How Do I Buy Gold and Silver?

How Do I Buy Gold and Silver?

We at Calaveras Coin & Pawn are hearing more and more questions about how to buy gold and silver:

• How do you buy gold and silver?
• Why should I buy gold and silver?
• What kind of gold and silver should I buy?
• What is the difference between numismatic and bullion coins?
• Which of these should I buy?
• Where can I buy gold and silver?

Including the following important questions:

• Will the government confiscate my gold and silver?
• Can the government make owning gold illegal?
• How do I know if my gold and silver dealer is reputable?
• Do buyers get some kind of confirmation that what they are buying from these shops is real and certified?

These are just some of the questions I will try to answer in this post.

Why You Should Own Gold and Silver

First off, why should you own precious metals?  Read this:

“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.

This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the “hidden” confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.”

Who do you think this was written by?  If you guessed former Fed Chief Alan Greenspan, you would be correct.  It is titled “Gold and Economic Freedom,” and it was originally published in 1966.  (Click here to read the entire Greenspan article.) After reading this, it is hard to believe he was the Chairman of the Federal Reserve for nearly 20 years.  Gold is the antithesis of the Federal Reserve Note.

Greenspan’s article is the time tested reason for owning gold.  For more current reasons, look no further than“The Seven “Ds” of the Developing Disaster,” written by gold expert Alf Field.  In short:

• Deficits
• Dollar
• Devaluations
• Debt
• Demographics
• Derivatives (this is the big one)
• Devolution

The above are the reasons why Field says gold and silver are bound to rise over the long term.  (Click here to read the complete article from Field.)

Video Explanation for How and Why to Buy Gold and Silver

For a video explanation for how and why to buy precious metals, we turn to Mike Maloney.  He’s a best selling author who wrote a book titled “Why Gold and Silver?”  His videos give the simplest and clearest explanation I’ve ever seen.  Below is one of my favorites.

Finally, renowned gold expert Jim Sinclair gives us the very best reason to own gold.  He says gold is the ultimate “insurance.”  In his recent book, “A Pocketbook of Gold,” Sinclair says gold is necessary for surviving the “monetary mayhem” we face.  Every gold buyer should own this tome because it’s thorough and easy to understand.  

How To Buy Gold and Silver

Now that you know the “why,” let’s get into the “how” of buying gold.  First of all, gold and silver are sold by the “Troy” ounce.  A “Troy” ounce weighs more than the ounce (avoirdupois) used to measure milk or meat.  A Troy ounce is 31.1 grams, which is more than the 28.35 gram ounces you come across in everyday life.  So, a  Troy ounce weighs about 10% more than a regular ounce.   Put simply, it is most common to buy and sell precious metals by the Troy ounce.

Gold and Silver Numismatic or Bullion?

When you are buying physical gold or silver, you can buy numismatic or just plain bullion.  Numismatic coins are for coin collectors.  There are numismatic gold coins and silver coins.  The value is determined on things such as date it was issued, rarity, condition and even the mint where it was produced.

There is a learning curve to be an investor in numismatic coins. You must also have a trusted and knowledgeable coin dealer to work with.  If you are a beginner or if you are just trying to protect your wealth and buying power of your money, then invest in bullion.  There are two main types of bullion products:  bars and coins.  I prefer gold eagle coins and silver eagle coins the best when buying bullion.  Let me explain why.

First, let’s just talk about bullion in coin form.  A coin is a universally recognized unit of weight, and many consider gold and silver coins to be money.  No, you cannot go to the supermarket with a gold or silver coin and buy groceries, but coins are the most liquid way to own bullion.  Unlike jewelry, you know the exact amount of gold or silver in the coin.  It is minted by a government, and that makes it very difficult to counterfeit.  These features make gold coins and silver coins easy to cash in and trade.

