Guest Post: "Five Questions To Ask Yourself Before Buying Precious Metals", by Olivier Garret, CEO of Hard Assets Alliance

17
Fri, Jun 1, 2018 - 5:17pm

Our friends at Hard Assets Alliance are back with another very helpful and timely post.

Five Questions to Ask Yourself Before Buying Precious Metals

By Olivier Garret, CEO of Hard Assets Alliance

Buying physical gold or silver as an investment is not always as straightforward as it sounds. Novice investors often get lost in a variety of options: “Should I buy minted bars or sovereign coins?” “Maybe that limited edition coin would be a good investment?”

Sensible investors evaluate bullion options by the price and premium on the gold spot price. But the premium is only one part of the equation. It doesn’t necessarily mean that you’ll get that premium back upon the sale.

Worse, there are unscrupulous dealers out there. They will try to trick you into buying numismatics and other collectibles that have a huge premium and won’t retain their value over time.

As a result, it’s essential to get an understanding of precious metals before dipping your toes into this market.

In this article, I’ll answer some of the most important questions you should ask yourself before buying precious metals.

What Is the Best Way to Invest in Precious Metals?

You can invest in precious metals by buying the physical metal like bullion bars and bullion coins or through financial products such as gold exchange-traded funds (ETFs).

Each method has advantages and disadvantages.

While investing in precious metals through ETFs sounds appealing due to its convenience, there are several key issues that investors need to be aware of in relation to this method of investment.

For example, if you invest in gold through an ETF, you don’t actually own the metal. You have no claim on the gold within the fund. This means that you cannot take delivery of the metal if the need arises.

In contrast, the key advantage of buying physical gold (such as bars and coins) is that you own the gold. Furthermore, you own an asset that can be stored outside the financial system, which reduces counterparty risk.

Counterparty risk is the risk that the other party in an agreement will default or fail to live up to its obligations. When investors buy gold ETFs, they are relying on financial institutions to deliver on their obligations.

In this regard, buying the physical metal is a more sensible option.

Key Takeaways:

  • Investors can get exposure to precious metals in two ways: physical gold (such as bars and coins) or financial products (such as ETFs).

    • With a precious metals ETF, you don’t actually own the metal.

    Should I Buy Gold Bullion or Silver Bullion?

    While both gold and silver have attractive features, gold is the better investment for the average precious metals investor. Gold has a much larger liquid market that is driven mostly by investment and jewelry demand. The price of gold is less volatile than that of silver, too.

    Meanwhile, silver is more speculative and has a stronger relationship to economic activity. This is because silver has many industrial uses. As such, silver can be attractive during down cycles when the price of the metal is cheap.

    The key advantage of silver is that it’s much cheaper than gold. Therefore, it’s more accessible to small investors.

    Key Takeaways:

  • Gold is a better investment than silver for most investors.

    • Gold’s price is less volatile than silver’s price.

    Bullion Bars vs. Bullion Coins—Which Are Better as an Investment?

    Bullion coins, such as Gold American Eagles, are the best type of precious metals for most investors. This is because sovereign coins are easily recognizable, easy to trade, and generally sell at higher premiums than bars. You could buy smaller bullion bars, such as a 1 oz bullion bar, but they tend to be harder to sell back and the transaction costs are higher.

    For institutional buyers or those looking to buy very large quantities of precious metals, large bullion bars are a more sensible option, due to the lower premiums.

    Key Takeaways:

  • Coins are the best way to buy precious metals for most investors.

    • Coins are highly liquid and easy to trade.

    • Bullion bars are more suited to large buyers.

    What Are the Best Bullion Coins to Buy?

    For North American investors, American Eagle and Canadian Maple Leaf coins—both silver and gold—are some of the best coins to buy. For investors in Europe, gold or silver Eagles or Austrian Philharmonics are good coins.

    The South African Krugerrand coin is another excellent coin for investors. The gold version is minted from 91.7% pure gold alloy and contains one troy ounce of gold. It’s one of the most traded gold coins in the world.

    Other good gold coins to buy that are reasonably liquid include the Australian Kangaroo coin and the English Britannia coin.

    Investors should stay away from sovereign coins from lesser-known countries. They should also steer clear of special edition commemorative sovereign coins. These coins are usually more expensive to buy and resell for less than the better known coins.

    Key Takeaways:

  • The best gold and silver coins for North American investors are the American Eagle, the American Buffalo, and the Canadian Maple Leaf.

    • For European investors, Eagles or Austrian Philharmonics are excellent coins to buy.

