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The Pitfalls Buying Silver and Gold, Chasing the Rold Rate Today

The pitfalls to avoid when investing in gold and silver while chasing the gold rate today.

Ok so you’ve been convinced that investing in gold and silver is the smart thing to do in today’s economic climate as the gold rate today continues to rise. You also realize that you have to act and buy gold investments or silver investments right now. But the question is; what forms of gold and silver should you buy? How do you buy? What forms do you buy it in?

          One of the most important things to remember is to buy real gold and silver not fool’s gold and fool’s silver. You need to buy gold coins, buy silver coins and gold and silver bars, physical precious metals that you can hold in your hands. Now you don’t actually have to hold them in your hand, you can have them stored in one of Brinks two locations.

          But physical gold and silver is the form to hold. There are many other forms of gold and silver out in the markets and many of them are nothing but fool’s gold or fool’s silver in my opinion. Number one would be the exchange traded funds, otherwise known as EFT’s. It is widely accepted in the gold community that the exchange traded funds do not have all the gold and silver that they say they do to back them up.

          What you are really buying is price exposure to the gold rate today when you buy these funds. You are not buying physical gold and silver that you can hold and touch. The purchase of physical gold and silver is one of the most private investments around. It’s a transaction between you and the dealer and nobody else knows about it. When you buy EFT’s you are putting that private investment back into the hands of the banks that have caused the whole economic financial crisis in the first place. Trust them to your own peril.

          Another thing to watch out for are the pool accounts and certificates. They probably don’t have all the gold and silver to back up the investments in the pool accounts. Basically you are investing in futures contracts. So you are getting exposure to gold and silver prices again and not the real thing.

          There are also numismatic coins or collectible coins. Now when you buy a numismatic coin, you could  be paying many times the actual gold or silver content that is in the coin because you are actually paying for  the rarity and how much someone else covets that particular coin. Whereas, with bullion coins and bullion bars, their value is derived from the world spot silver and gold spot price at any given moment. There are hundreds or thousands if not millions of buyers out there for gold and silver bullion coins.

          The other thing to look out for in collector coins is that in certain times – say when there is high inflation, you could have thousands of these coin collections come to market at the same time resulting in the numismatic premium suddenly disappearing. So that coin you paid thousands for would fall in price to its gold or silver value. At the same time physical gold and silver coins might be doubling, tripling or even quadrupling in price.

Buying Silver and Buing Gold, silver bars or mint coins

Here are some secrets to buying gold and buying silver.

Ok so you are convinced that you should be buying silver and buying gold. You’ve done some research and you have discovered that the safest precious metals investment is to hold the actual physical metal or have it stored at Brinks. But what do you actually buy; there are a lot of choices.

          The first question you need to figure out is just how big your purchase is going to be. If eventually you gold and silver holdings are going to be more than a million dollars, you might want to consider those big commodity exchange bars. These are the 1000 oz. silver bars and the 400 oz. gold bars or 100 oz. bars of gold. They have the narrowest bid ask spreads – the difference between the price at which the dealers are selling silver and gold to you and buying  silver and gold back from you. So this is a very efficient way to invest and these bars are very liquid because it’s on the exchange dealers can buy and sell it at any time. It’s not a good idea to keep it in the exchange vaults though. You could get it shipped to Brinks at Salt Lake City or Hong Kong.

          If there was a default on the commodities exchange and there have been defaults in the past, you don’t want your metal in the commodity exchange vault, because they would make the plans of what they are going to do with your metal. It’s safest to have it out of there.

          I believe you will see silver go over $100 /oz. But there is also the possibility you could see silver over $1000 / oz. That may seem crazy, but all you have to do is study the fundamentals underneath silver and a little monetary history, and you will see that stranger things have happened quite often in the past. Now if silver did go to $1,000. / oz. and you had a 1,000 oz. bar that would be a million dollars. When you go to liquidate your position you have to liquidate it at a million dollars at a time.

          So it might be wise to buy silver and gold in smaller increments such as 100 oz. silver bars. Make sure you get the bars from a well-known refinery. They have a hallmark on the bar and a serial number as well as the weight and fineness stamped on the bar. So you basically have a certificate of authenticity right on the bar.

          Then you have the 10 oz. and smaller gold and silver bars which again have the weight and fineness stamped right on them. These bars also stack nicely in a vault.

          My favourite is the 1 oz. government mint coins.  American silver eagle coins are one troy ounce fine silver or a Canadian maple leaf says 1 troy oz. .999 silver right on it. Other coins available are US gold eagles, US gold Buffaloes, Silver Austrian Philharmonics, the gold Canadian maple leaf and the gold South African Kruggerands are the most common.