Where do I buy gold? Is it better to buy coins, or bars? What about collector coins? I am often asked these questions, and will attempt to summarize the various options you have when it comes to acquiring and storing wealth in bullion. Please note, this is NOT investment advice and is intended as education only.
First, I don’t think of acquiring gold as “buying gold”. Instead, I think of it as “selling dollars”. I have dollars (Federal Reserve Notes) that someone wants to buy. In exchange, I am only willing to accept gold or silver bullion as payment.
JP Morgan, the famed banker, once said: “Gold is money. All else is credit.” Once you fully grasp what he is saying, you will never see the world of finance the same way again.
Gold is money. Federal Reserve Notes (dollar bills) are only currency. Currency is a form of credit, except today where the currency we use doesn’t even have a promise, or IOU, behind it! So I hesitate to even call it money!
So if someone wants my dollars (the fake currency) and they are willing to exchange it for gold (the real money), I am more than happy to make that trade! Any time I get something real for something fake, that’s a good deal!
While currency loses value over time, my gold remains fully valued!
State laws vary, and I will not spend much time here reviewing those. There are websites that delve into the laws around bullion ownership for each state. I will say though that Utah, Oklahoma, and Texas have some of the most favorable laws regarding precious metals, and Utah and Oklahoma allow gold & silver coins to be used in transactions (i.e. buying groceries) should the parties to the transaction wish to do so.
In 1933, ownership of gold bullion, gold certificates, and gold coins became illegal. During the Great Depression, President Roosevelt completely violated and disregarded the US Constitution, and your Constitutional rights to own gold, by mandating that all gold you held be turned into a Federal Reserve bank. Presidential Executive Order 6102 also required the bank provide in exchange for your gold a “Federal Reserve Note” in an amount equal to $20.67 for each troy ounce of gold you turned in. Like good citizens trying to help out a government who corruptly and foolishly mismanaged their affairs, American’s simply went with the status quo and handed their real money to the den of thieves. Hopefully, we’ve learned since then!
On August 15, 1971, President Richard Nixon removed the last remnants of the gold standard, and the link between the dollar and gold. https://www.youtube.com/watch?v=vNAvsrY9vR4
On January 1, 1975, President Gerald Ford lifted all restrictions on gold ownership, and American’s were once again permitted to own gold.
Because gold is a store of value, since 1975 varying laws have been enacted that treat gold dealers similar to banks, including laws meant to prevent the laundering of money, or to identify suspicious transactions potentially related to illegal activity.
Cash transactions of $10,000 or more will require you to complete IRS Form 8300. This form serves two purposes in my view. First, to identify that you have an unusual pile of cash for which you may not have a good explanation for where you obtained it. Second, to identify that you now have a stash of gold in your possession should the government ever decide they want to again violate the Constitution as they did in 1933 by seizing your gold.
The bottom line is, do yourself a favor and don’t make cash transactions in excess of $10,000! Also, don’t think for a moment that you can make multiple transactions for $9,900 (or an amount just under $10,000) and avoid scrutiny. If it appears to the coin dealer that you are “structuring” your purchases to avoid the IRS or FBI, the dealer is lawfully obligated to complete a “suspicious activity” report and file that with the government! One purchase probably won’t do it. But two or three will. For these reasons, consider using MULTIPLE COIN DEALERS, including those outside your immediate neighborhood.
Be aware that for transactions in excess of $1000, the coin dealer is required to verify and log your identity. Though they are not required to turn those logs over to an authority, they must be available for inspection should an authority have a legal need to review them.
I like anonymity when I do business. For all of these reasons, I like to keep individual transactions below $1000, using cash (which is what coin/bullion dealers prefer), and spread my transactions across multiple dealers, particularly those in another state if I happen to be visiting.
If by chance we enter a period of crisis where the government again confiscates gold as they did in 1933, no evidence exists as to whether I have gold or not. If they don’t confiscate it, it will be there to spend even if the banks are closed (as happened a few years ago in Greece, and is happening now in Lebanon with their banking crisis underway).
