Investing For The Long Term
People often choose gold bullion as a long term investment, given the steady rise in value over the years. Silver generally follows gold in terms of relative values, and in the past decade, gold has demonstrated a steady overall annual profit. They can also be traded in the short and medium term too, given an understanding of how gold and silver prices move in the markets e.g. such as calculating the gold silver ratio.
Of course when starting out with small amounts to invest, entry price is often a primary consideration for those who are new to investing in bullion. For this reason, many start by purchasing silver coins. Silver prices are significantly lower than gold, of course, which makes buying a few at a time more affordable. In time, however, many silver coin buyers graduate to buying gold bullion.
Collecting Gold Coins As An Investment
Before making any investments, you should consult with your investment advisor. If you have already , here is some sound advice before you make any investment in gold coins. Remember, in times of high economic volatility, the price of gold tends to rise. When the economy is strong and stable, the price of gold tends to fall. Avoid purchasing gold for investment purposes when the price has risen rapidly over a short period of time.
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Buyer Beware: The Truth About Modern Graded Bullion Coins As Investments
Investors are losing thousands of dollars on graded bullion coins. Dont make the same mistake!
For years now, investors have been misled by the promise of financial returns on modern, graded bullion coins. Dealers present recently minted, high-grade American Eagles and Buffalos as rare and charge as much as 10 times what these bullion coins are worth. While a 2017 MS70 1 oz. Gold American Eagle coin may be in perfect condition, in most cases, it isnt especially rare or valuable. If you pay a high premium for this coin, you wont get your money back when you go to sell.
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Physical Silver Is A Hard Asset
Of all the investments you own, how many can you hold in your hand?
In a world of paper profits, digital trading, and currency creation, physical silver stands in contrast as one of few assets that you can carry in your pocket anywhere you go, even another country. And it can be as private and confidential as you want. Physical silver is also a tangible hedge against all forms of hacking and cybercrime. Theres no erasing a silver Eagle coin, for example, but that can certainly happen to a digital asset:
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Coins Command A Higher Premium
Coins have a higher premium, partly because more labor goes into producing them, and partly because they might have intrinsic value based on design and age. Popular bullion coins with consistent premiums include the 1-ounce Silver American Eagle from the U.S. Mint and the 1-ounce Canadian Maple Leaf from the Royal Canadian Mint.
Problems With Storing More Than A Small Number Of Coins At Home
For a small number of coins, of limited value, often the most convenient and confidential storage solution is at home, in an insurance rated safe. This definitely works best when you do not need to itemise your gold coins nor extend your household insurance.
This will require that both:-
- Your coins do not cause your safes valuables to exceed your safes rating
- Your coins do not cause your high value, or high risk items to exceed your household insurances limit for these.
If these conditions are met, and no other terms in your insurance contract are breached, then keeping a small number of gold coins at home is a reasonably safe and economic storage solution.
When the above conditions are not met home storage becomes difficult.
If your safes rating is exceeded it is likely your insurance of its entire contents will be voided. Our advice is never to exceed your safes rating.
If you have to elevate your household cover to include a larger high value items figure it is likely the insurance company will both raise your premium and place a string of onerous responsibilities on you. This will include:-
- installing a regularly serviced and permanently monitored intruder alarm
- maintaining and undertaking to use every night high specification key-operated locks on all windows and doors, and
- ensuring windows are never left open in unoccupied rooms.
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What’s The Best Way To Invest In Silver
There are two main ways to expose yourself to silver: directly and indirectly .
Investors can buy physical silver in the form of bullion coins, bars, or junk silver bags. This is the purest form of silver investment, but it does incur storage-related problems and expenses.
Less pretty, but more pragmatic, is to invest in financial instruments that represent silver. For individual investors, these best indirect options include:
- Silver stocks: companies involved in the mining or processing of silver or in re-selling it . Camerana notes that there are very few “pure silver plays,” as he terms it, because “silver is often extracted from or mined together with other metals such as copper.”
- Mutual funds or exchange-traded funds that hold silver portfolios. Some invest in physical silver, others in silver companies.
