Physical Precious Metals Checklist
Precious metals have exploded as a hedge against indecision and inflation following the worst economic crisis since the Great Depression. However, not all firms have as much interest in your success as they do their own. So here’s a quick guide to follow if you’re interested in precious metals investing.
Avoid Numismatics
Numismatic coins are those that are sold as collectables. These include proofs, uncirculated coins, and sets. Be aware that these are highly profitable for coin shops and outlets, and are often sold to investors with the premise of growing in collectors value. That may sound all fine and dandy, but realize you may be paying two to three times the actual metal value of the coins you purchase. You wouldn’t pay $1500 for one share of Google stock, would you? Worst offender: GoldLine. GoldLine says they’re the premier precious metals company, but once you speak to a sales rep at the firm you’ll realize their inventory is about as bad as it gets for investors interested purely in the metal content.
Popular Means Expensive
American Silver Eagles (often advertised as ASE’s) can be just as expensive as numismatic coins. Let’s be straightforward, these coins are very popular among investors, and as a result of their popularity they have some of the highest premiums of any silver coin.
Buy Weight When Possible
As you rise through the weights and measures of gold and silver coins and bars, the price per ounce drops considerably. A 1/10oz gold bar, for example, may sell for a 20-40% premium over spot price whereas a 1oz gold bar will sell for a 10% premium. Heavier bars, like 5 pound bars (ante up!) sell for just 2-3% over spot.
Avoid Sales Tax if Possible
Some states have sales tax laws that make larger purchases of bullion less expensive. For example, Texas requires sales tax for all purchases under $1000. Spend more than $1000, though, and you won’t have to pay a dime in sales tax. That’s an instant savings of 6.25%. Not too shabby. Your bullion vendor should be able to give you an idea on how sales taxes work for your specific state.
Be Careful On Ebay
Five years ago when gold and silver were about as valuable as aluminum foil, you could be sure that the coins you bought online were 100% legitimate. With prices heading higher, however, Ebay has become grounds for fraudulent coins, many originating in China, that don’t contain even .0001 grams of precious metals. Buyer beware on Ebay.
I am a young investor, and I have been think a lot about the prospect of adding gold bullion to my portfolio. Its a hedge play with possible growth. What do you guys think of keeping 10% of your portfolio invested in gold, whether it be a gold miner or bullion?
Hey Jordan,
Precious metals especially gold is on a uptrend right now. While gold is predicted by many gurus that it will keep on rising and may reach $1,500 to $2,000/oz, the price at $1,300 now is already quite expensive for many people.
So for traders and investors who do not have so much capital for physical precious metals investing in the beginning, they can actually consider doing spot gold. There’s leverage provided but the only thing they have to be careful is money management.
I have around 30% to 40% of my portfolio in gold itself including bullion and spot gold.
Dan