COINS OR BARS?
I prefer coins over bars. In particular I prefer American Eagles, Canadian Maple Leafs, and Mexican Libertads. In and around my country, the coins are easily recognizable, and difficult (nearly impossible) to counterfeit. They may also be accepted more easily in a transaction than a comparable gold or silver bar.
If you want to own gold or silver bars, smaller sizes are better. With larger sizes (even though it feels awesome to hold them), there have been times where unscrupulous parties have drilled a hole in the side, removed the gold, and filled the bar with a similar weighted metal like Tungsten.
This fraud has happened even to professionals with bars of gold from Swiss refineries, and more recently with a 400oz good delivery bar sent to China! https://www.forbes.com/sites/timworstall/2012/03/26/the-drilled-gold-bars-filled-with-tungsten/#197746f44e13
While it is very fun to own a part of history, unless you know what you are doing in valuing a coin, it is best to stick with recent year bullion, in the form of gold or silver coins.
Coin collecting (known as “numismatics”) is best left to the professionals who specialize in certain types of coins. You will likely overpay if buying an old coin from a dealer, local or online.
Additionally, when looking to sell the coin, you will have a more difficult and costly task.
ONLINE OR IN PERSON:
I prefer to acquire gold or silver in person. Colorado is a state that does not charge sales tax on the sale of precious metals, a practice more and more states are now adopting. Acquiring in person allows me to pay the dealer with cash, and as long as I transact for less than $1000, I can remain completely anonymous. By using 3 or more different dealers, I can transact over $500,000 in a single year anonymously. Working with a trusted family member, that amount can be over $1 million!
By purchasing online, you may have to incur shipping and insurance charges, and it will take about one week for delivery depending on where you live. Some online dealers are good about waiving these shipping fees for orders over a certain amount (i.e. $100 or $400, etc). At the same time, it is impossible to remain anonymous when purchasing online, which will subject you to the unlikely risks of future gold confiscation outlined above.
Online dealers require a debit card, credit card, or money order to transact, and some accept Bitcoin. For these forms of payment, they do charge a small fee. Cash is king in the money business!
Some of the better and larger online bullion dealers include:
There are many others out on the internet as well, so be sure to look around. Primarily, you want quality coins, at the lowest prices, and prompt delivery. Gold is gold, and silver is silver. Assuming no problem with the coins or service, the lowest price at that moment of purchase wins.
EXCHANGE TRADED FUNDS (ETFs)
The SPDR Gold Trust Fund (Symbol: GLD) is the most popular gold ETF fund. When you invest dollars in the fund, the fund buys gold with those dollars. Or do they? How do you know for sure, since you cannot see it? An old saying: “If you don’t hold it, you don’t own it.”
Some gold ETFs permit the leasing of the gold they hold, and in exchange are given an IOU from the leasing party (usually a central bank or similar). In cases such as these, your ownership of the ETF means they owe you your money back, but the fund itself may be owed gold back. So you own an IOU of an IOU! (Remember JP Morgan: “Gold is money. All else is credit.”)
Ownership of shares in a ETF are also not typically redeemable for the gold or silver they hold. Sometimes, there may be exceptions to this if the amount of shares you hold is over a certain amount (i.e. $5,000,000), in which case, if you petition the fund, they have the option to reimburse you with the metal, or some comparable valued instrument. I have never known anyone to actually get reimbursed with gold or silver!
Ownership of ETF shares is therefore not the same as gold or silver ownership. However it DOES represent exposure to the price movements of gold or silver, at least under calm economic conditions. If the markets get volatile (such as when the 9/11 World Trade Center attacks occurred), stock markets can be closed for weeks! If that were to happen, your value remains locked up!
Other larger ETFs worth mentioning are the iShares Silver Trust (Symbol: SLV) which invests in silver, and the VanEck Vectors Gold Miners fund (Symbol: GDX) which invests in stock shares of gold miners.
Owning shares of mining companies can be quite volatile when compared to owning the raw metal. As the price of the underlying metal moves up and down in small percentages, this can have a dramatic effect on the earnings or losses of a mining company.
You should also be aware that the SLV, while it appears similar to the GLD, has different rules in their prospectus. Make sure you read, and understand what you are investing in!
For assets that are tied up in IRAs and 401(k)s, there are a few options to get exposure to gold or silver.
Some dealers offer “gold IRAs” which are properly certified IRA retirement accounts, and which invest in gold or silver bullion. However, just as a mutual fund holds stocks for you in an IRA, the gold dealer is required to hold the gold purchased in an IRA. You are not permitted to take possession. But unlike an ETF, if the stock markets are closed, the gold dealer may still be open, and you can still get at your money (albeit with taxes, and an early withdrawal penalty, etc).
In a 401(k), your are only permitted to invest in the funds offered. These funds typically do not involve gold, silver, or other commodities. Instead, they are mostly limited to stock funds, bond funds, and money market funds. If markets look shaky, the money market fund becomes the safety vehicle.
Some 401(k) plans offer a “self directed” option, where you can pick and choose the individual stocks and ETFs you want to own. Personally, I like this option, but it may not be right for everyone. Especially for those who don’t or can’t manager their own money.
With a self-directed 401(k) plan, you can choose to get exposure to gold or silver by purchasing into the GLD, the SLV, the GDX, individual gold miners, or other such funds and stocks. Again, you are not permitted to take possession of the physical gold or silver, but you at least have exposure to the price movement by owning shares in these instruments.
STORING YOUR GOLD:
I am often asked where to store physical gold or silver once it has been acquired. So some general rules on storing physical gold or silver are in order.
Understand that a “Safe” is NOT safe! I can crack the combination on any safe in your house in 30 seconds. All it takes is a gun put to your spouse’s head, and you will instantly tell me the combination, and help me open your safe. Storing all your wealth in a safe is a bad idea!
You can however, store a small amount in a safe, letting the thief “think” they got all your valuables.
Safety deposit boxes at a bank are also not safe! A bank should be viewed with a more suspicious eye than a professional thief! (Oh wait…..they ARE professional thieves!). In 1933, many people stored gold in safety deposit boxes at banks, only to learn they were being forced to turn over gold in them.
With the 2008 financial crisis, there is a new thing called a bank “bail in” (not the same as a bank “bail out”). With the bail-in laws now on the books, banks are permitted to confiscate depositors deposits to rescue the bank, instead of having to ask the government for bailout money! If you use a safety deposit box, that IS a deposit to the bank that can be seized in the event of a bank crisis or failure!
It is best to store gold in YOUR possession in multiple places that will not be readily searched. If storing outdoors on your property, you can put coins in a large PVC pipe and seal both ends with a PVC cap. This pipe can then be buried.
If storing inside your home, don’t use any normal hiding spots every thief knows about. This includes the refrigerator, the back left side of a sock drawer, the back left side of a closet, etc. Professional thieves know exactly where to look!
You also want to ensure you document, with your estate plan, where this gold and silver is hidden. If you were to suddenly pass away, you will want your heirs to be able to find it! A recent find in California unearthed a $10 million gold hoard (The Saddle Ridge Hoard) that someone buried a short time after 1894! Don’t do this to your kids! https://en.wikipedia.org/wiki/Saddle_Ridge_Hoard
PROTECTING YOUR GOLD:
While we talk a lot about gold and silver, there is one precious metal that should not be overlooked: Lead. Lead, in the form of a bullet, can be quite valuable at the appropriate time! People can get desperate in times of crisis, and as the old saying goes: “The most dangerous animal is a hungry human.”
If you have never owned a handgun, or never shot a handgun, consider investing in one, along with the training. At the appropriate time or place, this could save your life, or the life of those you care for!