are here to help. We do these podcasts to help, but if you need more, and you don’t have a financial advisor, just remember that Austin and I work at Hixon Zuercher Capital Management, and we have a link on our website that says, “Invest with us.”
If you’re interested in just talking a little more about that and seeing if you would be a good fit for our firm, and if our firm can do anything to help you out, we would love to have that conversation with you. So just click on that, on our website, and check it out. There’s a team of us that work together, and we’d be happy to talk with you.
Austin Wilson:
And as always check out our free gift to you, a brief list of eight principles of timeless investing. These are overarching investment themes meant to keep you on track to meet your longterm goals. It’s free on our website. It’s just a PDF. You can download it, and hopefully it will help you out.
Josh Robb:
Thanks a lot for listening. We look forward to talking to you next week. Austin, do you have anything else before we go?
Austin Wilson:
Yeah, I think if you guys want to help us grow our podcast, we’d appreciate it if you’d subscribe, if you haven’t already. Leave us a review on Apple podcasts. If you have any ideas of things you want to hear more about or topics or questions, email those to us, and we will get back to at hello@TheInvestedDads.com. And hit that share button. Share this episode with friends or family that you feel might be interested in the topic of investing in precious metal. Some people are really into that and might be interested. So check that out.
Josh Robb:
All right. We will talk to you again next week.
Austin Wilson:
Thank you. Bye.
Josh Robb:
All right. Bye.
Outro:
Thank you for listening to the Invested Dads podcast. This episode has ended, but your journey towards a better financial future doesn’t have to. Head over to TheInvestedDads.com to access all the links and resources mentioned in today’s show. If you enjoyed this episode and we had a positive impact on your life, leave us a review, click subscribe, and don’t miss the next episode.
Josh Robb, Austin Wilson work for Hixon Zuercher Capital Management. All opinions expressed by Josh, Austin or any podcast guest, are solely their own opinions and do not reflect the opinions of Hixon Zuercher Capital Management. This podcast is for informational purposes only and should not be relied upon for investment decisions.
Clients of Hixon Zuercher Capital Management may maintain positions in the securities discussed in this podcast. There is no guarantee that the statements, opinions or forecast provided herein will prove to be correct. Past performance may not be indicative of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses, which would reduce returns. Securities investing involves risk, including the potential for loss of principle. There is no assurance that any investment plan or strategy will be successful.
