The unprecedented uncertainty brought about by the global COVID pandemic has made investors far more risk-averse than presumed. Some have considered adding an asset like gold to their portfolio, which has typically been viewed as a hedge against economic turmoil. In this episode of The Agent of Wealth Podcast, host Marc Bautis is joined by Patrick Yip, the Director of Business Development at APMEX and OneGold. APMEX is one of the largest retailers of physical gold, silver, platinum and palladium, selling over $15 billion in product over its 20+ year history. OneGold is a fast-growing online precious metals platform that has processed over $750 million in transactions during its first three years in business.
In this episode, you will learn:
- How gold stacks up against the three other types of precious metals, and modern uses for each.
- Reasons why gold and other precious metals can perform positively during inflationary periods.
- Why more people are turning to gold as a form of currency in recent years.
- How to invest in tangible precious metals through APMEX and digital precious metals through OneGold.
- More trends in gold and the precious metals industry.
- And more!
Resources:
APMEX: Precious Metals Dealer (Metals You Hold) | OneGold: Buy Digital Metals (Vaulted Metals) | Contact Patrick Yip: [email protected] | Schedule an Introductory Call | Bautis Financial: 7 N Mountain Ave Montclair, New Jersey 07042 (862) 205-5000
Get 50% off gold and silver premiums on onegold.com using Coupon Codes:
GOLD50OFF (for Gold Premiums)
SILVER50OFF (for Silver Premiums)
Disclosure: The transcript below has been lightly edited for clarity and content. It is not a direct transcription of the full conversation, which can be listened to above.
Welcome back to The Agent of Wealth Podcast, this is your host Marc Bautis. On today’s episode, I brought on a special guest, Patrick Yip. Patrick is the Director of Business Development at APMEX and OneGold. APMEX is one of the largest retailers of physical gold, silver, platinum and palladium, selling over 15 billion in product over its 20+ year history. OneGold is a fast-growing online precious metal platform that has processed over $750 million in transactions during its first three years of business. Patrick, welcome to the show.
Hey. Thanks for having me on, Marc.
So I’m excited to talk about today’s topic. I think that, with everything going on in the markets and economy, a lot of light is being shedded on alternative investments and how they can be of use in someone’s portfolio. Can you start off by telling us a little more about APMEX, and how you got started there?
APMEX is one of the largest online retailers of precious metals. As you mentioned, we’ve been in business for over 20 years. My own personal history in the field goes back to 2008… I think many of your listeners will remember the financial crisis. Back then, I had an allocation of your typical stocks and bonds – just like most other people in the world. I saw the S&P basically correct 50%. Then, I asked my financial planner, “What happened? Did no one see this?” He was like, “Yeah, unfortunately, not a lot of people could have seen this coming.”
After that, I started researching precious metals and Austrian economics. Over time, I got more and more interested in it. I moved from California over to Oklahoma City in 2011 and I’ve been with APMEX for over 11 years now.
Okay, cool. So I guess if someone wants to invest in precious metals, APMEX is a place to go to purchase them?
Yes, and we offer solutions for all types of investors. APMEX is a the company to OneGold, and it has about 25,000 precious metals products in stock: Gold, silver, platinum and palladium. We have bars, rounds and coins. We have older coins, which is what we call numismatics. We have currency. We have collector coins, too. We have coins with things like peanuts, Star Wars, Cadillac… a whole bunch of different things. But investors go to APMEX to buy the physical precious metals.
Now, OneGold is a solution to buying, selling and owning vaulted positions of precious metals stored at very secure vaults around the world.
So the investor ultimately has an option: Do they want to physically take possession of the precious metals, or do they want the precious metals stored securely?
Correct. Some people like the physical aspect, because they like to have their investment in their hand. When it’s held physically, they feel secure in that it can’t be hacked or taken from them. Other people like a vaulted solution, perhaps because they have a large amount of wealth.
A lot of people get started in precious metals with a couple thousand dollars worth. But, over time, it becomes tens of thousands and, if you’re fortunate enough, it becomes a six- or seven-figure sum. But having a six- or seven-figure sum of precious metals in your home is not ideal. So a lot of those customers go to a vaulted solution. OneGold offers a secured vault where they don’t need to worry about anyone hacking or taking their investments.
Gold in Times of Inflation
Okay, that makes sense. Earlier, you mentioned the 2008-2009 recession and how that led you to the precious metals space. Can you talk a little about the use case for precious metals? How can precious metals benefit someone’s portfolio?