- Exchange-traded commodities , publicly traded securities that invest in silver bullion like the funds. However, they differ from that in that they’re debt instruments the underlying commodity they track silver in this case serves as collateral.
Allocated Or Unallocated Metals
There are many important implications in the difference between allocated and unallocated precious metals. Allocated precious metals provide the highest degree of investor safety. They are segregated, unencumbered and provide the holder ownership title. Allocated precious metals cannot be lent or leased to third parties. In contrast, unallocated precious metals begin to introduce counterparty risk, as ownership title is not secured by the holder. In certain situations, it becomes possible for gold investment vehicles to grant investor claims exceeding the total amount of underlying metal, if that metal is unallocated. In the event of issuer insolvency or bankruptcy, investors can become unsecured creditors.
Only consider investing in precious metals which are fully allocated, providing the security that the metals are not encumbered in any way and ownership claims do not exceed the value of the underlying metal.
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What Are Junk Silver Coins
The term junk silver can be confusing to a lot of people. There are a couple of key things that will put a coin in this category, though sometimes the definition can be a little fuzzy depending on whos classifying the coins.
The first thing you should know is that the term junk doesnt mean the coins are worthless! Rather, these are coins that arent worth much more than their inherent silver value.
All quarters, dimes, half dollars, and dollars minted before 1965 were silver. Many of these older coins are worth a lot to collectors today, such as a rare silver dollar sold this year. These are known as numismatic coins, which means they have value because of their year, condition, design, and other features, in addition to their silver value.
A junk silver coin is still silver, but it doesnt really have any additional value. Theyre often relatively newer and in poor condition, making them not very valuable to coin collectors. However, because theyre so easy to identify and have set amounts of silver in them, theyre great coins for investments!
Why You Might Get A Poor Price When You Sell Gold Coins
There is a good time to sell gold coins, but very few people ever manage to benefit from it.
It is when there is a mad rush to buy gold coins by the investing public.
At such times dealers get short of stock and sellers who are brave enough to sell into the gold price strength of a panic may well actually get a premium over the published gold price.
Those that do sell will be exceptionally brave and skilful investors. They will judge that the fears of crisis are unjustifiable, and sell to take advantage of the high price available just as gold ownership looks to be the wisest thing they ever did. By definition they will be in the tiny minority. And of course they will live to bitterly regret their decision to sell if the feared crisis deepens.
What is far more likely is that the seller of coins acts at the same time as many others. And then the coin prices drop to a discount to the world market bullion price because the dealers become overstocked.
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Research Before Regret: Paying Premiums For Rare Modern Coins
At Scottsdale Bullion & Coin, we are faced with breaking this news to clients far too often. They have paid premiums as high as 10 times what the actual coin is worth because a dealer misled them about the coins rarity and value. When they went to sell the coin, coin companies, and often even the very dealer who sold them the coin, will only pay the spot price. This is when they discover the unfortunate truth about modern, graded bullion coins: theyre bad investments!
Coin dealers have different tactics for misrepresenting these coins. Dealers often use autographs from prominent figures, such as former U.S. Mint directors, to exaggerate the value of coins. In rare cases has this ever been true. Its a great way to hype something that on its own is not scarce to begin with. Its really another way for companies to lead potential customers down the primrose path.
How To Buy Gold In 2021
For thousands of years humans have coveted gold and todays investors are no exception. Whether you plan to buy the metal in the form of coins, bars or gold-backed securities, there are plenty of reasons to add it to your portfolio.
Gold is considered a safe haven asset because when prices for other investments, like stocks or real estate, drop sharply, gold doesnt lose its value it may even gain value as scared investors rush to buy it.
Whats more, some experts also see gold as the ultimate way to protect your savings against rising prices since its held value for hundreds of years.
But when does it really make sense to invest in gold? And whats the best method? Heres everything you need to know about how to buy gold in 2021.
