Gold’s Secret Investment Benefit

Written by Luke Burgess
Posted November 30, 2022

Investing in physical gold and silver bullion holds a secret and powerful benefit… one that both creates a hedge and builds a foundation for wealth accumulation.

But I’ll tell you now that it’s not an equal benefit. It’s something that can financially help some people much more than others.

In fact, some investors are going to call this “benefit” a disadvantage. And, for them, they wouldn’t be wrong.

But owning physical gold and silver bullion can provide an unwitting advantage to tens of millions of folks across the country.

I won’t beat around the bush…

The secret benefit to investing in physical gold and silver bullion for these tens of millions of people is illiquidity

That’s not a mistake.

You read that correctly.

Illiquidity (its difficulty to sell) is the secret benefit to physical gold and silver bullion.

Now, before I explain, I should tell you I’m only talking about physical gold and silver bullion — coins and bars you can hold in your hand. I’m not talking about gold and silver stocks, ETFs, or any other digitally traded asset. Those are typically very liquid assets. I’m talking about owning the physical metal.

goldcoins

Investment assets aren’t really “liquid” or “illiquid.” The liquidity of investments is really a spectrum. Some investments can be liquidated in seconds, while others take months. Physical precious metal bullion falls somewhere in the middle of that spectrum.

Stocks are way more liquid than physical gold bullion. You can sell your stocks in seconds without even standing up. In fact, if you have sell orders set, your stocks will just sell automatically. You could sell your stocks while watching paint dry.

But selling physical gold and silver bullion is more involved.

There are multiple ways to sell bullion. You can sell bullion to a coin shop or bullion dealer with a brick-and-mortar storefront… when they’re open. You can sell it to a private individual… as long as they’re trustworthy. You could also do what’s probably the most common thing and sell bullion to a reputable online dealer like APMEX, Provident Metals, JM Bullion, and others.

Nevertheless, the least amount of effort in selling gold and silver bullion involves arranging a sale and then mailing the physical metal to the buyer. It’s everything you’d expect when selling a physical object.

Physical gold and silver bullion is much less liquid than stocks. On the other hand, physical gold and silver bullion is way more liquid than some assets, like real estate. According to Zillow, “Sellers spend approximately six months preparing their homes for sale [and] another 25 days with their house on the market.”

The point is gold sits somewhere in the middle of the asset liquidity spectrum, and that can be actually very beneficial for tens of millions of people — particularly those with poor saving habits.

I'll give you a personal example.

Like many people, I had very poor saving habits when I was 18 years old. I had two jobs, but I would just spend every dollar I earned buying crappy Mexican brick weed and trying (and failing) to impress girls.

When I was in my 20s, however, that changed. And it changed because I started buying physical gold and silver bullion.

Selling physical gold and silver bullion is not the worst thing in the world, but it can be inconvenient. Again, selling a stock takes a matter of seconds with a few button pushes. Unless you live right next door to a bullion dealer, selling physical gold and silver and getting paid can take anywhere from a few hours to a week.

Selling bullion is a kind of a hassle but not a huge one. It's just enough hassle for people with poor spending habits to dissuade them from selling their physical bullion to buy something frivolously. Owning physical gold and silver bullion sort of forces people to save.

At the same time, physical gold and silver bullion is liquid enough that if people absolutely need money, they can sell it in a reasonable amount of time.

When I was 21, I wouldn’t sell my gold to buy a guitar I wanted, but I would sell it if I needed to pay my rent. Owning gold back then forced me to be more financially responsible.

As I mentioned, physical gold and silver bullion being somewhere in the middle of the liquidity spectrum won’t be a benefit for every investor. However, for those with poor spending habits, owning bullion sort of forces them to save while providing a short-term safety net.

Now, I really don’t expect most Outsider Club readers to have poor spending habits, but I guarantee you know someone in your life who does. So as you’re thinking about what to get people as gifts for this holiday season, consider physical gold and silver bullion.

I will tell you physical bullion is not a gift everyone is going to appreciate immediately… especially a kid or younger adult. Odds are good you had an uncle or grandfather give you an American Silver Eagle for a birthday or Christmas. As a kid, that’s kind of a crappy gift. So I’d recommend using bullion as a secondary gift. But later down the line, if they ever need it, that bullion will be there.

Until next time,
Luke Burgess Signature
Luke Burgess

Luke’s analysis and market research reach hundreds of thousands of investors every day. Through his work with the Outsider Club and Junior Mining Trader, Luke helps investors in leveraging the future supply-demand imbalance that he believes could be key to a cyclical upswing in the hard asset markets. For more on Luke, go to his editor’s page.

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