Yeah, that’s a great question. Let’s start by looking at the current economic situation. Inflation is rampant right now. Everywhere you go, you see inflated prices for goods and services. According to the latest CPI data, inflation is running at 8.5% year-over-year, which is the highest it’s been in 40+ years.
What Is Inflation and Why Should We Worry?
Let’s take a quick look at inflation and why you need to be concerned about inflation.
If you look at the 1960s, where the U.S. had an inflationary period, it took the Federal Reserve nine years to resolve inflation. Then, in the 1970s, we had a similar inflationary period that took the Fed five years to resolve. So what does this mean? Today, we’re about two years into the inflationary cycle. It seems like a long time ago, but in January of 2021, inflation was only 1%.
So if inflation lasts five or nine years, like it did in the 1960s and ’70s, we’re still in the early part of the cycle. Five years of 8.5% compounded inflation – obviously inflation will go up and down… it’s been its highest 9% – is going to erode 35% of your wealth. That means that, in five years, $100 will have $65 in purchasing power. Now, let’s say inflation lasts nine years like it did in the 1960s, that’s going to erode 55% of your wealth. The same $100 will have only $45 in purchasing power by the end of that nine years. That’s what inflation is going to do to your wealth.
Related: How to Deal With High Inflation
How Gold Has Performed During High Inflationary Periods
Now, let’s take a look at how different asset classes perform during inflationary periods.
A lot of times, people are in a portfolio that’s allocated to stocks, and they hope that stocks will react positively in high inflation. But if you look at the S&P performance in the 1960s and ‘70s, it did not do too well – it actually lost money in the ‘60s and only gained 4% in the ‘70s. Keep in mind, this was a double-digit inflationary period. So even a flat portfolio still meant that you lost a ton of money due to inflation (at those times).
Now, let’s look at gold during the same time periods. In the 1960s, gold went up fivefold from 35 to 200. Then, in the ‘70s, it went up eightfold from 100 to 850.
Now, time will tell what gold and stocks will do in our current inflationary cycle. But if history repeats itself, stocks may struggle and gold may do well in the next couple of years.
Why is it that gold reacts positively during inflationary periods?
I think it’s because the dollar is being debased right now. All of these crazy policies are getting passed… for example, the Student Loan Relief Plan – I don’t know all of the details yet, but it’s frustrating for someone like my wife, who paid off her student loans years ago. It’s hard to see people now getting $10,000 (or more) forgiven. It’s like free money. I mean, I’m not trying to get political, but it’s an interesting world we live in now.
And it’s not set to a particular person, administration or country. Governments around the world are debasing currency. So people are looking for something tangible, something that cannot be debased. With gold, you can’t print more of it. Even something like real estate or commodities, you can’t just click a couple keystrokes and more of it appears. It requires some labor or some effort to actually make these hard goods. So I think that’s what makes gold so appealing during these times.
Are people still mining for gold? Are there companies out there that are still trying to produce more gold?
Yeah, there are definitely companies producing gold and silver. I’m not an expert in the mining space, but I know that it is getting harder to mind gold. For example, during the California Gold Rush period, you could go into California and find gold nuggets by just panning. That obviously doesn’t happen anymore.
It’s funny, we just got back from a trip to Alaska and one of the things we did was pan for gold. Like most people, we were unsuccessful.
It’ll break your back too. I did it in Colorado and after 30 minutes, I said, “I’m too old for this.”
Types of Precious Metals
Yeah. So I know we talked a lot about gold, but what about some of the other precious metal?
There’s four primary precious metals:
- Gold
- Silver
- Platinum
- Palladium
If you look at APMEX’s business, about 70% of our sales are gold, about 28% are silver and about 1-2% are platinum and palladium. So I’m going to ignore platinum and palladium for now.
Gold
Gold is known as the safe haven asset. It’s the asset that you want to get when you want to protect your wealth. Now, it’s not going to double or triple in a two year period, like Bitcoin has in the past, for example. But it could double or triple over the course of 10-15 years. Time will tell… depending on how the governments debase currency.
Silver
Silver is more of a volatile asset. Typically, it’s a higher beta asset. So if gold goes up by 1%, silver might go up by 2%. If gold goes down 1%, silver might go down 2%. If people are looking for a bigger return, a lot of times people will buy silver because it has more upside.
One of the things that I hear from people is that although gold holds value, it has no use. It doesn’t produce income and it can’t be used. Do the other metals have use?
