As featured in The Wall Street Journal, Money Magazine, and more!
     

How to Buy Precious Metals Including Gold and Silver

This article was written by in Featured, Investing. 13 comments.


There are two main reasons to head towards precious metals as a major investment. One reason one might significantly invest in metals is the belief that the value of gold and silver will increase more than other types of investments like stocks and bonds, or that the investment in metals will provide a certain type of diversification. Another reason is the belief that the dollar will eventually lose all purchasing power and metals, due to their “intrinsic value,” will be all that’s left to pay for daily needs.

In the doomsday scenario, banks fail, governments fall, and currency becomes worthless. Those who hold gold and silver, in theory, would have no problem. With the first situation above, ETFs representing gold and silver will often suffice, but for the second situation, in which the world is in turmoil, holding physical gold and silver is the best course of action.

Earlier, I received this question from Consumerism Commentary reader, KT:

I know nothing about purchasing precious metals. I have wanted to purchase some gold and have it delivered to me in its pure form, but after three years I am still looking for a company that can deliver this type of service. Can you recommend to me solid companies so my chances of getting taken in this endeavor are decreased? I would not trust a company who sends a piece of paper with the transaction it rather than the actual metals. I would like to purchase the gold, have it in my possession, and use it when my money runs out for the chemotherapy I am having to pay for out of my own pocket.

First, determine the amount of gold or silver you want to buy and what form suits you. You may want to take delivery in the form of coins (rounds) or bars. The choice is based on your preference; any amount you buy can take the form of rounds or bars. Keep in mind that the fewer pieces you buy, the better you chances of getting a good price. For example, buying a ten-ounce bar will probably be less expensive than buying ten one-ounce rounds.

Second, you’ll need to find a shop. There are many dealers online, and this is likely where you’ll find the best price. For example, APMEX is a reputable dealer. They were selected by the US Mint to be one of the few dealers allowed to purchase government-minted metals directly and sell to customers. From this list, the Mint further narrowed down the list of approved dealers for handling a major metal sales event featuring the first of the American the Beautiful five-ounce silver rounds, a special coin designed by the Mint that went on sale earlier this year.

You’ll find many options from a dealer like APMEX. To get the most for your money, buy as much as you want in one transaction and look for the least expensive option. Usually government-minted or branded metals, like American Gold and Silver Eagles, will cost more money than the APMEX house brand, yet they have the same composition.

Also look for coin dealers in your area. When you shop online, you will need to factor in shipping and possibly tax. You may be able to avoid at least the shipping cost by walking into a dealer’s storefront. They may charge a higher price per ounce for the metal, but you could end up paying less in total for your purchase. The phone book was once a reliable source for local dealers; these days, it may be better to search online for dealers in or near your town. Use Google Maps to help you locate the dealers rather than Google’s web search.

KT also asks:

Finally, what degree of purity most gold is being sold these days?

For gold, look for .9999 fine (or .9999 pure). This is 24-karat gold. American Gold Eagles, by contrast, are 22-karat, the long-held standard for gold coins for commerce. You won’t go wrong with American Gold Eagles or similar gold coins produced by other mints, however, although the composition includes slightly less gold.

With silver, look for .999 fine.

The purpose you state for buying gold doesn’t make too much sense, though. First, it’s unlikely that your doctor or healthcare provider will accept gold as a form of payment, despite the metal being considered legal tender. Therefore, you would need to sell the gold to pay for your chemotherapy.

Second, you’re guaranteed to lose some money. While no one can be sure what the value of gold will be in the future, I can guarantee that you’ll pay fees for buying the gold, and you’ll pay fees to sell. When you buy gold, you’ll pay a price per ounce that is a little higher than the market price, and when you sell gold, you’ll receive cash at a price per ounce that is lower than the market price. The winners are the dealers who make money regardless of whether customers are buying or selling.

The price of gold relative to the dollar might increase from the time you buy to the time you sell, offsetting some or all of the fees you pay, but you’re taking a bet with money you know you’re going to need.

Photo: covilha

Invest In APMEX Gold Bars Now

Updated September 22, 2011 and originally published May 16, 2011. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

Email Email Print Print
avatar
Points: ♦127,485
Rank: Platinum
About the author

Luke Landes, also known as Flexo, is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow Luke Landes on Twitter. View all articles by .

