Let me start by saying that I am not a professional financial advisor. Nor am I someone who wants to sell you anything, or give "investment" advice. I am a science teacher. I had some experience working on Wall Street in my previous carrier. I have had personal experience trading stocks. I also have had experience saving money in precious metals. Many of the questions that I had when I started buying silver and gold are the same ones that you may be asking as well. You may ask questions like: how and from who, or what kind, or what is the spot price? I am writing this to give a little direction and share some of our experiences in this matter.
The first time I wanted to buy gold
In 2000, I went to a bank and asked the teller if they had gold. Boy did I feel stupid. Guess what? Most banks don’t sell gold. [JWR Adds: A few banks sell American Eagles.] The good news is the teller thought I was joking. So, I went about my business. Then I mentioned to my boss that I was interested in buying gold and, as it turned out, he was a big coin collector. He showed me a couple of his gold coins. I was surprised at how small they were and how much he said they were worth. I did not buy any gold that year. The reason I did not buy gold that year was that I did not know what I was doing. Since then, I have started my own stack and done some homework that I felt I could share with readers on the blog.
The spot price
The spot price is the price you see when you look at the price of a commodity. It is used by commodities traders who buy and sell commodity contracts. As I write this, the spot price for silver is $34.78 per Troy Ounce. The last time that I checked, the spot price for gold was $1712.20. In the same vein, the spot price for 100 bushel of corn is $650.60. You should know what the spot price is before you go out and buy any gold or silver. However, you should not assume that you can go out and buy at the spot price. Nearly all gold and silver bullion, coins or jewelry is sold at a premium to the spot price. The following is an analysis of various types of precious metals that you can buy. This table was compiled by me using various sources of products that I could fine on-line. The prices are the retail price sans any shipping, handling or taxes. The melt value is simply the mass of the item times the spot price. The last column shows the percent of premium that you may pay if you invested in gold or silver using that particular item, on that day, at that price. Keep in mind that these numbers are for comparison only and you may find different prices. The spot price for gold and silver is on the left and it changes daily. I have sorted the "% Premium per ounce" column so you can easily see that jewelry is the most expensive way to buy gold, and bullion bars are the least expensive way.
Example Premiums on Silver and Gold When Purchased in Different Forms Item Weight (Troy Ounce) Melt Value Price $ Premium Per Item $ Premium Per Oz. % Premium Per Oz Gold (@ $1,725 Per Troy Ounce) 14K Necklace 20" 0.1972 $340 $749 $409 $2,073 120% Pre-1933 $2-1/2 0.125 $216 $300 $84 $675 39% Pre-1933 $5 0.242 $417 $490 $73 $300 17% Gold Eagle 1/10 Oz. 0.1 $173 $198 $26 $255 15%
Pre-1933 $10 Indian
0.484 $835 $919 $84 $174 10% Gold Eagle 1/2 Oz. 0.5 $863 $943 $81 $161 9% Gold Eagle 1/4 Oz. 0.25 $431 $471 $40 $159 9% Pre-1933 $20 0.9675 $1,669 $1,782 $113 $117 7% Am. Eagle 1 Oz. 1 $1,725 $1,816 $91 $91 5% 1Oz. Bar 1 $1,725 $1,767 $42 $42 2% Silver (@ $33 Per Troy Ounce) $1 Morgan Dollar 0.788 $26 $33 $7 $9 28%
1 Oz. Silver Eagle
1 $33 $36 $3 $3 9% Pre-1964 Quarter 0.18 $6 $6 Nil Nil 1%
Bullion Bars and Coins
There are may people out there saying "just buy bullion". As you can see from the chart above, bullion carries the lowest premium. Bars especially, have no numismatic or collector value. You are paying for the gold only and maybe a small amount for the fact that it is in a form that is easily recognized and .999 fine gold. There are also bullion coins that are sold for there content of gold or silver. The American Eagle comes in silver and gold. These carry a premium over the bars because they are easily recognizable and they have known purity. This is also true of other coins such as Maple Leafs, which are produced by governments, but are not intended for circulation as currency. Just so you know, if you sell to a dealer, large bullion transactions will trigger an IRS 1099b report. American Eagles and pre-1933 gold coins [normally] do not.
These are the pre-1933 gold coins that my boss showed me back in 2000. I wish I had bought some then. He had a coin he said was worth $500, but it only had $350 worth of gold in it. Today that same coin is worth over $1,800. Most of our silver and gold is in the form of numismatic coins. I do not buy "Key Date" or Mint State numismatic coins. Key date coins are coins that are particularly rare and carry high numismatic premium. The historic value placed on a 1862 New Orleans gold coin is extraordinary. However, the gold value of that coin is the same as any other $20 gold coin of that period. Buying high value numismatic coins is like buying fine art. And, I am afraid that when the SHTF the numismatic value may go out the window. If you avoid key dates, these coins can be a good way to collect gold and silver. They are a known quantity. The $5 Indian head coin always has around ¼ oz of 22k gold. It has been said that if gold is [again] confiscated that the government won’t take away these old numismatic coins, only bullion. That may be the way it happened in the past. However, I make no predictions about what the government will do in the future. I must point out, I find it unlikely that they would confiscate gold today because they simply don’t need it to back the paper currency.