Thinking of investing in Gold or Silver? Read This!

Image via Wikipedia

With gold nearly reaching an all time high and silver creeping up on the highs we saw in the 80’s, I thought it would be a good time to try an educate anyone that is looking to get into the precious metals markets.

In my eyes there are only two ways to purchase Gold, Silver or any other precious metal.  You can purchase the actual metals in coin, bullion or bar form.  Or, you can buy paper metals through your day trading account (ex. SLV or GLD).  Each method of purchase has its benefits and downfalls.

Owning actual silver bars or gold coins is very appealing.  Some investors seek coins with a US currency value on it others simply purchase minted bullion.  When you purchase these you will buy them at a premium over spot price.  Spot price represents the value of one ounce of un-minted metal.  With the cost of making a coin added to silver you’ll usually pay $1 to $2 over spot price.  Coins with a US currency value on them sell at a higher premium above spot price.  I personally seek out minted bullion rounds and don’t mess with the US currency, I want to own as much silver while paying as little as possible.

The benefit of owning actual silver is that it can be held as a reserve if times get tough.  If the economy were to fail or the dollar became severely devalued your silver pieces would be worth much more than what you bought them for.  This is great if you want to hold onto your silver until you die.

The downfall of owning actual silver is that the price has to move a lot before you can make a decent profit on it.  My local coin shop sells silver rounds for $1.25 over spot and buys them at $0.25 over spot.  Based on a $15.00 spot price, silver would have to go up 7% before I can break even.

Owning paper metals involves purchasing shares of silver, gold or other metals that are in huge bank vaults.  It makes it so you can buy and sell your metals on a world scale.  There are no shipping charges on this and the price of these shares follows the spot prices very closely.  Above I mentioned SLV and GLD, there are many many more of these.

The benefit of buying paper metals is that you can buy and sell within seconds and your profits are not eaten up by shipping charges and ebay fees.  The only fees you have to overcome are your $9.00 etrade fees.  This makes buying these shares the perfect investment for someone that is planning on buying and selling their metals as the market fluctuates.

The downfall of buying paper metals is that you don’t have the metals in hand should there be a huge economic crisis or gross devaluation of the dollar.  Rumors on the web say that the banks are only required to own a fraction of the metals that they are selling on the internet.  So, in reality your paper silver or gold may or may not be worth anything.

In conclusion, if you plan on buying and selling your silver often you would benefit by opening an etrade account and becoming a day trader.  If you want to buy and hold you should probably go for the real deal.

Related Articles

• American Gold Eagle Coins Cause Suspension Of Gold Proof Coins By US Mint (prweb.com)
• Gold and Silver Miners Setting Up for a Major Move to New Highs (seekingalpha.com)
• Silver hits two-year high, gold closes lower (marketwatch.com)
• Gold climbs above US$1,250 (financialpost.com)
• You Don’t Have to Be a Millionaire to Invest for Retirement With an Entrust New Direction Gold IRA (prweb.com)
• Junk Silver Coins Selling By The Bags To Investors Who Normally Buy Gold Coins (prweb.com)