    What Is the Best Place to Buy Physical Precious Metals?

    The best way to buy physical precious metals is through an online dealer that offers a buy-and-store program with non-bank London Bullion Market Association (LMBA) approved vaults.

    Investors should avoid taking physical possession of their gold or silver unless they believe there is an emergency. It’s much safer to have your bullion stored in a secure vault. It’s also much easier to sell your metals that are stored in a secure vault because you don’t break the chain of custody.

    Key Takeaways:

  • The best place to buy precious metals is through an online dealer.

  • Look for a dealer that offers a buy-and-store program.

    • Investors should avoid taking physical delivery.

    Final Thoughts

    Every investor portfolio should contain an allocation to precious metals. You’ve taken the first step toward ensuring your financial future by reading this primer on how to buy precious metals.

    With all of the uncertainty in today's global economy, it has never been more important to diversify and add the security of physical precious metals to your investment strategy.

    Free ebook: Investing in Precious Metals 101: How to Buy and Store Physical Gold and Silver

    Learn how to make asset correlation work for you, how to buy metal (plus how much you need), and which type of gold makes for the safest investment. You’ll also get tips for finding a dealer you can trust and discover what professional storage offers that the banking system can’t.

    It’s the definitive guide for investors new to the precious metals market. Get it now.

    About the Author

    Founder
    turd [at] tfmetalsreport [dot] com ()
    Does Feb19 Comex gold close above $1250 on Friday?
    YES
    77%
    NO
    23%
    Total votes: 137

      17 Comments

    SS121 · Jun 1, 2018 - 5:59pm

    what is going on around here?

    Should I Buy Gold Bullion or Silver Bullion?

    While both gold and silver have attractive features, gold is the better investment for the average precious metals investor. Gold has a much larger liquid market that is driven mostly by investment and jewelry demand. The price of gold is less volatile than that of silver, too.

    The price of gold is less volatile than that of silver, too. ??????????

    THE SILVER CHART HAS ALL BUT FLAT-LINED Olivier! ??

    SS121 · Jun 1, 2018 - 6:03pm

    What is going on around here? II

    What Is the Best Place to Buy Physical Precious Metals?

    The best way to buy physical precious metals is through an online dealer that offers a buy-and-store program with non-bank London Bullion Market Association (LMBA) approved vaults.

    Investors should avoid taking physical possession of their gold or silver unless they believe there is an emergency. It’s much safer to have your bullion stored in a secure vault. It’s also much easier to sell your metals that are stored in a secure vault because you don’t break the chain of custody.

    Key Takeaways:

    • Look for a dealer that offers a buy-and-store program.

    • Investors should avoid taking physical delivery.

    - - - - 

    So... send them the money, and tell them to keep the metal? What does history say about how well this has worked out Olivier?

    SquibLoad · Jun 1, 2018 - 11:03pm

    I have a question...

    Was this painfully generic press release also submitted to appear in the AARP monthly newsletter? Boo.

    imfd · Jun 1, 2018 - 11:21pm

    SS121, stacking & Bitcoin

    Being a bit of a crypto enthusiast, your comments alluding to where to store your stack made me think of a phrase employed by Bitcoiners, "everyone talks about Bitcoin, nobody talks about THEIR Bitcoins", seems like that is good advice regardless of what you are stacking, storing or otherwise. Very much enjoying your posts and starting to think that, once again, I am beginning to get it, but can you tell me, once gold and silver are no longer valued in relation to the USD, do they (PMs) become the denominator, ie: rather than silver being worth x USD, USD becomes is now worth X grams of silver ? Much as I can see it, I just can`t grasp it, cheers!

    Ronnie 666 · Jun 2, 2018 - 5:23pm

    One of the best bullion buying options

    With premiums at near all time lows this year one of the best options was buying old often graded good quality American or European gold coins. The US eagles and double eagles, British sovereigns, German, French, Swiss and Italian gold coins were available these past months often near spot. Often cheaper per AGW than modern Bullion coins from dealers. Obviously there are fakes which are not that hard to spot or test for. Buying PCGS, ANACS or NGC graded coins takes the risk of fakes out of the picture. Having small and fractional old gold is a fantastic way to slowly build up your stack. Unfortunately those low premium days are ending.

    SS121 imfd · Jun 2, 2018 - 8:27pm

    imfd - Re: post chart Silver and Gold valuations. . .

    imfd: ...can you tell me, once gold and silver are no longer valued in relation to the USD, do they (PMs) become the denominator, ie: rather than silver being worth x USD, USD becomes is now worth X grams of silver ? Much as I can see it, I just can`t grasp it, cheers!

