A Gold and Silver Buyer’s Guide Part I

If you’re interested in buying precious metals, but haven’t ever felt comfortable buying from "mainstream" retailers that you see advertised on TV, hear about on the radio or get emails about, then this report is for you.

In this report I will explain exactly how to buy precious metals, how to store them, as well as when, how and why to sell.

But before I get into those details, I want to quickly go over the reasons WHY to own physical gold and silver today.

The rules of investing extend into the world of precious metals – so don’t make any rash decisions about gold or silver. You need to have a plan for your investments, whether you’re buying a small business, shares of stock, a bond, real estate, collector’s items or precious metals.

So before you buy anything, ask yourself, "What’s my plan for this investment?"

It’s something you need to understand right now: the only reason to own physical gold and silver right now is capital preservation.

You can’t expect to get rich buying physical gold and silver. It might happen! But the realistic expectation for gold and silver is that they will gain in price commensurate with the devaluation of world currencies.

In other words, if the dollar loses half of its value, I would expect that gold and silver will gain 100% (double) in the dollar denominated price. I’m not really any richer if the dollar falls and gold gains. But I’m happy to preserve the total worth of the initial capital used to buy the gold or silver.

If it takes twice as many dollars to buy the same commodity as it did 5 years ago, you’re really not richer for owning the commodity.

As I said, it’s not unreasonable to expect to make some percentage gains from gold or silver – but that’s a speculation. My plan is to preserve the capital I have from the ravages of a prolonged currency crisis – and that’s why I buy silver and gold.

With that plan in mind, I’ll now describe the exact types of gold and silver products I buy, and why. I don’t have much use for collector’s coins or extremely rare or old coins. I’m not buying the artwork or the rarity of a specific coin.

I buy gold and silver to protect my capital – not to speculate on the relative rarity of one coin over another, plain and simple.

I buy regular old reliable bullion.

Bullion refers to a coin or bar that’s minted with a specific purity and weight content.

For silver, I prefer one ounce coins, as well as 10 and 100 ounce bars. I like having different denominations – because in the event of an all out currency crisis different denominations will be useful.

My silver coin of choice is the one ounce eagle. It’s arguably the most recognizable silver coin in existence, and in a pinch you can easily sell this coin to any retailer, pawn shop or collector.

You can also buy what’s known as "junk silver" which is simply a bag of United States silver coins (nickels, dimes, quarters, half dollars and whole dollars) minted for circulation up until the early 1960s when the silver content was reduced. These coins have the same kind of high-recognizance as the silver eagle.

As for bars, a variety of precious metals vendors offer several different sizes of bars from different mints. The important thing to remember with bars (and coins, for that matter) is to buy from reputable vendor. I’ll be going over some of the vendors I use later on in this report.

For gold coins, I prefer one ounce gold eagles – for the same reason I like the silver ones: they’re highly recognizable, and likely to be trusted and known by anyone interested in buying gold.

I also like British gold sovereigns. These coins have been minted for over 500 years by the British government – and they’re easily the most identifiable gold coin in the world, and they’re only ~1/4 ounce of gold, so they’re much more affordable for investors without very much expendable income (like me).

Below, I review exactly HOW to buy these bullion products. The good news is, there’s still time to buy bullion. As long as Central Bankers like Ben Bernanke try to print their way out of recession, buying bullion will be one of the few sane alternatives to holding dollars.

How to Buy Gold and Silver Bullion

  • The most important number
  • How to avoid getting ripped off
  • What to do with your gold and silver

So I’ve already reviewed why, when and what precious metal bullion you should buy.

Now, I’ll briefly tell you how to make sure you’re not getting ripped off – and I’ll tell you the precious metal vendors I use myself as well as what you should do with your gold and silver once you take delivery.

The first and most important number you NEED to know before you buy a single ounce of gold or silver is what’s known as the "spot price."

The spot price refers to the up-to-the minute price for gold or silver on world commodity markets.

You might see spot prices listed for the NYMEX or the London Commodity Exchange, but one is as good as another. There might be small differences, but nothing large enough for concern.

I prefer to use the website kitco.com to find the most recent spot-prices for gold and silver – as well as just about any metal.

Once you know the spot price, now you have the "wholesale" number. You can use this figure to try to find local brick and mortar coin vendors who might sell coins at, or even slightly below the spot price.

That’s easier said than done – because most vendors will charge a hefty premium over spot.

The more important function of understanding spot price is that you know when the retail price is way too high. I won’t dignify some of the more predatory gold vendors by linking to them in this report, but some of them will charge 100% or more over spot.

So pay attention to spot price vs. retail price and make sure the denominations are correct. In other words, make sure you’re not deceived into paying one ounce prices on a half ounce coin for instance.

The best way to avoid getting ripped off, is to find a reputable vendor that you know, trust AND who will buy coins back from you for a fair price. You can have a vendor who is willing to sell you coins for 5% over spot, but only willing to buy for 25% under spot. That’s not a great deal.

I buy bullion from one of two places: kitco.com or blanchardonline.com.

Both of these vendors satisfy my concerns over fair retail and buyback prices. Both have good selections of the bullion products that I’m interested in. Both actually offer a buyback guarantee, which is nice. And perhaps most importantly, I’ve only had wonderful experiences dealing with the customer service representatives from both firms.

I get no kick-back or discount from these folks for saying so, but I believe they’re among the fairest and most responsive bullion vendors in the business, and if you choose to buy from either one of them, I think you’ll be satisfied.

(By the way, drop me a line if you’ve ever purchased bullion products from either one of these vendors: [email protected])

So, let’s say you’ve taken delivery from one of these vendors, or from one that you know and trust. Now you have at least several hundred, or perhaps tens of thousands of dollars worth of shiny bullion sitting on the kitchen table.

You’re probably feeling excited. You probably want to take a picture, send it to your friends, or to that gold-bug brother-in-law of yours.

You might invite your kids to take a look at it or maybe even hold it.

It’s tempting to tell the world about your wise new decision to take physical delivery of bullion.

But don’t!

I strongly recommend telling just one other person, probably your spouse. Tell them where you plan on keeping it, how much there is, and how they can get it if something happens to you.

And you need to keep it somewhere safe.

If you have a large, hidden wall or floor safe, that’s a decent option. I’ve also heard of people sealing their bullion in PVC pipes and burying them somewhere on their property. Some folks will seal their bullion in the foundation of their house.

You might also consider renting a safety deposit box at a bank – although they’re not entirely safe. Safety deposit boxes are not outside of the reach of the Federal Government, nor are they immune from unscrupulous or inept bank employees.

So your best bet is to keep your bullion somewhere close to you, in a hidden, secure place that only you and one other trusted person knows about…

Continue reading Part II of A Gold and Silver Buyer’s Guide here.

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