Guide for New Investors

How to preserve your purchasing power and reduce financial uncertainty.

Download as PDF

Gold and other precious metals have always been synonymous with wealth and economic security. So why do investors seek the safety and stability of these natural precious elements, especially in times of uncertainty?

Here are the important facts:

  • Gold has been valuable throughout known history and retains its purchasing power for life’s necessities over long periods of time.
  • No other form of money or currency has outlasted precious metals as a store of value over time.

Accumulate gold and silver

Wealth preservation and financial security is about seeking assets that retain their purchasing power over time. Purchasing power represents the amount of goods and services you can buy with your money. You should aim to preserve your purchasing power to ensure that the money you are working hard to earn today is still valuable in the future when you want to spend it. The key to preserving your purchasing power is twofold:

  • You should hold money that retains its value over long periods of time.
  • You should hold money that appreciates relative to most, if not all, other forms of national currency in both the short and medium term.

Historically, buying gold and silver has been an excellent way to preserve purchasing power over long periods of time. Whether you compare these metals to a barrel of oil, the price of a house, or even a meal at a restaurant, it seems that whenever we study the prices of basic human necessities (energy, food, and shelter), we see that it takes a similar amount of gold or silver to buy these items as it did in the past. The further we go in history, the more obvious this trend becomes.

As indicated in the above graphs, it takes almost the same amount of gold or silver to buy a barrel of crude oil, an average house in the U.S., or grams of protein (whether USDA Beef or bushels of wheat) today as it did 100 years ago. This is in stark contrast to national currencies (also called fiat currencies) like the U.S. dollar, the values of which strongly erode over time, which make it appear that these basic human necessities are getting more expensive. Central banks and governments have set a long-term trend of weakening their currency, guided by a theory that inflation (debasing currency) stimulates economic growth. Currently, it appears that no country is actively seeking a stronger currency in this economic environment.

Whether this theory is right or wrong on a national level, it’s clear that holding national currencies is a poor way to maintain purchasing power for individuals, and this trend is unlikely to be reversed anytime soon.

It’s clear that given enough time, all fiat currencies lose purchasing power to gold and silver. Gold and silver have been money for at least 5,000 years and are the only globally recognized monies that cannot be created out of thin air or manipulated by central banks or governments. This makes both metals great stores of value (preservers of purchasing power) in the long-term. Unlike fiat currencies that can easily be printed into existence to fund government deficits or financial bail outs, gold and silver remain the ultimate forms of money.

The U.S. Dollar and Eight Other Major Currencies Versus Gold

Gold rose 8.1% against the U.S. dollar and eight of the world’s major currencies in 2016. Over the last 20 years, gold has climbed 242% against the world's reserve currency.

The below table displays the annual change in gold's rate of exchange against nine major currencies over the past decade.

Gold % annual change

  USD AUD CAD CNY EUR INR JPY CHF GBP
2001 2.5% 12.4% 8.9% 2.5% 8.6% 5.9% 17.9% 5.6% 5.2%
2002 24.8% 13.2% 23.1% 24.8% 5.8% 23.7% 12.6% 3.9% 12.7%
2003 19.4% -10.9% -1.5% 19.4% -0.6% 13.9% 7.7% 7.0% 7.6%
2004 5.5% 1.7% -2.3% 5.5% -1.9% 0.5% 1.0% -3.0% -1.7%
2005 17.9% 25.6% 14.0% 15.0% 34.9% 22.1% 35.3% 35.9% 31.3%
2006 23.2% 14.5% 23.5% 19.2% 10.6% 21.0% 24.5% 14.4% 8.3%
2007 30.9% 18.0% 12.1% 22.4% 18.4% 16.6% 22.9% 21.7% 29.2%
2008 5.8% 31.8% 29.2% -1.2% 10.5% 30.7% -14.1% 0.1% 43.9%
2009 24.4% -2.6% 7.3% 24.4% 21.3% 18.9% 27.5% 19.9% 12.2%
2010 29.6% 13.7% 22.9% 25.3% 38.6% 24.5% 13.1% 17.2% 34.2%
2011 10.1% 10.4% 12.7% 5.1% 13.7% 30.8% 4.4% 10.6% 10.6%
2012 7.1% 5.2% 4.0% 5.9% 5.2% 10.5% 20.7% 4.3% 2.4%
2013 -28.3% -16.4% -23.2% -30.3% -31.1% -19.1% -12.9% -30.0% -29.6%
2014 -1.4% 7.5% 7.8% 1.0% 12.0% 0.8% 12.0% 9.8% 4.8%
2015 -10.4% 0.5% 6.7% -6.3% -0.2% -6.2% -10.0% -9.7% -5.3%
2016 8.1% 9.3% 5.0% 15.7% 11.7% 11.0% 5.2% 9.9% 29.1%
2017 11.9% 7.0% 12.4% 11.0% 9.7% 6.4% 4.4% 9.4% 7.8%
Avg 11.3% 9.9% 9.8% 8.4% 12.0% 14.3% 12.2% 9.2% 13.2%
10 Yrs 242.0% 259.2% 278.6% 189.9% 302.0% 368.6% 283.6% 212.9% 315.0%