The Modern Uses of Precious Metals
Well, first, I look at gold as a currency – or money – without a country attached to it. The dollar itself doesn’t produce anything, right? The euro itself doesn’t produce anything either. But it doesn’t mean the dollar or the euro are useless. In my opinion, gold has a place in a portfolio. But if you’re looking for that big upside, gold’s probably not it. Like I said, it’s more of a safe haven.
Onto the other assets… silver is the most conductive metal out there, so it’s used in a lot of electronic currents. It’s the most reflective, too, so it’s used in solar panels. There are a lot of industrial uses for silver.
Platinum and palladium are mostly used in catalytic converters.
The Importance of Diversification
Got it. Not to transition over to a conversation on cryptocurrency, but you did mention Bitcoin a little bit earlier. One of the biggest things we hear about Bitcoin is that it’s like digital gold. Now, I guess that could mean a lot of different things… but do you see Bitcoin replacing gold in any way? Do you see it as a possible alternative to gold in the future?
A lot of people ask me, “Should I get into gold or should I get into crypto?” To me, there’s no right or wrong answer. I mean, why not have both? I think they both serve a different purpose.
Keep in mind, gold dates back 5,000 years. Precious metals have been around forever, and by now we know how they’ll perform in booms and busts, during recessions, and so on. I don’t think precious metals are going to go anywhere in the next, say, thousand years.
Now I think cryptocurrency is a different type of asset. Bitcoin has only been around since 2009, and unfortunately, that was after the 2007-2008 recession. Because of this, no one really knows what will happen to Bitcoin during the next recession. To me, that doesn’t mean Bitcoin is bad.
My thought is that you probably should have some Bitcoin in your portfolio, just like you should have some gold, some silver and so on. It’s all about diversification. If Bitcoin went to 100,000 and you missed out, would you be upset? Maybe. If Gold does what it did in the 1960s and 1970s – let’s say it had a 5x move up – and now you have gold that’s worth almost $10,000, would you be upset if you missed out? Maybe. So it couldn’t hurt to get exposure to both gold and Bitcoin.
Sure. Can you talk a little bit more about APMEX and OneGold, and how the exchange works?
So I call APMEX, the online retailer, the Amazon of purchase metals. We has 25,000 products. You add things to your cart and we ship it to your house. You do whatever you want with it from that point forward. You can hide it. You put it in a safety deposit box. You put it in a safe… whatever.
OneGold, a subsidiary of APMEX, is the more convenient option. Back in 2018, APMEX partnered with Sprott and Sprott, a large alternative investment manager with about 22 billion under management, to come up with OneGold. Basically, it’s a new and modern way to own precious metals. Some people call it the Robin Hood of precious metals, because it’s so intuitive and easy to use. OneGold is an online investment platform that allows you to buy, sell and trade vaulted positions of metals. So it’s similar to a trading account.
On OneGold, the precious metals are stored either in the US, Canada, Switzerland, or the UK – the buyer gets to choose. OneGold starts by having various agreements with vaulting companies, then purchasing large precious metal bars from the wholesale market… these are the bars you see in movies – like 400 ounce gold bars. So we buy it, store it and then make the metal available for sale. When the customer purchases it, they have fractional ownership in a large bar. And the reason we do this is because we’re able to give extremely attractive pricing.
OneGold eliminated having to pay for the whole supply chain, where this big bar is sent to a refinery, made into small pieces, stamped out and then sold through a retailer. Instead, OneGold allows the buyer to take direct ownership of the larger bars. And if you ever have a position large enough, you could swap your position at OneGold and actually get a physical bar for delivery too.
All of the metal held at OneGold is insured, audited and backed by APMEX and Sprott and Sprott.
Do you see people using the OneGold platform to trade precious metals daily? Or are people taking longer positions?
You could definitely day trade. I used to trade futures, but even the best day traders are only right 55% of the time. So it’s hard to be consistently successful in that way. I would say it’s a longer term hold, and the reason for this is I think a lot of things are cyclical.
From 2000 to 2011, the S&P had a lost decade. It basically didn’t go anywhere. Gold, on the other hand, went from 250 to about 1,900 from 2000 to 2011. Then, fast forward to 2011 to now, Gold basically didn’t do anything. It went from 1,900 down to 1,050 and back at 1,750. Stocks, on the other hand, went up fourfold from 1,250 to 4,800. Obviously we’re not there right now, we’re at about 4,000… but if you look at it, a lot of things are cyclical. So given that inflation’s here and the Federal Reserve is raising interest rates, I think now may be time that cycle swaps and stocks are going to struggle for the next couple of years whil gold may do well.
