6 Tips To Buying Gold & Silver Bullion
I’m constantly advocating gold and silver bullion in your possession to preserve your wealth. Holding fiat currencies long term, and that includes USD, Euro and other major currencies, is a losing proposition. You’re guaranteeing a loss in purchasing power over the long term. So, Here are a few tips for purchasing gold and silver bullion.
I personally hold about 50% of my assets in physical bullion and about 40% in equities. The other 10% is a mix of a few non precious metal equity stocks and cash.
1. Avoid Numismatics- Numismatic gold coins are coins that have value outside of the physical metal and their value depends partly upon rarity, condition, and other particulars. Bullion coins (non-numismatics) are coins like American Eagles, Maple Leafs, Kruggerands, and others that are purchased simply for the intrinsic gold content. Unless you’re a serious collector with vast knowledge and experience of numismatic coins, I’d highly recommend staying away from numismatic coins. By purchasing a numismatic coin, you guarantee yourself that you will not be paying fair market value for the gold content of the coin. Don’t allow yourself to be talked into purchasing these types of coins from a coin dealer or coin shop unless you know what you’re doing. Most coin shops and dealers jack up the prices of these coins by 20%-30% and sometimes more. I personally do not own any numismatic coins and believe they are a poor investment choice over the next decade. Stick to coins that are valuable only for their gold content. It makes little difference whether these coins were minted in 1900 or 2011. Stick to the gold bullion.
2. Avoid Commemorative Coins- Don’t get suckered into owning commemorative coins that act as some sort of symbolic symbol of patriotism or historical event. Most of these sets contain huge mark ups and are not sold strictly on their gold and silver content. For example, sets like these are often advertised via infomercial and contain words like “clad” in the description. Clad simply means “plated” and the coin is not a pure precious metal. It may only be plated with gold or silver. Remember, if it sounds too good to be true, it usually is. $19.99 for a 1 oz gold coin? Give me a break. Don’t allow the commemorative sets to tug at your heart strings regarding the support of some WWII battle or 9/11. Again, stick to the straight bullion coins.
3. Avoid “Proof” Coins- Don’t worry about the dates on the coins or if they are sequentially numbered or anything like that. I only care about metal content only.
4. Avoid Anything “Graded”- Graded coins are those that have been sent into a service of some sort to verify the value and or condition of a coin. Many investors get duped into buying graded gold and silver bullion coins at higher markups. Quite frankly it doesn’t matter whether the coin is a brand new, shiny 2011 American Eagle, or a 2001 with some wear and scratches. As an investor, I only care about the metal content of the coin and both would carry the same Gold content. Don’t buy anything in a sealed graded sleeve or case.
5. Buy To HOLD- While I believe that “buy and hold” in the traditional sense is dead, I do buy my physical gold and silver to hold long-term. I use gold and silver to hold my purchasing power and value long-term, and use the equity gold and silver stocks to generate the larger upside potential and build wealth. During the current monetary crisis, I believe holding gold and silver in physical form is your safe-haven, and the equity side is the money-maker. I personally avoid large positions in any major currency, and stick to a more sound store of value. On the equity side, I believe buying the right asset class, the right company and at the right time is the key to building wealth.
5. TEST YOUR Bullion DEALER- Remember, the keys parts of any gold and silver bullion transaction are the spot price, premium, and the mark-up. Here are a few things that might help… Are you clear about what you’re buying?- Be familiar with the gold coins that are traditional and widely accepted as gold bullion. American Eagles, Philharmonics, Krugerrands, Maple Leafs, and that’s about it. I’d stick to these and maybe bars as well. If you’re coin dealer starts trying to steer you in another direction, forget it and find another dealer. Do you know the exact price offered and all the fees associated with it?- A reputable dealer will tell you spot price, premium, and total with tax. If you can’t get a straight answer from them, I would suggest looking somewhere else.
IS THE DEALER WILLING TO BUY BACK WHAT THEY’RE SELLING YOU, AND AT WHAT PRICE?- I think this is the key to really picking out a scammer versus a legitimate dealer. A reputable dealer will have no problem buying back what they’ve sold you minus a few percentage points on the transaction. If you buy a coin and want to sell the next day, and the difference is more than a few percentage points, I would definitely look elsewhere. I think you’ll find that generally the gold dealer community is quite honest as a whole, and only a few bad apples try to spoil the bunch. I’ve dealt with multiple dealers in multiple areas of the United States and I’ve had no problems with dealers trying to scam me or sell me something that I really didn’t want. But, scammers are out there, just like in any industry.
Be aware of the above rules if you’re trying to invest strictly in gold for the metal content alone. Again, I put about 50% of my total portfolio in physical bullion and 40% in equity. I follow the strategy of picking the equity stocks that I believe will double in the next 12-18 months. Once the stock doubles, I sell half the position in equity and keep the other half. This strategy insures that I continue build and maintain wealth, but also have the upside potential for those gold and silver stocks from the newsletter that end up returning 200%, 500%, and even 1000% over the time it’s in the portfolio.
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To Sound Investing,
B.
