hey YouTube I'm Jimmy in this video I'm going to go through the advantages and
disadvantages of investing in gold and silver the best way to invest in them
and which is better gold or silver from an investment standpoint so in a recent
video I published a question came up about investing in gold and silver ETFs
and although I know a decent amount about gold as a hedge and a pretty good
understanding of how gold as a commodity is traded I realized that I don't know a
ton about gold or silver ETFs and probably not as much as I could about
gold or silver itself but as luck would have it I happen to know one of the
world's leading experts on gold his name is Will Rhind and I've known him for a few
years and I know him because he started a company called Granite Shares
they manage a few ETFs the reason I thought of him when I was prepping for
this video is that one of those ETFs is called the granite shares gold trust
ticker symbol ba R now his ETF is very similar to a spider ETF which is called
the spider gold ETF ticker symbol there is GLD GLD is the largest gold ETF in
the world with about 30 billion in assets so what's interesting about Will
and one of the reasons that I turn to him when I have questions about the
commodity markets specifically gold was that we'll spent two years as the CEO of
GLD so clearly he's one of the best at this okay so now let's kick it off with
the first question if we want to invest in gold or silver what's the best way to
do it is it in fact ETFs why don't we just buy the commodity itself well let's
say we would go ahead and we were to buy the commodity let's say we're to buy
gold a gold coin or bullion or gold bar whatever it might be well the first
thing we're gonna have to do is we're gonna have to store that how're we going
to store it safely do we put it in safe maybe a safe deposit box we stick it on
drawer mattress either way there's going to be a cost involved in storing it or
at least throwing it smartly but the biggest reason that we don't want to buy
gold itself is the pricing you would get so when you go ahead and buy gold and
let's say you buy gold gold coin from where you buy some reputable store
online well they're not gonna sell to you at the current spot price of a
$1,250 per ounce they're gonna mark it up so that they can make their money and
now let's say you want to sell it back to them well when you sell it back to
them the same issue they're gonna mark it down they're gonna pay less than the
current spot price so you get hit twice when you buy and sell it so if we're
gonna buy a gold ETF what do we get and what's the risk and the same will hold
true for silver but I'm just going to focus on gold for now so the two to ETFs
that I narrowed it down to was BAR and GLD and functionally the two of them act
very similar to each other when you buy a share either those gold ETFs you're
buying one tenth of an ounce so 10 shares is the same as buying one
ounce of gold now when the ETF gets money when you
invest money in the ETF the ETF takes that money and they go ahead and they
actually buy the gold and they store it in vaults in London they serve them in
different folks but either way the concept is the same you buy btf they
take that money they buy actual gold so in theory that ETF is completely
backed by gold this means that the price of these two ETFs should closely track
the price of gold actually it should closely track one
tenth of the price of gold the only real difference between gold and the ETF is
the fees and this brings me to why I like BAR over GLD. BAR charges 17
and 1/2 basis points and GLD charges 40 basis points to me it's as simple as
that they both do the very same thing why pay more now just to be clear yes I
know Will and I like him and he's helped me further understand the markets but
I'm not getting paid from him to say anything like this it's as simple as
they do the same thing as GLD but they charge less to me that's a huge
advantage so if we switch the silver well one thing I noticed that there's
not nearly as much money in silver ETF as a raising gold ETF the largest silver
ETF I could find was the iShares silver trust they've got about four and a half
billion dollars and they charge a fee of about 50 basis points so 1/2 of 1% then
there's also the aberdeen standard physical silver ETF their ticker symbols
SIVR once again they do the same thing as SLV
except that they only charge 30 basis points so to my way of thinking SIVR
seems to make more sense and I don't know anybody at that ETF so I'm gonna
have to branch out my network a little bit and see if I can expand that for a
future video ok now this brings us to the next question which is better gold
or silver so people often link gold and silver together and they talk about them
as if they're interchangeable investments and interestingly they're
really not broadly speaking gold isn't they very
usable commodity sure it's used in jewelry and some electronics but
historically gold has been mostly it's mostly been a way to store people's
wealth silver on the other hand has many more industrial uses than gold has and
ultimately what this means for us is that silver is much more tied to the
business cycle than gold would be this should also make silver more volatile
and when I went ahead and checked the one year standard deviation for both SIVR
