Citigroup to Pay $7 Billion Penalty, Savers Seek Alternatives

Clint Siegner Clint Siegner

Clint Siegner

July 14th, 2014 Comments

Turmoil in Iraq combined with a bank crisis in Portugal has led to significant volatility in the stock markets as well as precious metals markets in recent days.

The entire precious metals complex rose more than 1% while the broad stock market struggled last week.

However, the action has reversed this morning with financial stocks leading the market higher on news that Citigroup has agreed to a $7 billion settlement for its corrupt practices contributing to the 2008 financial crisis. Citigroup will now avoid civil prosecution by the U.S. Justice Department, giving investors in bank stocks reasons to be bullish.

The Remarkable Rise of Credit Unions, Gold,
and Other Savings Alternatives

Facing continued charges of corruption, exploitation, and mismanagement, Big Banks have been spending billions of dollars on advertising to persuade the public of the wisdom of opening traditional savings accounts and sinking money into CDs with almost no yield.

But alternative forms of savings are nevertheless on the rise.

Credit unions, which are owned by the depositors themselves, pay higher interest rates, and often offer loans on more advantageous terms, have flourished (with 10 million new customers in recent years) -- primarily based on word of mouth. The same is true with local and regional banks, which tend to cater to the specific needs of small businesses and consumers on a more personal basis.

But the real growth of savings going forward will occur entirely outside of the banking system -- with alternative ways of socking away cash -- peer-to-peer lending, saving in tangible assets such as precious metals, artwork, and even real estate. Citizens are slowly but surely realizing that the U.S. dollar is under assault by reckless, spend-and-borrow politicians and a Federal Reserve trying to win a global devaluation race.

When Do Fractional-Sized Coins Make Sense?

Interest is growing in fractional-sized coins and rounds. Money Metals recently added some of these products to the lineup -- including gold Maple Leafs and Kangaroos in 1/10, 1/4, and, 1/2 ounce sizes,1/10th ounce Walking Liberty rounds, and 1 oz and 50 gram Valcambi CombiBars which break into small pieces.

While Money Metals' premiums are generally lower than the competition across the board, they must include fabrication costs and/or wholesale premiums we must pay to acquire inventory. Fractional-sized coins carry more premium because the cost to manufacture something like a tenth-ounce round approaches the cost of minting a one-ounce round -- a product containing 10 times the metal content.

As always, it is useful to focus on the bid/ask spread – the difference between the premium you pay to buy and the premium you receive to sell – rather than on buy premiums alone. And the good news is, though small-denomination bullion products cost more to buy, they also command higher prices when it is time to sell. (See the "Sell To Us Price" that we publish on our product pages.)

Fractional bullion products offer four main advantages. Customers are almost always looking for one or more of these features:

  • Fractionals offer more flexibility if the metal is ever needed for barter and trade. Imagine going to a yard sale with a pocket full of one-ounce gold coins. Not very practical if you're just looking for a toaster or table lamp. You'll surely be glad to have some metal in small denominations.
  • Fractionals offer more affordability. Particularly when it comes to gold. Many customers want to own some gold, but not all want to spend nearly $1,350 for a one-ounce coin or bar. And some argue this dynamic will auger for even higher premiums on fractional products when metals prices rise.
  • Fractionals are easier to conceal.
  • Fractionals may be more appropriate for gifts.

If any of the advantages above are meaningful to you, you should strongly consider adding smaller denomination items to your holding. If not, save the premium and just buy one-ounce (or larger) products. For more information, visit our website or call 1-800-800-1865.

Clint Siegner

About the Author:

Clint Siegner is a Director at Money Metals Exchange, a precious metals dealer recently named "Best in the USA" by an independent global ratings group. A graduate of Linfield College in Oregon, Siegner puts his experience in business management along with his passion for personal liberty, limited government, and honest money into the development of Money Metals' brand and reach. This includes writing extensively on the bullion markets and their intersection with policy and world affairs.