Once you’ve decided that investing in Precious Metals is the way to go, the next question that pops up is: What’s the best way to buy Gold and Silver? It might sound complicated, but if you grasp these 8 key points, you’ll have all the info you need to make a safe and secure transaction.
When you dive into the world of Precious Metals, the first thing you’ll notice is the multitude of places where you can make your purchase, whether online or at a physical location. And not only that, there’s a wide array of prices and types of bullion available. But why is that?
Well, the truth is, it’s nearly impossible to buy Precious Metals at exactly the price they’re trading for on the stock market. This is because the London Bullion Market Association sets the suggested bid, ask, and spot price based on theoretical mining contracts. These contracts give us a good idea of the current demand and supply. And remember, Precious Metals aren’t just for investing; they’re also heavily used in industries like jewelry, dentistry, and technology, accounting for over 70% of the Gold and Silver market.
The spot price of Gold and Silver plays a huge role in determining the value of raw ore. Mining companies sell this raw ore to refineries, where it undergoes an extensive, labor-intensive, and costly refining process to become the pure .999%+ form of Precious Metals. This refined product is then sold to businesses or mints, where it’s turned into the final product. But keep in mind, that these mints, whether private or government-owned, have their own business expenses like employee wages and pricey equipment such as coin presses.
Now that we’ve covered all that, the next big question is: What’s a reasonable premium?
What Is a Reasonable Premium For Gold And Silver?
There’s a lot to consider when it comes to figuring this out, but as you get more acquainted with the wide range of Gold and Silver products available, you’ll start to develop a sense of what constitutes a good or bad premium over spot price. Let’s dive into a few key factors that often go overlooked.
Consider two coins of the same metal type and weight, minted by different governments. Take, for example, the 1 oz Silver Maple Leaf by the Royal Canadian Mint and the 1 oz American Silver Eagle by the U.S. Mint. Both coins are stunning and are considered premier Silver bullion, but there’s a notable difference in their prices. The 1 oz Silver Maple Leaf typically trades at around the current market spot price plus $2.00 to $3.00, while its American counterpart often goes for $4.00 to $6.00 over the market spot price. Why is that?
Well, in this case, it boils down to how the refining process is managed. The Royal Canadian Mint has its own refinery, giving it more control over the entire process. On the other hand, the U.S. Mint relies on several private mints to refine the metal and create the blanks used in manufacturing.
Of course, there are other factors at play too, like efficiency, volume, supply, and market volatility, among others.
2. Scams And Counterfeit Gold And Silver
Many people hesitate to buy Precious Metals because they fear getting scammed or ending up with counterfeit bullion. It’s a valid concern, as these scams are unfortunately common in our industry. However, there are simple steps you can take to protect yourself.
Firstly, consider investing in a test kit. These kits come in various forms, from chemical to magnetic to x-ray machines, and they’re readily available and affordable. With a test kit, you can quickly and easily verify the purity of any questionable item. If you prefer not to buy a test kit, you can always visit a jewelry store, where they often have handheld x-ray devices that can test purity in a matter of seconds.
Secondly, it’s crucial to only buy from reputable dealers. Take the time to do a bit of background research on a bullion retailer before making a purchase. If you’re unsure where to start, here’s a short list of bullion retailers that we personally vouch for. Keep in mind that this isn’t an exhaustive list, and there are many other reputable dealers out there:
Investor Crate – While we might be biased, we pride ourselves on conducting random batch testing and physically inspecting every item that leaves our facility. With our easy, cost-effective subscription-based model, we sell millions of dollars worth of Gold and Silver each year. So if you’re looking to build your stack month after month, consider us! But rest assured, you can also trust these other reputable dealers: [list of reputable dealers].
If you stick to buying from these companies, you can’t go wrong.
We strongly advise against purchasing from auction websites, random third-party sellers, sellers on social media, self-proclaimed “brokers,” Chinese websites, and popular big box websites that sell Precious Metals along with other unrelated items. If everyone stopped using these outlets to buy Precious Metals, counterfeits would no longer be in circulation. Our company, along with the aforementioned companies, sources directly from the Mint or pools inventories from major suppliers who also buy directly from the Mints.
3. Individual Retirement Account VS. Physical Precious Metals
Precious Metal IRAs are great for people looking to transfer their 401k or Roth IRA into Precious Metals without having to worry about storing large amounts of Gold and Silver. IRA companies offer an easy way to buy, sell, store, and receive monthly or quarterly earnings statements.
However, it’s important to note that they have full control over the entire process, and fees can become quite expensive. These fees vary between companies but may include storage fees, high markups, brokerage fees, and a significant percentage when selling. This doesn’t mean Precious Metal IRAs are a scam; just be sure to research and choose the best trust company for your needs.
Physical ownership is generally preferred by most people as it allows them to possess their wealth directly. This gives you more control over premiums since you’re not paying a third party to purchase and hold the bullion on your behalf.
