I have had many people ask me “what is the best way for me to buy gold and silver?” The short answer to that question is pretty simple. It depends. It depends upon what your intentions are for gold and silver. Personally, I believe that buying in different ways makes a lot of sense if you have the means to do so. I will try to lay out the ways to purchase gold and silver so that anyone who has an interest in doing so has at least a bit of a roadmap of where to start.
I believe it is important to note that included in this discussion will be gold, silver, paper contracts and precious metals mining stocks.
The main reason that many buy gold is to maintain purchasing power. Many people are aware of this and are also aware that it is better if you have the physical asset in your possession.
Having the asset in your own possession does, however, create some significant problems. This is why, while I suggest having some physical metals on hand for barter or emergencies, you may want to think twice about having substantial amounts where thieves could gain access.
I would also say that if you do store your own metals the fewer people that have knowledge of it- the better.
The first step is to find a reputable precious metals dealer. Since this industry is mostly unregulated it is important to find an entity that you can trust to not only deliver your product but you also want to be sure you are getting what you are paying for- the real goods. Before buying anything I would suggest that you get a solid recommendation from someone who has already done business with the firm you are considering and it couldn’t hurt to get a look at their rating with the Better Business Bureau and on-line comments.
Some of the larger and most respected metals companies also offer storage. This may be important because when you engage a company to store your metals, they will generally store it, insure it and audit it from time to time. This takes the hassle of protecting your metals off your plate. Of course, there is a storage fee. In an agreement such as this you have gold, silver, platinum, etc. that is allocated to YOU. It will be your metals and segregated from everyone else’s metals.
While there is an ongoing storage fee you would have to weigh that with the cost of providing insurance and security on your own which could be substantial if done correctly.
The only problem I really see with this is that if you needed access to the metals right away it would likely take a bit of time to get the metals delivered.
Most of the gold, silver, and platinum that I choose to hold is in an ETF. It is EXTREMELY important to do your homework on which ETFs are truly gold ETFs and not just paper contracts masquerading as the physical metals.
In this scenario I am holding gold that is in a vault and insured BUT it is in unallocated form. What this means is that there is a trust that owns the gold, silver or platinum, and I am a part-owner of the trust.
The convenience here is that I can buy and sell in my brokerage account so I can have liquidity just about anytime that I want.
Many times, my wife would ask me “how do we get the metal?”. My answer is that we don’t. If we need to buy an asset or need cash, we just sell the amount that we need, it is converted to currency, and we buy what it is we need or want. I believe that this accomplishes my need for maintaining my purchasing power as well as my need for speed and efficiency. At some point someone may want the physical metal as payment but in the situation we are in as I write this 99% of people still prefer CASH regardless of what is being purchased.
I also wanted to bring up precious metals mining companies which are seeing profits rise because of the price of the products they produce are rising. These stocks appear to be unappreciated probably because most people are chasing the latest AI story or internet darling stock. This is actually a different asset class because, in my opinion, the risk is higher here but the potential rewards when gold breaks out could be far higher than what I am expecting from the metals prices themselves. The main reason is that as metals prices rise the profits of miners rises far faster.
If a company mines gold and the all-in costs are about $1200.00 and the price received in $1900.00 the profit is $700.00 per ounce. If they produce a million ounces the profit is $700 Million. If the price of gold rises to $2200.00 the profit would be $1000.00 per ounce and the profit would rise to 1 BILLION. It is like using leverage on the gold price. The increased risk appears to me to be the instability of governments at this time. When the economy sinks governments do some crazy things like raising taxes, changing rules and in dire times may even nationalize a mine. I love this space because it is so undervalued, but I also have to keep in mind the risks associated with it.
If I were just getting into this area to diversify my holdings I would:
- Determine How much capital you want to allocate to this asset class.
- Determine which way of purchasing the metals makes the most sense for you – if it is buying from a dealer do your homework, if it is an ETF do your homework, and if it is the mining companies- do the same.
- Consider the advantages and disadvantages of each way to buy and hold the metals or miners.
- Consider that it may make sense to hold physical (in your possession), have some in storage and also have some that can be converted to cash efficiently if necessary.
- Review from time to time.
As the world appears to be descending into chaos it appears to me that the central banks not only knew that this was likely to happen but they may have actually planned it. This is just one more reason that they have been buying gold in record amounts for years now.
One of the main reasons I am so sure about how valuable metals are right now is the levels that central banks and major banks are going to, to keep the investing public disinterested in metals while they buy them all up for themselves. WATCH What They DO- Not what they SAY.
If you have any questions about the information in this article, feel free to call me any time.
Any opinions are those of Mike Savage and not necessarily of those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. The information in this report does not purport to be a complete description of securities, markets or developments referred to in this material. The information has been obtained from sources deemed to be reliable but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.
Commodities are generally considered speculative because of the significant potential for investment loss. Commodities are volatile investments and should only be a small part of a diversified portfolio. There may be sharp price fluctuations even during periods when prices are overall rising.
Precious Metals, including gold, are subject to special risks including but not limited to: price may be subject to wide fluctuation, the market is relatively limited, the sources are concentrated in countries that have the potential for instability and the market is unregulated.
Diversification does not ensure gains nor protect against loss. Companies mentioned are being provided for information purposes only and is not a complete description, nor is it a recommendation. Investing involves risk regardless of strategy.