Gold Bars and Silver Bars

Bars can range from a few grams to 600 ounces.  Small bars do not carry the same prestige as a minted coin.  Multiple ounce bars cannot be broken up, and you are forced to sell the entire bar if you want to liquidate it.  Large bars are usually for wealthy people investing large amounts of money.  The only advantage to buying gold or silver in bars is you pay smaller premiums (or commissions) per ounce.  Don’t get me wrong, gold and silver bars are valuable, but they are not as easy to sell or trade as coins.

Depending on the market and supply and demand, premiums (or commissions) can range from a few percent to 10 percent of the spot value of the quantity of gold sold (Typically Calaveras Coin & Pawn is 1-4%.   (If the mint shuts down, or there is some severe shortage in bullion, or there is systemic financial failure, then all bets are off and the sky is the limit on bullion commissions.) The spot value is the raw market price of refined gold or silver. Premiums are charged in addition to spot gold prices and silver prices.  The price of gold and the price of silver can fluctuate every second of every business day on the open market.  Many experts say to worry less about the premium you pay and more about the product you are buying.

Advantages of Owning Coins vs Bars

Still another advantage for coins–multiple ounce bars cannot be broken up.  You are forced to sell the entire bar if you want to liquidate—it’s all or nothing.  With coins, you can sell small, medium or large quantities when you want to cash out.

Yet another advantage of coins over bars is their acceptability. Once again, coins are better than bars because bars (small or large) do not carry the same prestige as a minted coin.  Even when prices rise dramatically, coins will likely be accepted without question or assay.   An assay is a scientific measurement of the amount of gold in a coin or bar.

In short, base your purchase on the future sale of the gold price or silver price, not saving a few bucks on premiums (or commissions) when you buy.  Here’s another way to look at it.  If you decided to sell some of your gold at $10,000 per ounce, what do you think would be more desirable: a Gold Eagle or a stamped 1 ounce bar?  The Gold Eagle will win out every time.  That does not mean that a 1 ounce bar is not valuable—it is.  It is just not as sellable as a 1 ounce coin.  Think of the “sell” when you buy, and pay a little more for quality.  If you are buying gold or silver–buy coins. (If you are a beginner, I do not recommend proof coins because of the collector value.)

Which Gold Coins Should You Buy?

So, which coins should you buy?  Let’s start with gold.  You should try to buy only 1 ounce coins.  The reason is if you buy what are called fractional coins (1/10, 1/4, 1/2 Troy Ounce), you are charged a premium, or commission, on each coin.  So, for example, if you bought 10  1/10  ounce coins compared to a single 1 ounce coin, you would have  exactly the same amount of gold.  However, your commission charges on the 10  1/10 ounce coins would be several times higher in total than the single 1 ounce coin.  Buy 1 ounce coins whenever you can.

So, which gold 1 ounce coins should you buy?  The 4 most popular coins to own are the

• U.S. Gold Eagle
• U.S. Buffalo
• Canadian Maple Leaf
• South African Krugerrand.

These 4 coins are the most popular and most recognized in the world.

There are other fine gold coins that are minted throughout the world. For example in Australia, China, Mexico and Europe. They are simply less popular, but are very much still valuable.

Buying Silver

When it comes to silver, there are two main ways to buy it.  Once again, you can purchase bars or coins and, once again, coins win out.  I’ll give you the same reasons as discussed above when I talked about gold.  Bars do not carry the same prestige as coins, and you cannot break them up.  There are two types of bullion coins you can buy to accumulate silver–one ounce silver coins and “Junk” silver coins.  First, let’s talk about one ounce silver coins.   One ounce minted coins are made by several governments including the U.S.  Most governments do not mint fractional silver coins.  I do not recommend non-government minted coins, only officially government minted silver coins.

The 2 most popular and recognized silver 1 ounce coins in the world are the:

• U.S. Silver Eagle
• Canadian Silver Maple Leaf

There are other very high quality official government minted silver coins, but the Silver Eagle, Maple Leaf  are the 2 most popular and well known ones in the world.

Junk Silver

Then, there is “Junk” silver.  “Junk” silver is any U.S. dime, quarter or half-dollar minted on or before 1964.   1964 and earlier  dimes, quarters and half-dollars had 90% silver content.  “Junk” is sold by face value of the coin.