and BAR SIVR came in at about 10 and BAR came in about 7.3 so it seems
that gold is less volatile than silver at least it has been over the past year
so this leads us to the question are gold and silver ETF is a good investment
right now well based on what I've seen from a silver perspective I would feel
much more comfortable investing in SIVR if we were closer to the bottom of the
business cycle since they are in fact more closely tied to the economy so if a
recession does hit and the market does keep going down well silver may not
perform as well since the industrial demand for silver would likely slow this
chart right here this is a chart of silver compared to the S&P 500 and since
the start of 2018 the S&P is down about 3% and SIVR is down about 14% when we
switch to gold well we can once again see that the S&P is down about three and
BAR is down about 4% now it looks like silver is in fact less resilient than
gold so this supports our thesis that the potentially slowing economy could
spook silver investors more than gold investors but there is something
interesting about this chart and that is that gold has been down since about
March sure when the market got a bit more
in this area well gold started moving higher but why the reversal of gold
prices back in the march/april area and our answer lies in this chart this is a
chart of DXY. DXY is the US dollar index
basically it's a US dollar versus all the world major all the world's major
currencies so it's a clean way of looking at the price of dollar first as
much of the rest of the world and we could see that when we look at how gold
did against the US dollar we can see that they move rather opposite of each
other they move inversely so when the dollar Falls gold will rise and I think
that this is crazy important because perhaps gold isn't the hedge it's believed
to be well it is but not for the reasons that many people thought it was at least
the way I was thinking it was before I went ahead and did the research for this
video and that's because in a recession often times the value of the dollar
weakens so we know that if the dollar weakens well gold will move higher so
ultimately it's likely the value of the dollar that's driving gold higher and
not the recession or not the S&P 500 so to test this I actually put together this
chart this is a chart of gold versus the US dollar during the Great Recession and
as we could see when the dollar fell early onlet on gold jumped higher then
when the dollar started to rally while gold began to fall then towards the end
of the recession the dollar fell off again and once again gold began to move
higher so now we know what we're dealing with as far as gold is concerned we know
that the silver that the price of silver is often tied to the business cycle that
being said do we think that silver and gold are good investments right now now
personally I'm not a huge fan of silver at this point because like I mentioned
before I actually think that we're closer to the end the to the top of the
business cycle than we are the bottom and I'd rather wait for the bottom we're
gonna jump in silver so we already saw that the gold is tied to the US dollar
and we know that the dollar rising helps create this dip in the price of gold but
what made the dollar rise well the dollar is tied to many different things
but one of the main drivers of the dollar is interest rates and if you pay
attention to the markets at all in recent years then you've likely heard
that interest rates have been rising rising rates
tend to drive the dollar higher and we know that if we drive the dollar higher
we're gonna drive gold lower that explains why the S&P is down and so is
gold and this brings us full circle as to why gold does work as a hedge see in
recession the Federal Reserve is unlikely to keep rising rates in fact
they're more likely to lower rates often leading to a falling dollar which we
know will lead to rising gold prices so should we buy gold for 2019 and for me I
think it makes a lot of sense to have this type of hedge in place and any
pullback in the economy or uptick and inflation will almost certainly stop the
Fed from raising rates any further this should help gold and ultimately our
portfolios so if you've been following our channel at all well you may have
seen that we're doing a series called the Dow of 30 where we're analyzing all
30 stocks in the Dow Jones Industrial Average and then what we're going to do
is we're going to take that analysis we're gonna build three different
portfolios a value of growth in a dividend portfolio well with that in
mind it might make sense to consider adding gold as a hedge as one of our
positions to see if it could help hedge our portfolios when we go ahead and
build those now for me I would add BAR over GLD simply for the
fact that the fees are lower I think watching fees is crucially important and
we're getting the same thing we're getting one tenth of an ounce for every
share that we buy but what do you think should we add BAR to our portfolios is
gold the smartest investment for 2019 it could be let me know what you think
in the comments below and if you haven't done so already hit the subscribe button
thank you for sticking with me all the way to the end of the video and I'll see
in the next video thanks