How to Invest in Gold and Silver
I've been posting a lot of links here about news and articles about gold and silver so you may be thinking, what's the best way to invest in gold and silver?
There are a lot of options out there when it comes to gold or silver investments. There's the popular Exchange Traded Funds or ETF like GLD and SLV. You can go to the Futures Market, you can also invest in precious metals mutual funds.
The best way to invest in gold and silver in my opinion is to buy the actual physical gold or silver bullion or coin. Here's why.
When you buy the ETF, futures contract or mutual fund. There is what we call a "counterparty risk". A counterparty is the other side of the trade or contract. For example, when you enter into a contract negotiation, the counterparty is the other person or entity you are dealing with.
Counterparty risk means there is a risk that the other person/entity will not honor the contract you entered into. If you been following this blog, I posted news about the failure of MF Global. The counterparty risk to the investors is that they can't get their money or gold back even if it was legally theirs. That's the risk when you invest in the paper markets like the ETFs, mutual funds or futures market.
When you own the physical gold or silver, there is no counterparty risk if you hold it in your possession. Even if the bank or the dealer you bought it from goes bankrupt, you still have your gold and silver with you.
That's why you would be reading a lot of advice that you should buy the physical instead of the paper market. The paper market is nice to trade with, but for longer term holding, owning the physical coin or bullion is the best option.
You can easily buy gold or silver coins at your local coin dealer. You can also do it online through the link on the right at Goldsilver.com (shameless promotion).
There are other sources like Kitco.com or silvergoldbull.com as well as Ebay. You have to be careful with Ebay though, you have to be sure you are getting the real thing.
The best way to start investing in gold or silver is to start with buying the 1 oz. gold or silver American Eagle or Maple Leaf. These are very popular and very well known to investors, so you won't have trouble selling them in the future. This is because these are produced by the US Mint and the Royal Canadian Mint which has very high production quality and ensures that the coins are 99.99% pure.
The next is buying the bars. The problem sometimes with buying the bars is that they are produces by different entities. Although if you buy them from a reputable dealer, you are assured that they are 99.99% pure. But the problem sometimes is when you sell them, the buyer may ask to have the bars tested for purity. It doesn't happen often, but it may happen when prices reach very high.
You can always start small like buying a 1 oz. coin. Then add to it then maybe move up to buying bars.
Eventually, you will have to sell your gold and silver unless you're a gold bug and believe that fiat currency is going away and that we're going back to the gold standard. You can sell your gold and silver back to your dealer at any time.
Check out several dealers because everyone has a different price. They all charge a mark-up or the extra price they charge over spot. Spot price is what you see on the chart on the right. You won't be able to by the metals at spot price. There's always a mark-up when you buy through a dealer. So check around to see who gives the lowest mark-up.
Some local sources you can check out are coin dealers and currency exchanges. Some stores have live pricing for their metals which is nice when prices are falling.
There are two kinds of market for precious metals coins. One is the numismatic or collectibles and the other is the bullion. Avoid buying collectibles though. When you are investing in precious metals, you only want to pay for the actual metal content. This way, you always know what the actual value of your investments are because the prices are quoted every day.
With numismatics or collectibles, you pay double, triple or sometimes four times the spot price depending on the number of coins minted, design, purity of the metals, plus mark-up. With regards to price, you'll only get paid what someone else is willing to pay for it.
For example, you may be able to buy 1 oz of .999 pure silver Maple Leaf for $32.00 right now. But a similar size coin with design and low mintage might sell for over $90 a coin. With that amount of money, you can already buy 3 silver Maple Leafs.
Stick with the bullions.
There are a lot of options out there when it comes to gold or silver investments. There's the popular Exchange Traded Funds or ETF like GLD and SLV. You can go to the Futures Market, you can also invest in precious metals mutual funds.
The best way to invest in gold and silver in my opinion is to buy the actual physical gold or silver bullion or coin. Here's why.
When you buy the ETF, futures contract or mutual fund. There is what we call a "counterparty risk". A counterparty is the other side of the trade or contract. For example, when you enter into a contract negotiation, the counterparty is the other person or entity you are dealing with.
Counterparty risk means there is a risk that the other person/entity will not honor the contract you entered into. If you been following this blog, I posted news about the failure of MF Global. The counterparty risk to the investors is that they can't get their money or gold back even if it was legally theirs. That's the risk when you invest in the paper markets like the ETFs, mutual funds or futures market.
When you own the physical gold or silver, there is no counterparty risk if you hold it in your possession. Even if the bank or the dealer you bought it from goes bankrupt, you still have your gold and silver with you.
That's why you would be reading a lot of advice that you should buy the physical instead of the paper market. The paper market is nice to trade with, but for longer term holding, owning the physical coin or bullion is the best option.
You can easily buy gold or silver coins at your local coin dealer. You can also do it online through the link on the right at Goldsilver.com (shameless promotion).
There are other sources like Kitco.com or silvergoldbull.com as well as Ebay. You have to be careful with Ebay though, you have to be sure you are getting the real thing.
The best way to start investing in gold or silver is to start with buying the 1 oz. gold or silver American Eagle or Maple Leaf. These are very popular and very well known to investors, so you won't have trouble selling them in the future. This is because these are produced by the US Mint and the Royal Canadian Mint which has very high production quality and ensures that the coins are 99.99% pure.
The next is buying the bars. The problem sometimes with buying the bars is that they are produces by different entities. Although if you buy them from a reputable dealer, you are assured that they are 99.99% pure. But the problem sometimes is when you sell them, the buyer may ask to have the bars tested for purity. It doesn't happen often, but it may happen when prices reach very high.
You can always start small like buying a 1 oz. coin. Then add to it then maybe move up to buying bars.
Eventually, you will have to sell your gold and silver unless you're a gold bug and believe that fiat currency is going away and that we're going back to the gold standard. You can sell your gold and silver back to your dealer at any time.
Check out several dealers because everyone has a different price. They all charge a mark-up or the extra price they charge over spot. Spot price is what you see on the chart on the right. You won't be able to by the metals at spot price. There's always a mark-up when you buy through a dealer. So check around to see who gives the lowest mark-up.
Some local sources you can check out are coin dealers and currency exchanges. Some stores have live pricing for their metals which is nice when prices are falling.
There are two kinds of market for precious metals coins. One is the numismatic or collectibles and the other is the bullion. Avoid buying collectibles though. When you are investing in precious metals, you only want to pay for the actual metal content. This way, you always know what the actual value of your investments are because the prices are quoted every day.
With numismatics or collectibles, you pay double, triple or sometimes four times the spot price depending on the number of coins minted, design, purity of the metals, plus mark-up. With regards to price, you'll only get paid what someone else is willing to pay for it.
For example, you may be able to buy 1 oz of .999 pure silver Maple Leaf for $32.00 right now. But a similar size coin with design and low mintage might sell for over $90 a coin. With that amount of money, you can already buy 3 silver Maple Leafs.
Stick with the bullions.
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