The most popular way to buy “Junk” silver is a 55 pound bag.  A 55 pound bag is $1,000 in face value of the coins, but that also equals 715 ounces of silver.  So, for example, a bag of dimes may have a face value of $1,000, but you pay the same as you would if you paid for 715 ounces of silver.  You always pay the spot price of silver plus a premium.  The advantage of buying “Junk” silver is you pay less premium per ounce than a 1 ounce silver coin, but you still have coins.

It is the cheapest way to buy quality silver coins officially minted by the government.

You can also buy “Junk” silver in much smaller increments.  Just remember that $1.50 in change equals about an ounce.  So, 15 dimes of “Junk” silver is an ounce and so on.  This way, you can always figure out how much you are paying per ounce when you buy “Junk” silver.  The most desirable “Junk” from best to least are half-dollars, quarters and dimes.  There are a few later years of coins after 1964 (mostly Kennedy half-dollars)  that had 40% silver, but those are extremely bulky and are the least desirable “Junk” silver coins.

Gold or Silver Exchange Traded Funds (ETF)

What about gold or silver Exchange Traded Funds (ETF)?  Are ETF’s as good as physical gold or silver? ETF’s are not just as good as physical gold or silver.  There have been questions about how much precious metals they actually hold.  Nothing is as safe as holding the physical metal in your possession.  If you are going to buy gold and silver mining stocks, you must do your homework.  You must also constantly keep track of the mining company.  Again, nothing is as good as physical gold or silver.

Jewelery vs Owning Gold and Silver Coins

Is jewelry the same as owning gold or silver coins?  No, because there is no uniformity in jewelry.  It does not have a uniform weight or metal content.  Jewelry has to be melted down.  That is why coins are the preferred way to own gold.  They are uniform in weight and content.

Will Gold and Silver Be Confiscated?

Will the government confiscate my gold and silver?   The government can make owning gold illegal, but it probably won’t.  The last time it was confiscated, we actually used gold as currency. The $20 gold piece was used right up until 1933.  FDR confiscated them because he stopped the use of the coin and raised the price of gold to $35 per ounce.  It was a move that was supposed to help The Great Depression economy.  We do not use gold as currency today, so a confiscation is a lot less likely.  You will be required to report the gain when you sell, and you will be required to pay taxes. Also, make sure you save your receipts, because you will only have to pay taxes on the gains, not on the total purchase price of your precious metal coins.

Where to Buy Gold and Silver Coins

So, where do you buy gold or silver coins?  You can buy online and pay horrible shipping charges or you visit us at Calaveras Coin & Pawn in Angels Camp.  Do your research no matter where you buy.    When it comes to pricing, we have very competitive prices on coins with very low premiums.  When you visit, Calaveras Coin & Pawn will give you a total price with spot price of the coin and any applicable premium.  Be careful of persons online offering you extremely low prices its one of those things "if it sounds to good to be true".  We work on extremely low margins with volume being our key.  We want to insure you have a safe, secure and fair transaction.  Calaveras Coin & Pawn wants your continued business. 

Gold and Silver Storage

Buy a safe!  If this is your preference, do your homework on what kind of safe to buy and picking a secure place to install it. When it comes to storage a less preferable option that should only be used temporarily is a bank safety deposit box.  Just be sure to check your bank’s rating on a regular basis.  Two of the best places to check your bank are Bankrate.com (click here) and The Street.com.(Click here) If your bank’s rating starts to fall, you will probably want to move your precious metals.  

Delivery of Gold and Silver

Finally, when buying silver or gold coins, you should always take physical delivery.  Do not let third parties hold your precious metals on a permanent basis. Your property is best held by you.  Be sure you know and understand exactly what you are buying, and you will do just fine.  Calaveras Coin & Pawn encourages you to stop in for a no cost, no obligation chat to talk about your needs and hopefully your gold or silver purchase.