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8 things to know before buying Gold and Silver

Once you’ve decided that investing in precious metals like gold and silver is the right move for you, the next step is figuring out the best way to make your purchase. It might seem daunting, but if you understand these eight key points, you’ll be equipped to navigate the process with confidence and security.

When it comes to buying precious metals, you’ll quickly discover that there are countless options available, both online and in physical locations, where you can purchase gold and silver. Additionally, you’ll encounter a wide range of prices and various types of bullion to choose from. But why is this the case?

The truth is, it’s nearly impossible to buy precious metals for the exact price they’re trading for on the stock market. That’s because the London Bullion Market Association sets the suggested bid, ask, and spot price of the commodity based on theoretical and provisional mining contracts. These current mining contracts offer insight into the current demand and projected supply of precious metals. It’s important to remember that precious metals aren’t just used for investment purposes; they also play a significant role in various industries, including jewelry, dentistry, technology, and more. In fact, over 70% of the gold and silver market is driven by industrial demand.

The spot price of gold and silver primarily determines the value of raw ore. Mining companies sell this raw ore to refineries, where it undergoes a lengthy, challenging, and costly refining process to extract its pure form. This highly purified form, typically around .999% pure, is then sold to businesses or mints, which further process it into the final product. These mints, whether private or government-owned, have their own business expenses, including employee wages and the cost of specialized equipment like coin presses.

Given this process, it’s essential to consider what constitutes a reasonable premium.

What Is a Reasonable Premium For Gold And Silver?

Answering this question involves considering numerous variables, but as you become more acquainted and explore the diverse range of gold and silver products, you’ll develop a better sense of what constitutes a favorable or unfavorable premium over the spot price. While the factors at play are extensive, let’s touch on a few key ones that some people may overlook.

For example, let’s compare two coins of the same metal type and weight issued by different governments: the 1 oz Silver Maple Leaf by the Royal Canadian Mint and the 1 oz American Silver Eagle by the U.S. Mint. Both coins are exquisite and represent premier silver bullion for their respective countries, but there’s a difference in price. The 1 oz Silver Maple Leaf typically trades at about the current market spot plus $2.00 to $3.00, whereas its American counterpart often commands a premium of $4.00 to $6.00 over the spot price. Why is this?

Well, one reason is that the Royal Canadian Mint controls the entire refining process, whereas the U.S. Mint relies on several private mints to refine the metal and produce the blanks used in manufacturing.

Other factors that can influence premiums include efficiency, volume, supply, market volatility, and many more.

2. Scams And Counterfeit Gold And Silver

Many people hesitate to buy precious metals due to concerns about scams or counterfeit bullion. It’s a valid worry, as such incidents are unfortunately common in the industry. However, there are simple steps you can take to avoid falling victim to scams.

Firstly, invest in a test kit. These kits come in various forms, from chemical and magnetic tests to X-ray machines, and they’re readily available and affordable. With a test kit, you can easily verify the authenticity of any questionable item. If you’re hesitant to purchase a test kit, you can always visit a jewelry store, where they typically have handheld X-ray devices that can assess purity in seconds.

Secondly, it’s crucial to only buy from reputable dealers and to perform a bit of background research on a bullion retailer before making a purchase. If you’re not up for that, here’s a short list of bullion retailers you can trust. (Keep in mind that this list doesn’t cover all reputable dealers; it’s just based on our personal experiences.)

Investor Crate – We like to think we’re the best company on the planet, but we might be a bit biased! However, we conduct random batch testing, personally handle every item leaving our facility, offer a convenient subscription-based model, and sell millions of dollars worth of gold and silver annually. So if you’re looking to build your stack every month, consider us! But you can’t go wrong with the following dealers:

If you stick to these companies, you’ll be in good hands.

It’s strongly advised to steer clear of auction websites, random third-party sellers, sellers on social media, self-proclaimed “brokers,” Chinese websites, and popular big-box websites that sell precious metals alongside other unrelated items. If everyone stopped using these outlets to buy precious metals, counterfeit circulation would drastically decrease. Our company, along with the companies mentioned earlier, sources directly from the mint or pools inventories from large suppliers who also buy directly from the mints.

3. Individual Retirement Accounts VS. Physical Precious Metals

Precious metal IRAs are great for folks looking to roll their 401k or Roth IRA into precious metals and may not have the capacity to store a large amount of gold and silver themselves. These IRA companies offer an easy way to buy, sell, and store precious metals, providing monthly or quarterly earning statements. However, it’s important to note that they control the entire process, and the fees can add up quickly. Fees vary from company to company and can include storage fees, high markups, brokerage fees, and a significant percentage when selling. While precious metal IRAs aren’t necessarily a scam, it’s essential to research which trust company is the best fit for you.

For many, physical ownership is preferred because it allows them to possess their wealth and investment. This provides more control over premiums since you’re not paying a third party to purchase and custody the bullion on your behalf.