The U.S. Dollar and Eight Other Major Currencies Versus Silver

While 2010 was a great year for gold, it was the best year of the decade for silver. Silver rose against all nine of the major world currencies, topped by a spectacular 97% jump against the euro. Silver's results are displayed in the below table.

Silver % annual change

  USD AUD CAD CNY EUR INR JPY CHF GBP
2001 0.4% 10.2% 6.8% 0.4% 6.4% 3.8% 15.6% 3.5% 3.1%
2002 3.5% -6.1% 2.1% 3.5% -12.3% 2.6% -6.6% -13.8% -6.5%
2003 24.3% -7.2% 2.6% 24.3% 3.5% 18.6% 12.1% 11.3% 12.0%
2004 14.9% 10.7% 6.4% 14.9% 6.7% 9.4% 9.9% 5.6% 6.9%
2005 29.2% 37.6% 24.9% 26.0% 47.8% 33.8% 48.2% 48.9% 43.8%
2006 46.4% 36.1% 46.9% 41.7% 31.4% 43.9% 48.1% 36.0% 28.8%
2007 14.6% 3.3% -1.8% 7.2% 3.7% 2.1% 7.6% 6.5% 13.1%
2008 -22.9% -4.0% -5.9% -28.0% -19.5% -4.8% -37.4% -27.1% 4.8%
2009 48.0% 15.9% 27.7% 48.1% 44.4% 41.5% 51.7% 42.7% 33.6%
2010 83.2% 60.7% 73.8% 77.1% 96.0% 76.0% 59.8% 65.7% 89.7%
2011 -9.9% -9.7% -7.8% -14.0% -7.0% 7.0% -14.6% -9.6% -9.5%
2012 9.0% 7.1% 5.9% 7.8% 7.1% 12.5% 22.9% 6.3% 4.2%
2013 -35.8% -25.2% -31.3% -37.6% -38.4% -27.6% -22.1% -37.4% -37.0%
2014 -19.3% -12.0% -11.7% -17.3% -8.3% -17.5% -8.3% -10.1% -14.2%
2015 -11.9% -1.1% 4.9% -7.8% -1.8% -7.7% -11.4% -11.2% -6.8%
2016 15.0% 16.3% 11.7% 23.1% 18.8% 18.1% 11.9% 16.9% 37.3%
2017 12.6% 7.6% 13.1% 11.6% 10.4% 7.1% 5.0% 10.1% 8.4%
Avg 14.3% 10.9% 11.5% 11.4% 14.9% 16.0% 15.1% 11.6% 14.9%
10 Yrs 203.0% 217.4% 233.7% 159.2% 253.3% 309.1% 237.8% 178.5% 264.2%

The Bottom Line

If you had invested $10,000 in 3-Month U.S. Treasury bills on January 1, 2000, your purchasing power would have slightly decreased by January 1, 2011. If you had invested the same $10,000 in gold or silver, your purchasing power would have more than tripled.

How much should I buy?

Gold and silver are excellent means for preserving your purchasing power, but choosing how much gold and silver to buy should be your personal decision.

Holding between 10-25% of your assets in precious metals is a widely-acknowledged investment principle. Research has shown that wealthy individuals keep around 10% of their wealth in precious metals as a diversifier and hedge against crisis events. 

The first proponent of the “10% rule” was former Federal Reserve Governor and Harvard economist John Exter. Exter came up with “Exter’s Pyramid” to convey the inherent risks of each type of asset to economists, banks, and financial institutions. At the bottom of Exter’s pyramid was gold, forming the safest foundation of one’s assets. At Goldmoney, we agree with Exter’s core principal and believe that a 10-20% allocation to gold is wise, or a higher figure if you live in nations with higher inflation and weaker government accountability.

