Over the past week, I have had several people ask me how to buy gold and silver.
Rather than thinking about it as “buying” gold or silver, I like to think about as “selling” dollars. You sell your dollars, and someone pays you in gold and silver. This is what smart investors do when they believe the value of the dollar is going to decline, or in general to protect their assets from inflationary or severe deflationary economic conditions.
You can own precious metals physically, and there are a lot of advantages to doing so, which I will not get into here.
Typically, precious metals are bought at a metals dealer. There are several reputable online dealers who will ship orders direct to your home. Some of them are:
- APMEX (American Precious Metals Exchange): https://www.apmex.com/
- Money Metals Exchange: https://www.moneymetals.com/
- SD Bullion: https://sdbullion.com/
- JM Bullion: https://www.jmbullion.com/
- GoldSilver.com: https://www.goldsilver.com/
eBay ( https://www.ebay.com/ ) also has a section of their website called “Bullion Hub” under the “Coins & Paper Money” category. Many of these same dealers sell through eBay and offer very low prices and free shipping if you buy from them through eBay. Sometimes though the prices are marked up to compensate for the eBay seller costs. So you should compare.
Unless you understand numismatics (coin collecting) and what constitutes value in the coin world, I would suggest simply staying with recently produced precious metal coins such as the American Eagle, Canadian Maple Leaf, or similar. Precious metals coins are easily and readily identifiable, and are available in small quantities, ready to be used like money in the gold-standard days.
The precious metal dealers also offer “bars” of varying weights. Bars, some as small as your fingernail, typically come in a “TEP” (Tamper Evident Packaging) assay card, which you should not remove. This is the purest way to purchase precious metals, and at the lowest possible price.
Take some time, look around the websites, and learn what is available. To obtain up to date information on the precious metals markets, you can visit Kitco ( https://www.kitco.com/ ), a precious metals information hub that shows current spot prices for various metals, and recent news on the precious metals markets.
If you have assets in an IRA, some of the dealers listed above offer what is a called a “Gold IRA”. You simply set up an account with them, and they store the precious metal for you. You can then transfer some or all of your current IRA value to the dealer, who acts as the custodian for your gold. IRS rules prohibit you from purchasing gold in an IRA yourself, so the custodian takes care of transactions you direct, and the physical storage.
401k and IRAs
If you are like many who have a 401k or an IRA in a brokerage account, those accounts offer a set of mutual funds (often “target date” funds or other index funds). Often, they also offer a “self-directed” brokerage option, which allows you to invest in individual stocks and ETFs (Exchange Traded Funds).
There are ETFs traded on the New York Stock Exchange that invest in, or track, various precious metals such as Gold and Silver. The most common of these is the GLD ( https://www.cnbc.com/quotes/?symbol=GLD ). This ETF owns actual gold. While you are not allowed to take possession of the gold, your IRA or 401k can at least benefit from the price movements of gold, allowing you to protect your assets in a significant market downturn. (Note: I currently have positions in the GLD)
There is also a similar ETF for Silver ( https://www.cnbc.com/quotes/?symbol=SLV ). (Note: I currently have positions in the SLV)
Another popular way to benefit from upward price movements in precious metals is to own shares in the miners themselves. During the Great Depression, shares of mining companies did very well. While everyone else lost up to 90% of their stock values, shares of mining companies actually rose!
As happens, there are ETFs that focus on Mining companies. One of the largest of these is the GDX ( https://www.cnbc.com/quotes/?symbol=GDX ). (Note: I currently have positions in the GDX). There are also silver mining ETFs such as the SLVP ( https://www.cnbc.com/quotes/?symbol=SLVP ).
For folks who have their life savings trapped in 401k or IRA retirement account, these ETFs offer an alternative to traditional stocks or bonds, and allow you to “hide out” in bear markets.
Gold Or Silver?
Another question I am frequently asked is which is better, gold or silver?
There is a ratio that is publicized known as the “gold-silver ratio”. Historically speaking, silver will trade from 20 to 50 ounces per ounce of gold. For years, gold was pegged at $35 an ounce, while an once of silver was set at $1. This would be a 35 to 1 ratio, in that it costs 35 ounces of silver to buy and ounce of gold.
Lately, this ratio has gotten really out of whack! As of this writing, it now takes 86 ounces of silver to buy an ounce of gold. To get back in line with historical norms, either silver needs to double or triple in price, or gold needs to fall in price by more than 50%.
Since metals overall are underpriced relative to their economic value, it is far more likely that silver will increase in price, and do so at a faster pace than gold will increase.
So the bottom line is that I think Silver is a better value than Gold at this point.
And since it is that time of year, a great Christmas gift idea is a silver coin or gold coin! They last forever.