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.
Related Posts
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- Ultimate Suburban Survivalist Guide — Now With Free Reports (01/07/10)
- Silver Transcript — Gold and Silver News — More! (12/01/09)
- 2 Charts and News on Gold and Silver (10/22/09)
{ 6 comments… read them below or add one }
Thanks, good points as always … here’s myultimate take on the matter … Of Mortgage Brokers, ARMs, Attrition and Marathons
Thanks, good points as always … here’s myultimate take on the matter … Of Mortgage Brokers, ARMs, Attrition and Marathons
P.S.: Forgot to mention solid post!
Where does gold bullion ( in the form of GLD shares) figure into all this? Should i dump all my GLD and buy physical gold coins? This might make for a local storage problem in my safe deposit box or under some mattresses!! Or is GLD still a viable way to own gold if the ecenomic roof falls in?
coins sold by local dealers are at a big premium….too big for me…my local best guy wants spot+20% and u get your coins in 2 months!….pass.course using cash may count for something,but there are ways around gov’t paperwork:
i get 4 9’s pure gold jewelers bars from united precious metal refiners in albany NY. spot+5%+35$ per 10 oz+shipping….and they take u.s. postal money orders so if u want to stay off the radar screen(buy em up to 2900$ at a pop with no ID at post office)…..they buy them back very reasonable,even pieces of them pinched off to keep your check from them down to a reasonable amount(under 10,000$ can be easily cashed at one of their bank’s branches(uhbc or something they are everywhere)when it goes to $4000/oz.
coins are for chumps.
Hey come on, it’s easy to buy gold coins in the USA for spot+5%, surely! Even in the dismal UK where premiums are almost always higher (especially on silver) you can buy gold for 5-7% over spot for a single 1oz coin or a small group of coins. If you know a good dealer, he can get you other things such as Sovereigns for 5% over melt. You just have to shop around.
Jeweller’s bars eh? How would any secondary buyer know that jeweller’s bars are the real thing? I suppose coins could be fake but they are produced by the powers that be and anyone counterfeiting them is likely to get locked away for a long time - so give me the coins anyday - you can sell them to almost anybody and they are recognised worldwide. You can even get semi-numismatic coins for low premiums if you wait in the weeds and pounce when the opportunity arises - and then if you are fortunate, you can re-sell them for a higher premium later and pocket the difference.
The “market price” / paper price of gold and the physical commodity are becoming “unlinked”. There is no more gold metal at the London market. It has exited. There is no more gold in the USA’s Ft. Knox. the Chinese were paid w’ counterfeit bars last summer, and they discovered the fact. Hence, the 20% premiums.
If one is still able to purchase at small premiums, that is because the dealer has a supply. When that runs out, and they need to restock there will be hefty “premiums”, if they are able to obtain the metal at all.