Basics On Buying Precious Metals

Why Buy Gold And Silver?

Right now, the stock market is on a seemingly endless rally, confidence in the dollar is rising, the markets are reacting well to the election of Trump. BUT–Trump himself pointed out that the fed can’t keep interest rates low forever, and we’re facing a HUGE bubble in all sectors of the economy–and he is right.

The Sad Facts…

Our stock market is artificially inflated at the moment, due to Quantitative easing, that has been going on for years. It should be noted that more and more companies are artificially inflating their stock through “buy backs”–also a way to decrease the amount of publicly held debt when a down turn is expected.

The fed has kept the money supply high and the interest rates low for far longer than should have been the case–just as the quantitative easing has continued longer than it should have. In a healthy economy, NEITHER measure should have occurred at all.

We’re 20 Trillion dollars in debt. And that doesn’t include our unfunded liabilities, or all the toxic derivatives waiting to crash down on us. All told, we’re likely a shade over 150 TRILLION dollars in the hole–but since the treasury cash flow reports are something nobody pays attention to, it’s not something the average person understands.

This Is Why Hard Currency–Gold And Silver–Matter.

The dollar is what is known as “fiat” currency–IT HAS NO INTRINSIC VALUE. A dollar is only worth what you and someone else AGREE it is worth. It is “riches”, NOT WEALTH. WEALTH is hard assets–land, precious metals, precious stones. They have an intrinsic value. And right now, despite the rosy numbers the media likes to toss around, the entire world economy is built on false premises.

So now is the time to buy gold and silver. Get rid of any stock you hold in companies you’re boycotting, and invest in metals. Put aside 30.00 a week to buy a few ounces of junk silver. Oh, and stock up on toilet paper (seriously).

Buying Gold And Silver

There are lots of ways to buy precious metals–collectible coins, shares in gold funds, mining stocks, etc. I’m going to stick to the most basic ones in this article and bring up other options later.

When it comes to gold and silver, the best choice is coins, as they are easily recognized by the average person. After all, you recognize a 1950 quarter, don’t you? This is the best place to start. And we’ll look at silver first, as it is the most inexpensive and fungible (liquid) product.

Silver coins are sold in two forms–numismatic and junk silver. NUMISMATIC is collectible coins–and they can be VERY pricey. The biggest advantage to collectible coins is that over time they may increase in value more than Junk silver coins.

JUNK silver coins are coins that are too worn to be valued by collectors. Unlike Numismatic quality coins, JUNK silver is usually sold for a certain percentage above the “melt value”–meaning what the silver is worth melted down. So where a Morgan Silver dollar, weighing 26 grams or so (just under an ounce) may sell for HUNDREDS or even thousands of dollars in collectible form, the same coin as junk silver–if you found one–would go for around 20.00 at today’s price. BIG DIFFERENCE.

In a stable economy, or if you’re buying for the grandkids, you get the good numismatic specimens to hold for 50 years or so. In THIS economy, you go for junk silver. It’s typically going to be dimes. LOTS AND LOTS of dimes. Though you do still run into rolls of junk quarters at times.

Gold coins can be had as small as 1/20th of an ounce, as can gold bouillon bars/ingots. You’ll NEVER find “junk” gold, so to speak, though some will be lower quality or more common coins than others. The most common gold coins will be Canadian Maple Leafs and Chinese Pandas, though nearly every nation has produced gold coins.

Getting Ready To Buy…

When you’re ready to buy, you’ll want to look up the “spot” price for both gold and silver, the price they are selling for the day you shop. Also see if you can get a “melt” value for silver coins. Then, you begin comparison shopping.

Most cities will have several coin shops, as well as pawn shops, to consider. Pawn shops are a good place to buy if you want numismatic quality coins, and you may also find jewelry called BAHT chains there. But they’re not the first choice.

Your local coin dealer charges a “premium” to sell you coins. So, for example:

A local store charges a 10% PREMIUM. an ounce of gold is 1500.00. You would be charged 150.00 PREMIUM, for a total of 1650.00 BUT BE CAREFUL AND ASK IF THE PREMIUM IS BY THE OUNCE OR BY THE COIN! In recent years, due to drastic increases in precious metal sales, some shady coin dealers are charging either a set amount per coin, or a set percentage per coin. And as SILVER coins DO NOT COME IN STANDARD INCREMENTS THE WAY GOLD COINS DO, you can end up getting ripped off. A reputable dealer will charge a per OUNCE premium. Gold coins come in standard increments: 1/20th, 12/10th, 1/5th, 1/4, 1/2, 1 oz. SILVER COINS ARE NOT STANDARD. And if you’re buying junk silver–by far the best choice, then you’ll be buying by the ounce, or if you have the cash, by the kilo, and the coins will be weighed on a scale in front of you.

Once you have located all the coin dealers in your area, you’ll be asking these questions:

  1. What is your premium for buying, and selling? This number changes daily, and sometimes more often, and is based on the daily spot price. So a dealer will typically say 5% of spot, for example.
  2. Ask if the premium is based on weight or per coin?
  3. ASK IF THEY HAVE ANY JUNK SILVER. Since this is by far the most affordable option, they may not even have any in stock.

Some dealers MAY elect to sell junk silver based on melt value rather than actual weight–so, for example, if 1 Franklin half dollar is worth 5.00 MELT VALUE, ten will cost you 50.00 plus the premium. IF THIS IS THE CASE, IT NEVER HURTS TO DOUBLE CHECK AND MAKE SURE THE PREMIUM IS BASED ON MELT VALUE, NOT WEIGHT.


Places NOT To Buy Silver Or Gold (unless you know your market well)…

DO NOT BUY COINS AT GUN SHOWS! Unless you are a seasoned collector or know the market for junk silver VERY WELL, a gun show or collectibles show is the one place you’re almost guaranteed to pay too much–other than an auction, of course. You will get lucky–sometimes. but it’s rare.

DO NOT BUY COINS OFF CRAIGSLIST! Craigslist, free newspapers, and random classified ads online often lead to fake coins, over priced coins, stolen coins–or assault when you go to see the coin.

PAWN SHOPS ARE ONLY FOR THE EXPERIENCED. There are many reputable pawn shops that occasionally have collectible coins–but again, they will likely be priced higher than you’d get the same coin at a coin shop, so best left to experienced collectors.

AUCTIONS ARE ONLY FOR THE EXPERIENCED, ALSO–NEVER bid live. Determine the real value–or what you feel comfortable paying, place an auto bid–AND GO AWAY. Unless you are a serious collector, and can control auction fever, you can end up really screwing yourself.

Next article, tomorrow, will deal with storing your hoard, and actually using it. It might surprise you to discover that you can often get discounts on all kinds of goods and services by paying in coin….