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Unorthodox Leverage Ideas for Gold and Silver

Commodities / Gold and Silver 2010 Jul 29, 2010 - 03:14 AM GMT

By: Dr_Jeff_Lewis


Leverage is a very natural part of a great number of traditional investment options.  Real estate investing is nearly dependent on leverage; stock traders have up to two times leverage through their brokerage accounts, futures traders are naturally highly leveraged, and currency traders use the most extreme leverage of any investor.  So where does this leave the market for physical metals?

Leverage and Physical Metals

Unfortunately for physical metal investors, leverage is not as easily offered by your coin dealer as it is with stockbrokers.  In fact, you'd be hard-pressed to find any company willing to sell gold and silver on leverage simply due to the fact that it is so hard to track – but so incredibly easy to sell. 

If we think about this in a roundabout way, there are a few ways to grab cheap leverage to double down on your precious metals and prepare for the long term.  One choice that comes to mind first is also, in many cases, the scariest.

Have a Credit Card?

The idea of putting precious metals on a credit card may seem scary for some.  Of course, credit cards often come with all the worst of features, high annual interest rates, short payment terms, and confusing billing statements.  However, when used correctly, you'll be able to grab leverage for cheaper than most investors.  When it boils down to the basics, a good credit card will get you the leverage you want for cheap.

Go Introductory

Most credit cards offer unbelievable introductory offers for nearly free money for as long as a year.  Take a peek in your mailbox, and you may easily find a 1.99% APR balance transfer rate, with zero fees, for a year.  If you were to purchase previous metals on the card, the “interest” would be just 1.99% for an entire year – which is several points lower than even the cheapest home loan (a product banks see to be far safer than an unsecured credit card).

On the downside, you'll have to make a minimum payment of 2-3% per month, and then pay off the balance before the end of the introductory period.  However, you'll be able to borrow cheaper than any other investor – and with incredible convenience (just swipe a card).

That's Absurd!

There are only really two other options for buying metals on leverage.  The first is to use an alternative loan, such as a HELOC in which you borrow against your house for extra cash.  The problem here is that defaulting on your loan means you lose your home, and you'll never get the kind of interest rate you can with an introductory credit card. 

The other option is to trade paper metals through a commodity broker or exchange-traded fund. However, interest rates from stockbrokers are again higher than introductory credit card rates, and with ETFs, you never know if the precious metal you supposedly own is actually in existence. 

While there are no “traditional” means of leveraging your precious metals purchase, you can be creative and find economically smart ways to put unorthodox leverage in your favor. 

By Dr. Jeff Lewis

    Dr. Jeffrey Lewis, in addition to running a busy medical practice, is the editor of and

    Copyright © 2010 Dr. Jeff Lewis- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Shelby Moore
29 Jul 10, 10:56
Leverage is for thieves

They will reap what they deserve:

Why? Because a loan is money created out of thin air on fractional reserve system (1% reserves). So you steal from society to buy metal because you want to kill the fraud of inflation?

Doesn't make any sense! And you have a PhD?

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