Buying Gold For Dummies

Dear reader,

At Rich Dad, we say, “Knowledge is the New Money.” This is because wealth is attained by your ability to understand what is happening in the markets and to act accordingly. This means that if the dollar is tanking, you have enough knowledge to invest in things that hedge against the dollar—like gold.

Gold was my first real investment as a young adult. I began investing in gold before I began investing in real estate. In 1972, at the age of 25, I began buying gold coins when gold was approximately $70 an ounce. For me, gold and silver are a hedge, not a primary investment vehicle. As I’ve written before, it is always smart to have liquid investments on hand. Kim and I have a year’s worth of income in liquid investments that can be sold quickly if needed.

For many people, their preferred class of liquid investments is either stocks or cash. We both know cash is worthless, so I wouldn’t count on it as an investment. It will lose its value and may drop to zero or close to zero very quickly. When it does, assets with inherent value, like gold and silver, will be worth more, not less. I don’t count on stocks for various reasons, but one is you never know what or when a catastrophe will wipe out all of your earnings (think 2008).

I buy gold and silver because for thousands of years they have been true money. I feel safer keeping my money in precious metals rather than in fiat currency.

A Balanced Portfolio

There are many people who brag about having a well-diversified portfolio. What they really mean is that they own many different stocks, bonds, and mutual funds. In reality, that is a portfolio stuffed with one type of asset, paper assets. That is not balanced.

A truly balanced portfolio will have investments from the four asset classes: Business, real estate, paper assets, and commodities. For me, part of my balanced portfolio is commodities such as gold and silver, among others. They are not my primary investment strategy. But they are much better than holding onto cash. In the end, my primary investment strategy is what it’s always been: cash flow.

Before we get into how to buy gold and silver, there one precious metal investment vehicles that you need to be aware of, especially their pitfalls. When I talk about investing in gold or silver, I am talking about holding the real thing. 


The acronym ETF stands for exchange-traded fund. 

Here’s why I wouldn’t touch a gold ETF: Much of the global banking system runs on what is known as fractional reserve banking. 

The world’s banking system is built on fractional reserve banking, a system that has been running the world for thousands of years. The following is a simple explanation of the system.

A thousand years ago, you are a shop owner. You have 10 gold coins. You need to travel a thousand miles, through the rough country with the likelihood you’ll run into some bad people country, to buy goods for your store.

You go to a local “banker” who agrees to hold your 10 gold coins in his safe. The “banker” issues you a piece of paper saying that you have deposited 10 gold coins with him.

You then travel a thousand miles through the rough country with only a piece of paper. Your gold coins are safe. You then buy new merchandise for your store, give your piece of paper to the person who sold you the merchandise and head home.

The person who sold you your merchandise goes to his “bank” and collects his gold. After a while, both you and the person who sold you your merchandise realize that paper is much more convenient than gold coins. You both leave your gold with your bankers and use your bankers’ CDs, or certificates of deposit, like paper money.

People who need money go to your banker and ask for a “loan.” The banker lends out nine of your 10 gold coins. The one gold coin he holds in his vault is the “fractional reserve.” In this example, the fractional reserve is one coin or 10 percent.

This is where it gets exciting. The person who borrowed nine of your 10 gold coins goes to his bank and deposits your nine gold coins. His banker then lends out 8.1 of the nine coins to other borrowers, who do the same thing with their bank.

Your 10 (real) gold coins could easily become a 1,000 (fake) gold coins. And everything is fine—as long as no one wants real gold coins. This is the modern banking system.

The reason I want my real gold coins in my own private vault and not paper gold coins in an exchange-traded fund (ETF) vault, is because, for every real gold coin, there are an estimated 100 to 500 fake paper coins. Everything will be fine… until everyone wants real gold.

The fractional reserve banking system of banking applies to everything, not only money or gold. The entire banking system is based on counter-party trust.

I prefer to trust God’s money—real gold and silver—rather than the elites who print our money, run our government, central banks, banks, bond markets, and stock markets.

Always remember: gold and silver will be here long after you, I, the elites, and the cockroaches are gone.

Where To Buy Gold And Silver

The first thing you want to do to buy precious metals is to find a trustworthy dealer that will give you good services and advice. To purchase physical gold and silver there are basically two kinds of dealers to choose from which are online bullion dealers or coin shops.

As in any market, price and service quality vary among dealers, so finding a trustworthy one is a crucial first step. Ideally, there would be several within a short drive. But bullion dealers are scarce, and most bullion is bought online or over the phone and delivered through the mail. Because of the extremely low-profit margin on bullion products, I don’t know of any bullion-only walk-in shops. For a bullion-only dealer, you will have to go online. The easiest way to find these dealers is to Google “gold and silver,” and dozens of dealers will come up. I can’t stress enough, however, how important it is to do your research before engaging any of the dealers you find online. 


Robert Kiyosaki

Robert Kiyosaki
Editor, Rich Dad Poor Dad Daily

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Robert Kiyosaki

Robert Kiyosaki, author of bestseller Rich Dad Poor Dad as well as 25 others financial guide books, has spent his career working as a financial educator, entrepreneur, successful investor, real estate mogul, and motivational speaker, all while running the Rich Dad Company.

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