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History Of Gold Investing
A brief history of golds role in the economy will give some context to gold investment. Both gold and silver have held a place in the economy for almost as long as commercial activity has existed. Precious metals were a very obvious choice for primitive forms of money. They were used for making jewelry and the fact that supply was limited, meant their value remained in equilibrium. Precious metals were also convenient to use as money as they were easier to transport than any other items of value.
Gold and silver remained the primary form of money until well into the 19th century. In fact, the US Dollar was originally a one-ounce silver coin. The first forms of paper money in Western economies were receipts for gold or silver that was held in a vault. Until the 1870s a bimetallic standard was used in the US, meaning that both gold and silver could be used as money. In 1873 silver was removed from the standard as it was believed too many people had access to unminted silver, which posed a risk to the monetary system. This resulted in the era of the gold standard.
Invest In Silver Etfs Etns Or Mutual Funds
You can invest in silver funds through your bank or investment broker. There are many exchange-traded funds , exchange-traded notes , and mutual funds that own silver and whose prices are directly correlated to silver’s price. Purchasing a fund that owns silver can be convenient if you dont want to own physical pieces. It may also be more liquid with the ability to sell your shares back to the open market.
Precious metal ETFs may be taxed as collectibles and subject to higher capital gains tax.
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Gold And Silver Volatility
Before investing in anything, its critical to consider the risks. All precious metals have some volatility, and many can be more volatile than paper assets. Precious metal values are dependent on the market conditions at any given time, and those conditions change 24 hours a day, seven days a week. However, because of the specific conditions that affect the price of gold and silver, they may help reduce the volatility of your diversified portfolio.
All investments have risk, but risk isnt simple to calculate.
Various factors cause the value of gold to change. For example, if a new mine opens up, that might slightly increase golds availability, driving the supply up incrementally and reducing its value by a small amount. However, theres so much gold on the market that supply changes are less important than market sentiment. Economic instability and the activities of central banks often have a larger effect on gold prices.
Silver is more volatile than gold because it plays a much larger role in industrial operations. Basically, silver is far more important to consumer goods than gold is, which adds another factor to its market value.
Gold Is A Better Hedge Than Silver
Since silver is an industrial metal, it’s more vulnerable to recession and pressures affecting manufacturing companies. Such factors can affect gold, which also has its industrial uses, but overall, gold is more driven by investor sentiment. So gold acts as a better, purer hedge against the economy and stock market.
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World Demand Is Growing
Despite the effect of the global pandemic, global demand for silver is growing. Virtually all major government mints have seen record levels of sales, with most already operating at peak production.
Surging demand is nowhere more evident than China. This behemoth market has a long history of cultural affinity toward precious metals. And with its population growing , its tremendous appetite will continue.
This kind of demand doesnt happen in a vacuum. Sooner or later there will be consequences when surging demand meets crimped supplyand those consequences are all positive if you own the metal.
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Is Investing In Silver Better Than Gold
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Price Of Silver Versus Gold
The most critical factor that diverts the attention of the investors to invest in silver is its low price compared to gold, but gold has less price per ounce. One ounce of gold ranges from hundreds of dollars, but silver does not even reach 100$. One more exciting thing to note is that gold is available in bulk than silver, but its value remains very high.
Gold As A Hedge Against The Dollar
The idea that gold preserves wealth is even more important in an economic environment where investors are faced with a declining U.S. dollar and rising inflation. Historically, gold has served as a hedge against both of these scenarios. With rising inflation, gold typically appreciates. When investors realize that their money is losing value, they will start positioning their investments in a hard asset that has traditionally maintained its value. The 1970s present a prime example of rising gold prices in the midst of rising inflation.
The reason gold benefits from a declining U.S. dollar is because gold is priced in U.S. dollars globally. There are two reasons for this relationship. First, investors who are looking at buying gold must sell their U.S. dollars to make this transaction. This ultimately drives the U.S. dollar lower as global investors seek to diversify out of the dollar. The second reason has to do with the fact that a weakening dollar makes gold cheaper for investors who hold other currencies. This results in greater demand from investors who hold currencies that have appreciated relative to the U.S. dollar.
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