How To Invest in Precious Metals Like a Pro
Knowing how to invest in precious metals can make all the difference in the world. Investors need to evaluate the wide range of options available to them. There are several ways to get exposure to the metals market in your investment portfolio: ETFs, mining stocks, mutual funds, and the physical commodity (bullion).
Owning precious metals can help protect and grow your wealth.
There are also many types of physical precious metal products. Thankfully, jumping into the world of bullion coins and bullion bars isn’t as complicated or challenging as some might think. One of the key takeaways: It can be fun and is often quite rewarding.
It’s possible that once you find your calling in rare metal, you’ll always want to have gold or silver bullion stocked away. Here are just five of the many exciting ways you can buy precious metals:
#1: Stacking Precious Metals
When people think about investing in gold or silver, their minds often turn to the famous cartoon character Scrooge McDuck, a miserly fowl whose pile of gold effectively doubles as a swimming pool. Of course, this is pure fantasy.
Scrooge McDuck swimming in gold coins. Image: Pinterest
People buy gold to make money in the long run. Aside from inheriting a bunch of gold bars from a relative, holding precious metals is always stacked up one troy ounce (oz) at a time.
Gold and silver stackers are pretty common, and their goal? Simply to amass as much gold or silver as they can: Coins, rounds, bars—the format is usually immaterial to them. They just want as much physical metal as they can get, as cheap as they can find it. That means items priced as close as possible to the silver or gold spot price.
Popular precious metal products are often designed to be stacked. This is true of well-known bullion coins like the Gold American Eagle, Gold American Buffalo, Gold Canadian Maple Leaf, and Gold South African Krugerrand. Their raised rims make the coins ideal for stacking.
#2: Collecting Precious Metals
More orderly options for precious metals investing is to buy it in the form of collectible coins, rounds, or bars. Indeed, collecting gold and silver coins is one of the most common ways to build an accumulation of physical precious metals.
There are some extraordinarily popular gold and silver coins out there, including pre-1965 90% dimes and quarters, Morgan and Peace dollars, and pre-1933 United States gold, including Saint-Gaudens double eagles.
Coin collecting is a wonderful pastime.
But rounds and bars are also collectible. There are plenty of people out there who will go the extra mile and pay well above current market gold prices to acquire just the right round or bar. Regardless of economic conditions, the value of these products never falls below their underlying metal content.
#3: Diversifying With Precious Metals
No bullion dealer who values their good reputation will ever advise anyone to spend all their disposable money on precious metals. You want to avoid putting all your eggs in one basket. But that doesn’t mean you shouldn’t have at least a few golden (or silvery) eggs in your financial portfolio of personal wealth.
Diversifying with different precious metals is a strategy used by many investors.
Therefore, many investors will devote a certain amount or certain percentage of their investment funds toward precious metals. The allocation is often 5% to 10%. They include bullion as part of a larger investment strategy that may also entail investments in the stock market, bonds, real estate, exchange-traded funds (ETFs), and other liquid assets.
Diversification can also apply within buying precious metals. It may be a better investment to include platinum and palladium with your silver and gold bullion due to these other metals' industrial uses in catalytic converters. Commodities have proven to be a good investment as the global economy moves to newer technologies. High demand for such industrial applications only grows.
#4: Bagging and Rolling Precious Metals
Not big on stacking, nor do you want to obsess over filling holes in an album? Don’t worry… There’s another way to purchase precious metals that may just float your boat—or serve as its ballast, anyway.
The practice of storing and transporting coins in bags goes back many decades.
Gold and silver coins are often sold by the roll or even the bag. To be sure, a bag of gold bullion coins will set you back some big bucks, but junk silver coinage is commonly sold in bag quantities of $10 face, $100 face, or even $1,000.
And gold? You’re sure to find what you want in rolls of 20 pieces or more. Legal tender silver coins, too. Rolls and bags are great for the precious metals investor who wants to load up on their bullion quickly and efficiently. And when you wish to liquidate, rolls and bags are usually pretty fast sellers, too.
#5: Stocking Away Precious Metals
Hope to retire someday? If so, chances are you have an individual retirement account, an investment vehicle more popularly known as an IRA. Did you know many forms of precious metals qualify for inclusion in an individual retirement account (IRA)? That’s right… These are called precious metals IRAs, and they are a type of self-directed IRA. They can offer you a tax-sheltered alternative to investing in silver, gold, and other bullion.