It could be that diversifier in the portfolio that helps.
Right.
Now we know that investing in physical precious metals – like bars and coins – it’s not the only way to invest in gold. Someone could invest in an ETF or even invest in the stock of a company that could benefit if the price of gold goes up. What are the pros and cons between investing in precious metals directly versus some of the other ways I mentioned?
So buying precious metals through APMEX or OneGold is going to directly tie you to the commodity price: You own that metal. If you look at something like an ETF, which is by far the most popular way to buy-purchase metal, it’s usually through something like the GLD or SLV. What I would recommend before you get into a lot of these ETFs is to read the Prospectus.
Unfortunately, a lot of people choose an ETF without understanding the terms and conditions of it. Some ETFs say that the metal is not insured. Now, you hope that nothing happens, but it’s always a possibility that something could happen. In addition, on the GLD and SLV, they say the metal could be held at a custodian, sub custodian or even a sub custodian of a sub custodian. I read that and think, ‘Okay, so do I have a title to it? Are there too many parties involved in this?’ Those are just some things to be aware of.
Mining stocks are a good thing that you bring up… I do have some mining stocks in my portfolio. The important thing to consider with these is that you’re largely betting on a management team. You could have the best asset in the ground, but if the management team can’t execute, then you’re not getting gold out of the ground. Or you could have a not-so-great property and a management team that has experience – they know how to pull the gold out of the ground – and they mine very efficiently. So with a mining share, there’s a lot more due diligence required before you just blindly invest.
And is gold priced the same way as stocks, where you can get an updated price at any point in time?
Yeah, the price of gold is refreshed every 60 seconds, so it’s just like any stock that trades throughout the day. You can check out the live prices on apmex.com or onegold.com.
And are there different classes or types of gold, or is there only one variation of it?
Gold is essentially gold, and silver is silver. On the APMEX side, there are products that are better than others… Better in terms of more desirable or more liquid. If you do want to purchase physical gold through APMEX, I recommend you get some of the most popular products: the Gold Eagle or the Silver Eagle, the Gold Maple or the Silver Maple, for example. Those are the ones I think you can’t go wrong with.
On OneGold, you’ll have ownership in what they call a London Good Delivery bar. The London Bullion Market is one of the largest – if not the largest – market in the world, and they have certain regulations for the gold bars. They need to be of a certain purity, of a certain size, recognized by a certain refinery, etc. They need to pass all these certifications before they get approved, and that’s what you’ll essentially own on OneGold.
And let’s say I buy gold on OneGold and at some point in the future I want to sell it. Am I selling it back to OneGold? Is OneGold on the other side of the trade?
Yes, OneGold will be the other side of the trade. And we provide market depth because we’re connected with a lot of wholesalers too. So if you want to buy a large position, we could certainly buy that from the wholesalers. If you want to sell it, there’s no worry about liquidity. What we’ll do is if you want to sell a large position, we would basically just offset our risk with the wholesale market. We’ve done transactions north of $10 million on OneGold.
What do you see as some of the trends coming up in the precious metals industry?
That’s a great question too. As COVID hit, we basically saw business ramp up and boom. So comparing this year to a couple years ago, we’re seeing sales at like 2.5% times what we saw a couple of years ago. We’re on track to ship over $2 billion in precious metals to retail customers this year. In fact, earlier this year we had our best month ever. We sold $235 million in precious metals to retail customers. We’re seeing the number of customers also double or more than double from a couple years ago. So I think with inflation here, people are wondering how they can protect their assets, and gold is historically known to do so. I think people are just running to it.
Nice. Well, we’re just about out of time. Patrick, I’d like to thank you for being on The Agent of Wealth Podcast today. How best can someone reach out to you, or find out more about APMEX and OneGold?
As a closing thought, I would definitely recommend that all investors allocate a portion of their portfolios to gold. You could buy physical gold at apmex.com, or you could buy a vaulted solution on onegold.com.
I have a special promotion for listeners: It’s 50% off the gold and silver premiums. That coupon code is GOLD50OFF for gold and SILVER50OFF for 50% off silver premiums on onegold.com. If your listeners have any questions about the precious metals market, APMEX or OneGold, feel free to reach out to me directly. My email is [email protected]
Perfect. We’ll link to all of that in the show notes. Thanks again for being on the show and thank you to everyone who tuned into today’s episode. Don’t forget to follow The Agent of Wealth on the platform you listen from and leave us a review of the show. We are currently accepting new clients, if you’d like to schedule a 1-on-1 consultation with our advisors, please do so below.
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