In today’s digital online world, we seldom own assets that we can physically see and touch that hold and increase their value despite market whims and fluctuations. Gold and silver are the only currencies that have been in use for the last 5,000 years. What (with that in mind) is the best way to buy gold and silver in today’s markets?
ALSO READ: Bitcoin vs Gold: Why Bitcoin is Better
Assets such as gold and silver are ruled by the law of physical supply; there is only so much gold and silver available. When you buy gold or silver, you can physically see the item and weigh it yourself if you chose, so it is much easier to determine the actual value.
Where does gold and silver bullion come from? After the metal has been mined and then refined, it is generally sold to bullion banks. These banks are the middlemen between the suppliers and the buyers.
Just like a normal bank is the middleman between you and the government’s reserve bank, bullion banks are the intermediaries between the gold suppliers and the buyers.
Gold producers sell to the banks, despite what the market demands at that particular moment are, and buyers purchase from the bank. The bank stores the gold, handles financing and basically distributes the gold across the globe for investment or industrial purposes, or jewelry. The buyers in this instance are the companies or mints that sell the bars or coins.
Buying Gold or Silver Bars
Perhaps the easiest and best way to buy gold and silver is to simply purchase bars. Investors generally buy gold or silver in bars as they are less expensive (or closer to commodities exchange prices) than coins.
Gold and silver bars are purchased per ounce. You can buy them as 1-ounce bars, 10 ounces, 100 grams and 1 kg (32.15 ounces). Gold and silver prices are easy to find online, making it simpler to determine your budget. These precious metals are sold in troy ounces that is slightly (about 10%) heavier than a normal ounce.
Motley Fool - the BEST Stock Picking Newsletter
While you are determining your budget, the price of gold or silver on the exchange is only an indicator to compare prices charged by bullion companies and ensure that you are being charged fairly. The company that you decide to purchase from will, of course, put a markup on the metals.
If you are buying bars, size does matter. It will be easier to dispose of smaller bars than a larger bar. Also, there will be less demand for a larger bar than a smaller one, so keep this in mind when thinking about what to buy.
Do your homework
Ensure that the company you will be using to purchase the gold bars has a good reputation. Do your research by checking their website and reading reviews online about their service. Also, run a check through the Securities and Exchange Commission to make sure that they have not been reported for any questionable behavior.
While doing your research, you might be tempted to go online and buy gold and silver directly from private sellers or small companies. Don’t do it. The opportunities for fraud and theft are legion. Reputable gold and silver dealers will supply you with a certificate of authenticity and answer your questions clearly and simply.
Authentic gold and silver will be properly identified with a recognizable hallmark which is stamped on by the refiners. Not all governments sell gold bars and if it is sold by a government it should also display a hallmark. A good hallmark indicates a good quality metal. Check with your buyer which refinery processed your bars.
Another factor to take into consideration is the cost of shipping to your location. Shipping costs and insurance can increase the price. If you can, try to keep your purchases as local as possible. Remember that if you are buying from a company overseas and they are purchasing from a bullion bank or mint in another country, your costs can significantly increase.
Some companies will actually store the bullion for you. If you are worried about security, this is an avenue worth exploring.
Buying Gold or Silver Coins
If you are thinking of purchasing coins for the investment value, there are several types of coins to choose from.
Firstly, you find coins that have been in circulation and due to rarity or demand are collected and sold at more than the face value. These circulating coins are a fascinating collectors’ area, but you need to be very informed to speculate in this field successfully.
An exception to this is silver coins which have the same value as silver bullion and are referred to as “junk coins.” In America, these coins were minted and in circulation before 1965, and are traded today because they consist of 90% silver.
Collectable and proof coins are coins that are typically sold in increments of an ounce and minted by governments to sell to collectors and the general public. They are valuable because of their rarity as well as their weight in metal. These can also be purchased in sets.
These coins can vary greatly in value; it is worth your while to do your research thoroughly before buying a commemorative coin or set, but if they are rare and in demand they can be sold at a significantly higher price than their face value.
Finally, bullion coins can be bought from bullion companies, or in some instances directly from the mint of the government. The most common bullion coins are coins such as the American Eagle, the Krugerrand, and the Canadian Maple Leaf. These coins generally weigh 1 oz. but are sometimes minted in smaller coins as well.
A bullion coin is often sold for about 4 or 5% more than its value if it were melted. The simplest method of seeing if you are getting a good deal is to check the price of gold and silver per ounce and compare it to the price of a bullion coin per ounce.
If you are looking at buying a coin directly from the government online, ensure that the website is an actual government website such as this one for the United States Mint. There are several websites that give the appearance of being government websites but are in fact legal private companies.
Coins can also be purchased from overseas, as with purchasing gold or silver bars, and you need to take the transport cost into consideration as well as the insurance cost.
The safest and best way to buy gold and silver is to do your homework properly, decide what is best for you, and to use a reputable supplier. If you keep that in mind, your investment will increase in value and give you peace of mind for years to come.
Stefan Gleason is President of Money Metals Exchange, the national precious metals company named 2015 “Dealer of the Year” in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, Detroit News, Washington Times, and National Review.