Savings Bond vs. Silver and Gold
dcarr
Posts: 8,424 ✭✭✭✭✭
I came across this bond recently in with some of my wife's papers. I noticed that it states "interest ceases 30 years from issue date". And that 30 year period happens to have ended this month (June 1994 to June 2024). So it is time to cash it in. According to Treasury Direct, the full maturity (current) value of it is $82.06 . The bond initially cost $25 in June 1994.
That got me thinking, what would have better, buying this bond or silver ?
The price of silver in 1994 ranged from a low of about $4.75 to a high of $5.75 .
Using the mid price for the year ($5.25) means that $25 would buy about 4.76 troy oz of silver in 1994.
Today, that silver would be worth (at current $29.42 "spot" price) $140.
So the $140.00 silver value is more than the $82.06 bond maturity value.
Even if the highest price in all of 1994 were used ($5.75), the value of the silver would still be $128 (well above the bond value).
If I do the same thing for gold, the median 1994 price was about $385.
So $25 would buy about 0.065 troy oz. At today's price, that would be worth about $150, so even better.
Comments
Seems clear to me, though I'm sure there are some who will say you are 'cherrypicking ' dates again, and prove to you haw the bond was the better deal!
Actually, I just cashed in a few of those also.... same situation, they stopped earning interest after 30 years. Just about forgot about them.
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I'm just picking those dates because those are the dates on this bond.
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Gold is ALWAYS better. Glad you are finally coming around. Welcome! RGDS!!
.> @blitzdude said:
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I could pick MANY date ranges where silver performed better than gold.
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I'm sure you could. but we are currently discussing the date that YOU JUST picked. THKS!
If you're going to go the "savings bond" route, do it with series I bonds, A $25 I bond purchases in 6/1998 is worth $113 as of 6/2024. I suspect, that one purchased in 1994 is worth around $125, or 5 x issue price.
Ugh. Over a 30-year holding period, that's a nominal 4.04% return. I'm pretty certain that real inflation (none of that CPI, PPI, PCE rubbish) over that same 30-year period is at least 4%.
Over a period of time as long as 30 years, it seems likely that practically any commodity but especially a monetary commodity will do better. I've just looked up the prices of copper (~4.7%), silver (~5.9% even after today's smack down), and gold (~6.2%) over that same 30-year period and they all performed better than that Treasury bond.
Interestingly, platinum (~3.1%) and crude oil (~2.0%) did worse. Of course, investing in an oil company such as ExxonMobil (~7.1% not counting dividends) or Chevron (~6.8% not counting dividends) had substantially better returns. Dividends for the oil companies probably add another 4% or 5% to the nominal, annually compounded rate of return.
Some may say that buying the bond shows faith in your government.
Actually, 30 years ago that was a big part of it. Rock solid safety, and patriotic... invest in the U.S. of A. My, how times have changed.
Unfortunately, I bonds did not exist and thus not an option 30 years ago. I think I bonds were started in 1998, probably because people were not buying as many bonds any more?
The 30 year Treasury was yielding an average of 7.4% in June 1994. $25 @ 7.4% for 30 years is $212.
Knowledge is the enemy of fear
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You wrote that gold "ALWAYS" outperforms silver.
But that is not true.
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Yup, ...I should have changed to a "hypothetical" purchase date of 1994.
April 1998: Begin offering of 30-year inflation indexed bond. ( I bonds)
problem with I bonds being Gov.Inc telling you what inflation supposedly is
Should have bought Apple stock. Split adjusted price less than one dollar in 1994, now, nearly $200 per share.
Should have bought Apple stock. Split adjusted price less than one dollar in 1994, now, nearly $200 per share.
If we could just hop into the wayback machine, you would be 100% correct. Unfortunately, life doesn't work that way.
I knew it would happen.