Should I Add Precious Metals to My Investments?

I often get asked about investing in gold or silver.  There are many people who are interested in buying gold or silver, but they are not sure how to buy it or where to buy it.  This article will try to answer these questions.

First of all, it helps to understand that precious metals can be purchased in different forms, weights, and designs.  They are most commonly found in bar (or ingot) and round (dated currency or plain).

These bars and rounds use the Troy Measurements for weights.  They can be sold by the ounce, 1/2 ounce, 1/4 ounce, or 1/10 ounce.  The American Eagle Gold coin is an example of that.  They can also be sold by the gram.  One Troy ounce is equal to 31.1034768 grams.  Most starter investors or collectors prefer to buy by the gram - especially for gold products as they are expensive.

Considering bars, or ingots as the Mints call them, they normally come with a design stamped and serial number.  The actual silver content should be 99.9% pure.  I have seen bars sold with the term "clad".  Beware - these are not 99.9% pure bars.  They are normally brass or silver coated with gold. Avoid bars that are clad if you want 99.9% pure.

Considering rounds, or coins, these will also come with a design stamped on them.  Please note that rounds are not currency.  The American Eagle 1 ounce silver Coin also has a round option. The Coin will be dated with the mint designation on it.

What's the deal with coins and rounds?

Coins are collectibles and have intrinsic value as they are dated and normally associated with a particular mint.  Because of this - they normally increase in value as they age.

I have also noted that foreign precious metals cost more than domestic.  In the United States (U.S.) we have several private mints in addition to the U.S. mint.  These private mints will sell their own products or partner with a mint distributor.  The U.S. mint does not sell its own products.  It relies on mint distributors to handle those transactions.  As such, the cost of the product will be higher as an additional set of hands is involved.

So let us assume that you want to buy some gold or silver for either collecting or investment purposes, how do you buy it?

It may surprise you to know that you can buy it directly from a mint distributor, or from an online auction or marketplace.  When I buy directly from the distributor, I try to pay the lowest amount over spot value as I can.  Johnson Matthey (JMBullion), for example, accepts old fashion checks and money orders along with credit cards.  Since the credit card fees are directed back to the consumer, we pay more for the precious metal products. It is 2014 and I have sent them checks to pay for my orders and it only takes an extra 3 or 4 business days to process.  The American Precious Metals Exchange (APMEX) is another good distributor that I have purchased from.  There are more - you can just search the internet for them.

Now that you have some gold or silver, what do you do with it?  One good thing to note is that some purchases are Individual Retirement Account (IRA) approved.  The distributor websites provide more info on that.  If you are collecting gold or silver for an investment you will want to consider storing the products in a Bank monitored safe deposit box.  Another note for investors is to consider the mint state of the coin.  There are a few companies that check and identify the real mint state value.  The highest is MS70.  You will want to search on the terms "mint state designation" in your internet browser to find articles that explain exactly what the different states are and their values.

My personal collection consists of Silver Coins (circulated and uncirculated) from The U.S. Mint, The Royal Canadian Mint, and The Royal Mint (United Kingdom).  The 99.9% Silver Britannia is the prettiest coin in my collection.  As far as silver bars are concerned, I have some bars from U.S. Private mints and PAMP Suisse.  I also have some small gold bars that are stored in Assay Cards and serialized.  These are called Gold Gram and are from Turkey. As I mentioned before, gold is expensive.

My collection is both a hobby and an investment.  When determining how much money to use for this precious metal investment I decided to stay with 10% of my non-retirement savings.

Friendly reminder - the value of precious metals rises and drops frequently on the stock market. There is no guarantee that you will make a profit from this type of investment.

Photo Gallery of Silver and Gold Bullion Art .

What About Online Auction Sites?

Online auction sites, like ebay, offer both distributors and individual sellers a platform to sell their metals either on auction or the "Buy It Now options".  I have "won" auctions and also bought the products immediately.

When using the auction method, please ensure you know the real value of the product, and the highest price you are willing to pay for it.  Be prepared to lose the auction!  Some buyers get caught up in the auction competition aspect and end up paying more than the real value for the product - just to WIN.

Here are some of the higher volume vendors that are reputable, in alpabetical order:

American Precious Metals Exchange (APMEX), Bullion Exchanges, JM Bullion, Liberty Coin, Modern Coin Mart, and Pinehurst Coin Exchange.

I have also purchased products from various individual sellers with no issues pertaining to the quality and shipping.