Now, the rules are basically the same, and there are contribution limits. Plus, you can’t physically hold your bullion at home. The most traditional way to contribute to a precious metals IRA (also commonly called a "Gold IRA") is to keep your precious metals in an approved depository. But it’s a safe and often successful way to build wealth for your retirement. With a precious metals IRA you may just come out further ahead than you ever imagined.
Industry groups such as the World Gold Council and London Bullion Market Association emphasize that physical gold has no counterparty risk. Precious metals provide a financial safe haven for the long term. They are highly liquid and improve the risk profile of your portfolio.
Other Ways to Invest in Gold
As mentioned above, there are several other ways to invest in precious metals aside from physical bullion. You can buy shares of a gold mining company, for instance. In the last decade, gold ETFs have also become a popular way to get exposure to gold as an investment.
All of these alternative investment assets come with their pros and cons compared to physical gold. They avoid the storage fees associated with holding bullion, but come with added transaction costs when liquidating your investment. Nonetheless, based on their past performance, the value of ETF shares and miners have seen steady growth in line with the rise in precious metals prices.
Frequently Asked Questions About Investing in Precious Metals
The process of buying and selling precious metals may seem abstract to most folks. Many have “heard” about investing in gold, silver, platinum and palladium but don’t know much about these investments. Here are some more answers to common inquiries about one of the least understood asset classes.
What causes gold prices to move up or down?
There is no single factor that directly causes a higher price or lower price for gold or any other precious metal. It depends on things such as market conditions (like high or low market volatility), economic uncertainty, the level of interest rates, and the pace of currency devaluation by inflation.
Gold, silver, platinum, and palladium also have high economic value due to their limited supply. Each metal shares these characteristics but has its own sources of investment demand.
For instance, silver benefits from significant demand for industrial purposes. It is widely used for electric vehicles, solar panels, and other technologies. Similarly, platinum and palladium are heavily mined in South Africa and mainly used in the automotive industry. All of these factors impact price movement.
How do I get started investing in precious metals?
If any of the different ways to invest in precious metals sound promising to you, don’t wait. Even if you add just one ounce, get on the ball while bullion prices are good. You can easily buy silver, gold, and other precious metals in-person or online through a bullion dealer.
But don’t just turn anywhere for your gold or silver. Unfortunately, many scammers are either selling fake or stolen goods or charging way more than is fair.
A sampling of the selection of products available for sale at Gainesville Coins.
How do I choose the best place to buy gold, silver, palladium, or platinum bullion from?
Look to trusted, reputable bullion dealers who charge fair market prices for their precious metals, offer an excellent selection of products, and who will stand behind the items they sell. Doing an online search for the best gold and silver dealers is a great start.
Don’t forget to check online reviews. Unpaid customer feedback is where you’re bound to find the information you’re looking for about this bullion dealer or that. And even in the era of Yelp! and Google Reviews, the good ol’ Better Business Bureau (BBB) still means something. Look for bullion dealers who have an A+ BBB rating.
Good service, fair prices, and decent selections are all well and nice, but they don’t mean squat if the dealer is crabby and unwilling to answer your questions. The bullion dealer you choose must be a true professional with expert staff who are knowledgeable in the products they sell. They can educate you on the bullion you want to invest in and help you do your due diligence to make informed buying decisions.
Go with a bullion dealer who has many years of experience, offers the best combination of products and service, and is good for their word. Need a little more advice on finding the best bullion dealer? Don’t forget to see who they keep company with. A dealer affiliated with prestigious organizations such as the National Inflation Association and National Coin & Bullion Association is someone hanging out with the right crowd. It shows their professionalism and integrity are among the best in the industry.
Joshua McMorrow-Hernandez is a journalist, editor, and blogger who has won multiple awards from the Numismatic Literary Guild. He has also authored numerous books, including works profiling the history of the United States Mint and United States coinage.
More information about how to invest in precious metals from the authors at Gainesville Coins:
7 Benefits of Investing in Precious Metals
Beginner's Guide to Investing in Precious Metals
Investing in Gold: What You Need to Know
Investing in Silver: Guide for 2021
Investing in Platinum - Everything You Need to Know
Gold and Silver Futures Contracts 101