Isn't the gold price too high to buy?

Nobody can predict the future, but there is a strong case for the continued appreciation of the gold price (and other precious metals) in terms of U.S. dollars, euros, and most of the other major world currencies; however, price is not the key consideration when purchasing gold, as gold investments are first and foremost made to act as insurance against financial uncertainties and currency debasement. Visit our Gold Research section to learn more about how precious metals can protect your wealth.

Buying platinum and palladium

Platinum and palladium are part of the platinum group metals (PGM), and are also known as the “Noble Metals”. Being both rare and durable, they exhibit similar scientific properties to gold and silver; however, unlike gold and silver, their demand stems almost entirely from their industrial uses and their prices have generally risen during past economic booms.

Physical platinum and palladium stored at secure and insured vaults lack counterparty risk, which makes them reliable stores of value in times of financial distress.

At Goldmoney, your holding allows you to buy, sell, and store platinum and palladium at the lowest rates to complement your gold and silver holdings.

Applying for a Goldmoney Holding is simple.

Goldmoney has made it easy for you to apply for a Holding free of charge. If you live in the U.K., U.S., Canada, or one of the other fast-tracked countries, you can complete the process entirely online.

The sign-up process can be completed within minutes; it involves completing an online application form and uploading scanned copies of your bank statement and a photo ID document, such as a passport or driver’s licence. After we have reviewed your form and supporting documents, we will notify you and provide an update on the status of your application. Once your application is accepted, you may fund your Goldmoney Holding and start buying precious metals. Learn more about the sign-up process in our Support and FAQs section.

Does Goldmoney offer consistent and competitive prices?

Some precious metals dealers charge high prices for gold, silver, platinum, and palladium that vary widely. For example, many coin dealers for example try to convince clients to buy “numismatics” and other fashionable coin products at high premiums to the underlying metal value. We founded Goldmoney because we felt clients needed a transparent way to buy and sell physical precious metals at honest market prices.

We always offer you consistent and competitive prices. Learn about our dealing rates and storage fees here.

Are my metals safe with Goldmoney?

Goldmoney has invested significant resources over the years to become the leading online provider of gold and silver bullion. All metal is directly owned by our clients and routinely verified by independent third parties. There is always a one-to-one ratio of the metal in our vaults to the metal in our database. Your metals are safely stored in a secure and insured vault. Find out more about the unparalleled safety and security we offer as the only regulated precious metal investment service.

Goldmoney Network – Global Liquidity Platform

As an investor, you need to be able to easily buy, store, and sell your precious metals on a secure platform that’s accessible to you 24 hours a day, seven days a week, and offers transparent and competitive pricing. Powered by several U.S. patents, the proprietary Goldmoney network provides you with a flexible solution that enables you to access global physical bullion markets and vault custodians in the best way possible.

You will have immediate access to our unique precious metals purchasing platform once you have opened and funded a free Holding. We allow you to exchange between metals directly without having to sell them first and provide multiple account funding and withdrawal options, including credit and debit cards.

Ready to get Started?

Apply for Your Holding
JFSC Regulation
The JFSC is the main supervisory body that oversees and regulates Jersey's large financial services industry. Jersey enjoys a global reputation as a key offshore financial centre. It has achieved this position with its well-developed financial and professional services infrastructure, system of regulation, a robust legal system, including strong privacy and data protection legislation, and a stable political environment. Goldmoney in all respects operates within the legal framework and the data privacy regulations applicable in Jersey.

Structure
Goldmoney Inc. is a publicly listed corporation traded under the symbol “XAU” on the Toronto Stock Exchange (TSX). We carry our operations under three wholly owned subsidiaries: Goldmoney Wealth Limited (Jersey) which is a segregated customer subsidiary that provides metal storage services for Goldmoney clients, Goldmoney Processing Europe Limited (Jersey) which undertakes the purchase and sale of precious metals, and Goldmoney Processing Canada (Canada) which undertakes the purchase and sale of precious metals.

Corporate Governance
Goldmoney Inc. has adopted best practices in Corporate Governance. The corporation is governed by a Board of Directors that has implemented a Code of Conduct and a Code of Ethics, as well as Internal Audit and Whistleblower Policies.