4. Selling Gold And Silver
Precious Metal IRAs are great for people looking to transfer their 401k or Roth IRA into Precious Metals without having to worry about storing large amounts of Gold and Silver. IRA companies offer an easy way to buy, sell, store, and receive monthly or quarterly earnings statements. However, it’s important to note that they have full control over the entire process, and fees can become quite expensive. These fees vary between companies but may include storage fees, high markups, brokerage fees, and a significant percentage when selling. This doesn’t mean Precious Metal IRAs are a scam; just be sure to research and choose the best trust company for your needs.
Physical ownership is generally preferred by most people as it allows them to possess their wealth directly. This gives you more control over premiums since you’re not paying a third party to purchase and hold the bullion on your behalf.
5. Local Coin Shops And Pawnshops
Local Coin Shops (LCS) and pawnshops vary widely in terms of trustworthiness and fairness when it comes to the products they sell and the premiums they charge. It takes some effort to scout, learn, and talk to people to get an idea of their pricing. In my own experience with local shops in my area, I’ve found that these businesses often have higher prices. However, it’s essential to distinguish between being overpriced and deliberately gouging customers.
It’s important to remember that running a small business that deals with Precious Metals is costly. There are expenses like insurance, market fluctuations, tight profit margins, and the cost of securing a building lease. So, there’s a distinction between fair pricing and unfair pricing. Before leaving a negative review online, consider these factors. Some people enjoy the experience of browsing, selecting items, and supporting small businesses, even if it means paying a slight premium over the spot price.
6. Buying Gold And Silver Online
Buying Gold and Silver online has its pros and cons. As mentioned earlier, you need to do some research on each company to ensure you don’t stumble upon a scam website accidentally. However, there’s also a broader range of options available compared to a pawnshop or LCS. Plus, you can easily compare prices and find the best deals in real time.
Most online bullion retailers don’t keep an inventory and instead pool their resources. This approach makes sense because even a small box of Gold could represent a significant amount of inventory. Price differences between retailers are often due to marketing strategies, business overheads, efficiency, and company optimization. Legitimate bullion retailers aren’t trying to cheat you; they’re simply adjusting their prices to stay afloat. One of the biggest misconceptions in the Precious Metals investment industry is that retailers are making huge profits. In reality, selling retail bullion to investors is not as lucrative as many assume, given the slim profit margins involved.
7. Strategies – How People Use Gold And Silver To Make Money
Mining stocks – Some folks prefer to get it from the source!
Some of the big publicly traded mining and refining companies buy land that’s rich in Gold, Silver, Platinum, and other precious metal deposits. They do various things with this land, like flipping it, holding onto it until prices rise, mining the precious metals, or buying and selling contracts. Investing in stocks of these companies can offer impressive returns and is definitely an option for those interested in commodity investing.
Rolling over to or starting a new IRA – You’ve seen the commercials!
Some folks, especially those with plenty of cash, opt for this approach. They don’t want to hassle with researching the commodity or buying a safe; they simply seek the potential investment benefits in the form of gains. They prefer not to deal with the entire process and don’t even want to see it unless it’s in the form of a piece of paper stating it’s more valuable than when they bought it. And that’s perfectly okay—it’s always an option for people.
Long-term investing.
Some folks say Gold and Silver are lousy investments, but the counterargument always revolves around their long-term potential. While they might not always increase in value, a glance at the charts shows they certainly have historically. Gold and Silver consistently appreciate over time. In fact, in the last 20 years, Gold has surged by 550%. Armed with this knowledge, people often buy Gold and Silver bullion with the intention of holding onto it for several decades. Consequently, investors also pass down their bullion to their children and grandchildren.
Hedging against inflation.
Throughout history, Gold and Silver have consistently surged in value during economic downturns. Whenever the economy takes a hit, governments often resort to printing more money as a primary tool to alleviate the crisis. Consequently, the value of the dollar decreases, requiring more of those paper bills to buy Gold and Silver. This phenomenon always has a dual effect: the predictable decline in the dollar’s value and the subsequent surge in demand for Gold and Silver. Both the industry and investors scramble to stockpile these precious metals, driving their prices up dramatically.
Dollar-cost averaging.
Not everyone has $800,000.00 to buy one of those Gold bars you see in bank heist movies, so one of the most common strategies when investing in Gold and Silver is dollar cost averaging. This is for folks like you and me who want to buy a few rolls of something on payday each month to give to the grandkids.
Dollar-cost averaging Precious Metals is when you consistently purchase your bullion throughout the year. Buying month after month, regardless of what the market is doing, generally speaking, yields you that year’s average Gold and Silver prices. This helps take some of the pressure that can come from staring at the market ticker all day and makes it a fun hobby that’ll help your family’s generational wealth over time.
8. Have Questions About Investing In Gold And Silver?
Hey there! Just a heads-up: this blog is purely for entertainment, so don’t take it as financial advice. We strongly recommend reaching out to a certified financial advisor if you have any questions or are thinking about investing in Gold, Silver, Platinum, or anything else, really. It’s crucial to do your homework and always understand the risks before investing your hard-earned money! And hey, if you’ve got any questions about our services, feel free to hit us up.