{ 13 comments… read them below or add one }

avatar Jason

There is no guarantee that you’ll lose money. Even if you paid a $100 commission each time, if the price of gold jumped to $2500 an ounce, you’d come out way ahead. It depends on the buy/sell prices and the amount of commissions. You know, just like buying and selling stocks.

Reply to this comment

avatar wylerassociate ♦162 (Cent)

thanks for the column, flexo.

Reply to this comment

avatar Jeff

I recently made several small silver purchases. The pieces were shipped to me with no problem. However, I got eaten alive with the shipping charges. At the time, I thought that it was worth it because I wanted to touch the silver and put it in my safe. After these purchases, I looked around the site that I used and found that you can “bundle” your purchases and have them sent to you at one time for a cheaper shipping price. This would make the effective amount per ounce that you paid smaller and you will “be to the good” sooner if prices rise.

Reply to this comment

avatar The Latter-day Saver ♦706 (Dime)

I don’t own precious metals, and if I were to incorporate them into my portfolio I would do so through and ETF or some other lower cost way than by purchasing physical bullion or coins. It seem that most precious metals dealers are looking to make an additonal 6-10% premium on their products above spot price, which since these metals are trading at near record highs doesn’t seem like the most prudent investment option. Sorta like a mutual fund that charges a 6-10% front end load! I don’t know very many “enlightened” investors willing to pay that premium. Just my two Krugerrands!

Reply to this comment

avatar lynn ♦155 (Cent)

To Jason I would say the opposite is true. I wouldn’t be happy purchasing metals with a front load cost. Who can say when they will increase or decrease in value.

Reply to this comment

avatar Jason

Well of course not. That’s why it’s called speculating.

Reply to this comment

avatar lynn ♦155 (Cent)

I know you didn’t mean for this to be funny, but I laughed anyway! I know this. Just adding my comment for personal reasons.

Reply to this comment

avatar Jon

A technical point on American Gold Eagles:

They do not contain “less gold”. While it is true they are struck from 22ct gold they still contain the same quantity of fine (24ct) gold as an equivelent 24ct gold bullion coin (such as a Gold Buffalo or Gold Maple) The 22ct eagles are struck slightly larger to accomodate the additional metal used in the alloy, and still contain 1 ounce of Fine Gold.

Put another way, the 1 ounce American Gold Eagle contains 1 ounce of 24ct Fine Gold. But it also contains a little additional copper that makes the coin more durable and scratch resistant.

Reply to this comment

avatar The Retirement Master

I had a client who was depending on her husband’s gold to pay for their retirement, so we had to set up an IRA pretty quickly. Personally, I think investing in metals carries too much risk. Of course all investments carry risk but when it comes to saving for something as important as retirement, it’s a good idea to have something a little more concrete. The way I see it, collecting gold and silver can be a great hobby but you never really know if it is going to pay off. However, I suppose it’s always a good idea to diversify your portfolio, right?

Reply to this comment

avatar skylog ♦368 (Nickel)

agreed. i have a smallish position in silver which has done more than i ever could have imagined. that said, it seems i missed the top as it has been hovering in the mid 30′s now for a few weeks after coming down from just under 50. the run was insane, but the drop was even more so. i could not imagine being a small fish like myself and putting large numbers in any of the precious metals.

Reply to this comment

avatar Retiree

Buying is easy. But how do you SELL gold or silver without paying a large commission?

Reply to this comment

avatar Cejay ♦1,521 (Half-Dollar)

I commented to a fried tht I was thinking of this and he told me to buy silver since it was easier to keep and carry.

Reply to this comment

avatar csdx

I never understood the whole, gold for doomsday plan. I mean at the end of the day, it’s as useless as paper money. I mean at least silver and diamond have industrial uses. If you really want to prepare for the end of the world, your money is probably best invested in those 25+ shelf life food stockpiles and guns and ammo.

Reply to this comment

Leave a Comment

Connect with Facebook

Note: Use your name or a unique handle, not the name of a website or business. No deep links or business URLs are allowed. Spam, including promotional linking to a company website, will be deleted. By submitting your comment you are agreeing to these terms and conditions.

Notify me of followup comments via e-mail. You can also subscribe without commenting.

Previous post:

Next post: