Why Gold & Silver?
Gold and silver have been held by people throughout history, most notably by people like Mansa Musa. In addition, it’s what people buy in times of recession, economic uncertainty, US Dollar devaluation, multiple countries selling their products in currencies other than the US Dollar, and a several-month wave of layoffs in multiple industries in the United States.
Here’s a quick guide on how to buy gold and silver so that you can switch to a currency that has real, physical value in case the fiat national currencies take a hit.
The Value of Gold & Silver
Gold and silver have had relatively steady long-term rises in price (appreciation).
For example, in US Dollars gold rose from $345 per troy ounce in 1993 to $2,011 per troy ounce in 2023.
In addition, silver rose from $3.77 per troy ounce in 1993 to $24.79 per troy ounce in 2023 (US Dollars) in the same time frame.
Most precious metal prices have high short-term volatility, making market entry timing hard. The factors that influence the price of gold are: gold production, industrial demand, gold reserves, US Dollar value, and market volatility.
Best Time to Buy Gold and Silver
GoldPrice.com is a website with the historical prices of gold and silver. It shows you the best time to buy precious metals.
Regarding gold, it shows that its price is low during the start of each year. It surges during February and March, and then surges again during the fall and winter seasons.
Silver is more volatile than gold. No analysis or historical prices shows a good time to buy besides its prices dropping in early January.
Some Useful Terms for Precious Metals
Fineness – the purity level of gold/silver. How many parts of bullion is pure gold or silver per thousand parts.
Bullion – physical metal with a purity standard, usually 99.5% or 99.9%. You can buy it directly fromt a mint or a reputable gold/silver dealer.
Troy ounce – the weight measurement & default trading unit for precious metals. It’s slightly heavier than the imperial ounce.
Numismatic – a coin with a value outside of its precious metals content.
Spot price – the market price for precious metals set by the London Bullion Market Association (LBMA). It changes minute-by-minute throughout the trading day.
Ask – a spot selling price.
Bid – the price market makers will pay for precious metals.
Spread – difference between buy & sell price.
Premium – added to the ask price to cover manufacturing/distribution cost.
Allocated metals – physical gold or silver bullion stored in 3rd-party vault that belongs to owner.
Bull – expecting prices to rise.
Bear – expecting prices to drop.
Exchange-traded funds (ETFs) – their main goal is to track asset (i.e. gold/silver) market prices by buying into them. This is done by buying shares in the trust without having access to the fund’s assets.
Bullion
Bullion is a physical metal with a purity standard, usually 99.5% or 99.9%. You can buy it directly fromt a mint or a reputable gold/silver dealer. It’s most common forms are bars or coins.
Bars and coins are roughly the same value per troy ounce, with different features useful for different purposes.
Bars are great if you’re looking for long-term storage because they’re easy to store. In addition, because they’re easy to manufacture they have a lower premium and total price, making them cheaper than coins. The downside of bars is that they’re less liquid, or harder to sell.
Coins are great for short-term storage. They’re easier to sell and more liquid than bars.
Numismatic is any coin with a value outside of its precious metals content. Stay away from these, as well as collectible coins, as dealers charge very high premiums for them.
Supplier Business Criteria
Before choosing which gold or silver dealer you’ll buy from be sure to make sure that they check each of these requirements:
- are a respectable retailer
- have a lengthy, credible history for quality
- hold high accolades from business organizations & customers
- have a big inventory
- offer simple/secure transactions
Factors to Consider When Buying Physical Gold
You must consider the following when buying physical gold:
- storage
- insurance
- a reputable manufacturer
- purity
- liquidity
Storage is a secure spot to keep your gold and silver. Check your storage provider’s insurance policy to learn how they protect your metal.
Insurance protects your precious metals from natural disaster or theft if you keep it at home.
A reputable manufacturer helps the value of your metal grow in value over time. Examples of respected producers are Credit Suisse, the Perth Mint, and the Royal Canadian Mint.
Purity means getting at least 91%, if not 99% pure gold.
Liquidity means it’s hard to resell physical gold. Pawnshops don’t offer fair prices for it. Gold dealers will buy it back for a price below gold’s spot or market price.
Storage Methods
You can keep your precious metals using these methods: a [wall] safe, a safety deposit box, and/or a 3rd-party storage facility.
A wall safe at home is best for a few items. Avoid them if you have a lot of precious metals, as it’s a security risk for your family.
Third-party storage facilities are usually the best option. They offer high-end security, need insurance to cover things like theft or natural disaster losses, and do need a storage fee to secure your precious metals.
Dodging Scams While Shopping for Gold and Silver
The most common places to buy and sell precious metals are online or through a reputable coin shop or broker.
Online marketplaces are easy to use, have clear prices, offer better options than local dealers, and have lower operating costs.
A reputable coin shop or broker is the best for small buys or sells. They charge higher premiums compared to online. Finally, they can negotiate better prices once your relationship with the dealer improves.
Investment-quality gold bars must be at least 99.5% pure gold.
Gold coins usually have lower purity than gold bars. For example, a one-ounce American Eagle coin is only 91.67% gold.
If you live in America, be sure to buy from a dealer that’s listed in the US Mint’s database. In addition, here’s a website you can find the most reviewed gold and silver dealers in America. If you live in Canada, you can use the Royal Canadian Mint to find gold and silver dealers near you. If you’re hip and want to try something besides the Royal Canadian Mint, here are other well-reviewed gold and silver dealers in Canada.
Gold, Silver, Platinum, or Palladium
Gold & Silver
The gold to silver ratio (GSR) is the price for one ounce of gold divided by the price of one ounce of silver.
If this ratio is at or above 80, that means silver is cheaper than gold. The last three times history saw this ratio is when the price of silver rose steadily by 40%, 300%, and 400%.
If this ratio is at or below 20 it means that gold is cheaper than silver. During times of fear or uncertainty gold outdoes and is more stable than silver. Gold has been the steadiest, most profitable asset during the 2010s decade.
Platinum and Palladium
Platinum and palladium is great for those that are more aggressive and looking to diversify. They trade more like industrial metals, meaning you’re betting on an improved global manufacturing.
Here are some general guidelines for deciding which metals to buy:
- Gold bullion if you’re looking to keep your wealth and safety with less risk and volatility. It’s also great if your investment time outlook is under three years.
- Silver for wealth preservation & higher potential appreciation. The best way to buy at the lowest premiums is through 100 ounce bullion bars.
- Platinum/palladium are great ways to diversify precious metals holdings into alternative metals.
Don’t Lose Your Position in Precious Metals by Trading In and Out
Swap gold for silver, or vice versa depending on the gold to silver ratio. Do not trade in and out of your core phyiscal metal holding.
Low Transaction Costs
Try to keep transaction costs low each time you buy or sell precious metals. Th components of a transaction cost are the buy-sell spread, shipping expense, and sales tax (for some US states). The buy-sell spread, also known as the bid-ask spread, is the difference between premium to buy metal & premium/discount received when you sell the metal back.
| Recommended Forms | Silver | Gold |
|---|---|---|
| Long-Term Appreciation | Pre-1965 90% silver coins, rounds, 100 oz bars | Gold Bars, Canadian Gold Maple Leaf coins, Krugerrands, Eagles |
| Barter & Trade | Pre-1965 90% silver coins, American Eagles, rounds | Fractional rounds or American Eagles (1/10th or 1/4 oz size) |
| Holding in IRA | Rounds, 100 oz bars | Gold Bars, Canadian Maple Leafs, American Eagles |
| Short-Term Trading | Pre-1965 90% silver coins, American Eagles, rounds | American Eagles,Canadian Maple Leafs, Krugerrands |
Buying Bullion from US Dealers
Besides Canada, there are more bullion dealers in the US than there are in Canada. This makes sense because the US market is bigger. On top of this, many US states offer tax-free bullion. Here’s a site with American sites Canadians can buy American gold from.
The best methods for buying American gold are: locally, shipped via a 3rd-party service, or online from a website.
Summary
Recessions are nothing new in North America, however, it’s always good to have alternate methods to trade with. It’s also a good idea to diversify your investments so that you can rely on other investments when some go down.
When’s the first time you bought gold? When’s the first time you bought silver? Where did you buy it? What was your reason?
Leave your comment below with your answers and don’t forget to share the content.
