5 Tips for Gold and Silver Buyers

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An excerpt from my book, The Ultimate Suburban Survivalist …

Precious metals are usually sold by the troy ounce, which weighs more than the typical ounce we use in everyday life. But just to add further confusion, there are 12 (not 16) troy ounces in a troy pound.

Bullion Bars and Coins

Bullion coins—American Eagles, Buffaloes, Canadian Maple Leafs, etc.—allow you to own investment grade gold (between 0.90 and 0.9999 fineness) in a quantity that will be recognized at any gold dealer in the Western world.

Most bullion coins are minted in 1/10-ounce, ¼-ounce, ½-ounce and 1-ounce form (some can be larger). However, one-ounce gold bullion coins such as Eagles or Krugerrands are by far the most popular for small investors.

However, I’d avoid obscure gold coins, sometimes given as commemorative pieces or medallions. You might get a junk price for something a dealer can’t easily sell.

Be careful buying gold or silver bars – they’re easier to counterfeit than a coin. Coins have much, much wider recognition.

Semi-Numismatic and Numismatic Gold Coins

Numismatic or older and rare coins are bought not solely for their precious metal content but also for their rarity and their historical, aesthetic appeal. They are leveraged to the gold price, which means that the price of these coins can increase faster than the gold price in a bull market (due to their historical and aesthetic value and to their rarity) and can decrease by more when gold is in a bear market.

Many investors opt for high-quality pre-1933 high-grade gold coins.

These can be great investments. On the other hand, if you’re one of the people worried about a money panic and a potential breakdown in society, you have to wonder how well numismatic value will hold in such a situation.

Physical Alternatives to Coins and Bars

Most people buy gold bars or coins. But gold buyers and sellers also traffic in gold dust, nuggets, wire, and even gold chips used by dentists to fill teeth. But none of these are as fungible as coins or bars and coins are the most fungible of all. The more a gold piece is a fabricated product of known weight and purity, the better off you usually are. Gold dust in particular can be diluted or even counterfeited.

Gold Investing—Keep it Simple

Your investment advisor may have other ideas, but I recommend:

Investment #1—Buy gold. And I mean physical gold, the kind you put in a safe. You don’t buy physical gold to get rich; you buy it to preserve wealth. If Treasuries implode, gold will make a mighty fine insurance policy. Also, you might want to pick up gold in forms that you can easily barter if paper money becomes worthless—simple gold rings, for example. Wedding bands are good for this. I know of a guy who has hundreds of wedding bands stored on clothes hangers in his closet.

The worst time to buy gold is when it’s going higher. Nothing travels in a straight line, so wait for a pullback and pick up simple gold coins or gold bars.

Investment #2—Silver. Again, I mean physical silver. If our economy, financial system, and paper money go south, you’ll want gold and silver. Flashing around too much gold could make you a target. Silver doesn’t attract as much attention and it’s still a precious metal. In fact, silver is undervalued compared to gold by some metrics.

Five Tips for Gold Bullion Buyers

Here is a collection of five tips from expert sources.

1. Call at least three dealers for a price. The difference between a good price and an almost good price can be the difference between getting 100 ounces of gold and 90 ounces of gold.

2. Make sure you include shipping costs in your calculation of the price of the coin—shipping costs vary wildly from dealer to dealer.

3. You need to be explicit on what you are locking in, including price, merchandise, and terms of payment. If there seems to be any waffling on the part of the dealer, this is a warning sign to steer clear.

4. Look for a dealer who has been in business for a number of years. Ideally, if you go to someone who was in business in the 1970-to-1980 boom, they’ve seen enough ups and downs in the market to handle the challenges of price fluctuations and coin availability.

5. Get to know a local dealer. The advantage is he can call you when he gets new inventory and there will be no shipping involved.