    Silver will still be valued in USDs, at least in the U.S., but the price will vary from transaction to transaction as set between the buyer and the seller. simple as that.

    The USD value of Silver will be set by the agreement between the buyer and seller. No more silver chart.

    Just like used cars and used lawnmowers, and multi-million dollar mansions, and fine art and farmland are priced today.

    Maybe you put an ad on Craigslist, 2 Silver Eagles for $2500.00 then somebody offers you $2,250.o0, you say "ok" and complete the deal. What was the price of Silver?? $1,125.00 per ounce in that example. Still in USDs, Still real Silver Eagles, just no 'silver chart' dictating the price you sell your Silver for.

    That's why right now to be able to buy Silver pieces for under 20 bucks an ounce is beyond ridiculous.

    hope this helped answer the question? let me know if no and i'll give it another go.

    imfd · Jun 2, 2018 - 11:29pm

    SS121, many thanks

    I was overthinking that one, your answer was obvious once I read it, I guess that is the nature of education, that which was once obscure, once learned, becomes clear, many thanks for straightening things out for me...again :)

    imfd · Jun 3, 2018 - 1:44am
    Texas Sandman · Jun 3, 2018 - 9:40am

    best place to store precious metals

    I have bought and sold PMs most of my adult life in physical form. The one prior time I went to SELL precious metals ($13.50/oz silver if memory serves in the run up to the $50 hunt silver price blow-off) , I had absolutely no problem whatsoever picking up my silver bars, taking them down to the precious metals exchange in the village by Rice U. in houston and selling them. No problem whatsoever.

    And the problems SS121 alludes to, I think, where people have been charged storage fees on their PMs, while their PMs have been lent out or sold are legion.

    I'm sorry, but the reason you buy precious metals in the first place in physical form is avoidance of counterparty risk. Dependence on a counterparty to store them for you negates the very reason you bought in the first place!!

    Turd, who in the hell is this jackwagon writing the article and why is he here lecturing us?

    Markedtofuture · Jun 3, 2018 - 10:43pm

    Bill Dudley Admits Why The Fed Got It All Wrong

    In Parting Interview, Bill Dudley Admits Why The Fed Got It All Wrong

    "...the collapse of the financial system and that taking down the real economy - wasn’t an actual possibility within the major macro models.."

    SquibLoad · Jun 4, 2018 - 4:04pm

    Jackwagon!

    Tee-hee! laugh

    Texas Sandman · Jun 4, 2018 - 6:53pm

    Yeah, jackwagon

    That was the term that came immediately to mind describing this individual on a PM site trying to tell US/ME how to buy/store precious metals. Something completely useless.

    I then went and watched the youtube video of the Lee Ermey GEICO ad. Then I went Tee-hee.

    I like his therapeutic technique. I think we should send HRC supporters, starting with that Libero out to see him. OOPS! He's dead.

    R. Lee Ermey GEICO Commercial - Therapist Sarge.mp4
    Texas Sandman · Jun 4, 2018 - 7:01pm

    >>>OOPS!  He's dead.<<< .... 

    >>>OOPS! He's dead.<<<

    .... and probably still voting without problems. smiley smiley

    Texas Sandman · Jun 4, 2018 - 7:19pm

    OOPS! He's dead.

    >>>.... and probably still voting without problems. 

    No. He's not a registered demonrat.

    Bohemian · Jun 4, 2018 - 7:43pm

    @Texas Sandman

    California Online Voter Registration

    "Safe at Home Participants"

    Please do NOT use this form to register or re-register to vote if you are enrolled in a confidential address program such as Safe at Home. If sharing your address could put you in life-threatening danger, you may be eligible to register to vote confidentially.

    Texas Sandman · Jun 4, 2018 - 7:51pm

    @Bohemian

    I think everyone can vote confidentially in California. Another great idea by Governor Moonbeam, I'm sure.

    I fled the state when I graduated college. When I was forced to go back a few years ago for my father's funeral or "celebration of life luncheon" or whatever, I was reminded of the wisdom in that decision and fled once again as quickly as socially permissible.

    Lotus land.

    boomer sooner · Jun 5, 2018 - 1:22am

    Sandman

    Your father is still eligible to vote according to the research by Judicial Watch. It seems that the Cali.gov does not purge/investigate the voting rolls, ever. LA County has 140% registered voters to eligible voting age residents, as do many other areas of the state.

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