4. Selling Gold And Silver

A common misconception is that you’ll pay a premium for gold and silver when you purchase it, but when you go to sell it, you won’t even get the spot price. This holds true if you decide to sell it to a local coin shop, cash for gold, or pawnshop. We recommend reaching out to actual bullion retailers to sell your gold and silver, as often you will be able to sell it at spot with a premium (albeit usually small). This is because everyone will inevitably resell the bullion and need to make a profit, but this is easily offset if you sell higher than when you purchased it. See the last section “Strategies” for more elaboration.

5. Local Coin Shops And Pawnshops

Local coin shops (LCS) and pawnshops vary widely in terms of trustworthiness and fairness when it comes to the products they sell and the premiums they charge. It may require some research, asking around, and getting estimates to gauge what they are charging. In my personal experience with local establishments in my area, these businesses tend to be on the pricier side. However, there’s a distinction between being a bit overpriced and intentionally gouging customers.

It’s important to understand that maintaining an inventory of precious metals as a small business is costly. It’s subject to market fluctuations, requires insurance, operates on narrow profit margins, and entails expenses like security and building leases. So, while there may be a premium over the spot price, it’s essential to consider these factors before leaving a negative review online. Some people enjoy the personalized experience of shopping locally, selecting their items, and supporting small businesses, even if it means paying a slightly higher premium.

6. Buying Gold And Silver Online

Buying Gold and Silver online has its advantages and disadvantages. As mentioned earlier, you need to do a bit of research on each company to ensure you haven’t stumbled onto a scam website. However, once you’ve vetted them, you’ll find a much wider variety of options compared to a pawnshop or LCS. Plus, you can easily compare prices and find the best deals in real time.

Most online bullion retailers don’t maintain their own inventory but instead pool their resources. This makes sense because even a small amount of Gold could amount to a significant inventory value. The price differences among retailers typically come down to factors like marketing, business overhead, efficiency, and company optimization. Legitimate bullion retailers aren’t trying to rip you off; they’re simply adjusting their prices to sustain their operations.

One of the biggest misconceptions in the Precious Metals investment industry is that retailers are making huge profits. In reality, selling retail bullion to investors is not very lucrative, as the profit margins are quite slim.

7. Strategies – How People Use Gold And Silver To Make Money

Mining Stocks – Some Folks Prefer to Get it From the Source!

Some of the big publicly traded mining and refining companies buy land that’s abundant in Gold, Silver, Platinum, and other noble metal deposits. They may do several things with this land, like selling it for profit, holding onto it until the market value rises, mining the Precious Metals, or engaging in buying and selling contracts. Investing in stocks of these companies can offer impressive returns and is definitely worth considering for commodity investing.

Rolling Over to or Starting a New IRA – You’ve Seen the Commercials!

Some individuals, especially those with substantial wealth, prefer this approach. They’re not interested in delving into researching commodities or purchasing a safe; they simply seek investment benefits in the form of potential gains. They prefer not to deal with the entire process and are content to have it represented solely by a piece of paper indicating its increased value since purchase. This is entirely acceptable and remains an option for individuals.

Long-Term Investing.

Some folks argue that investing in Gold and Silver isn’t worthwhile, but the counterargument always emphasizes its long-term potential. While its value may not always soar, historical data shows that Gold and Silver have consistently appreciated. For instance, in the last 20 years alone, Gold has seen a 550% increase in value. Armed with this knowledge, many people acquire Gold and Silver bullion with the intention of holding onto it for several decades. Consequently, investors often pass down their bullion to their children and grandchildren as a long-term investment strategy.

Hedging Against Inflation.

Throughout history, whenever the economy takes a hit, Gold and Silver tend to surge. Typically, when the government faces an economic crisis, its go-to solution is to print more money. Consequently, the value of the dollar drops, requiring more of those paper fiat currencies to buy Gold and Silver. This predictable pattern has a dual impact: the dollar’s value decreases while the demand for Gold and Silver skyrockets, as both industries and investors rush to stockpile these precious metals.

Dollar-Cost Averaging.

Not everyone has $800,000.00 lying around to splurge on one of those hefty Gold bars you often see in bank heist movies. That’s where one of the most common investment strategies comes into play: dollar cost averaging. It’s for folks like you and me who prefer to chip in a bit each payday to gradually build up their stash, maybe to pass on to the grandkids someday.

Dollar-cost averaging in Precious Metals means consistently buying bullion throughout the year. By purchasing month after month, regardless of market fluctuations, you generally end up with an average price for Gold and Silver over the year. This approach alleviates some of the pressure of constantly monitoring market prices and turns it into a fun hobby that can potentially grow your family’s wealth over time.

8. Have Questions About Investing In Gold And Silver?

Hey there! Just a heads up: This blog is purely for entertainment purposes and shouldn’t be taken as financial advice. We highly recommend reaching out to a certified financial advisor if you’re considering investing in Gold, Silver, Platinum, or anything else. It’s crucial to do your homework and understand the risks before diving into any investment with your hard-earned money!

If you have any questions about our services or anything else, we’re always here to help. Feel free to shoot us a message by clicking on the ‘contact us’ button below.

Thanks for tuning in, and don’t forget to share this with your friends if you found it helpful!

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