Why Purchase Precious Metals?
The Advantage of Physical Assets
Precious metals have long been treasured both for their beauty and rarity. As a result, these metals have been used by many civilizations as a store of wealth, and in some cases, a foundation for currency.
Historically speaking, these stores of wealth have not experienced the kind of boom and bust cycles present in other forms of investment. This observed stability exists for several reasons. First, precious metals such as modern bullion have intrinsic value. The fact that precious metals consist of something that actually has value makes them more stable than fiat currency which is made of near-worthless paper.
In addition, these metals in many cases have practical applications. Modern industrial processes make use of metals such as gold and platinum for their unparalleled conductivity and use in manufacturing electronics. Moreover, in the case of economic turbulence, when investors do seek investments other than those vulnerable to market fluctuations, they wisely turn to the stability of precious metals. This increased demand has the effect of increasing their values, making them an even better investment.
Finally, when precious metals are minted as collectable coins such as the popular Gold Eagle or Gold Buffalo, they are sought after not only for their intrinsic value, but for their rarity as a collectable item. Again, because there is a fixed supply of any one coin, increased demand for such an asset increases its value. It is for these reasons that for hundreds of years, gold and silver coins have enjoyed a remarkable history of defining purchasing power and backing international finance. For more on this subject, see our article addressing the superiority of precious metals.
Technology and Precious Metals
The influence of the Internet on the trade of precious metals has been vast. It is no longer necessary for collectors to buy and sell coins only locally. The Internet has several venues through which to vend or purchase these assets to buyers or sellers around the world.
It is easier now than it has ever been to learn how to trade precious metals. There are numerous resources available on the web for anyone needing to keep on top of the market, or simply wanting to learn more about the practice.
Grading services authenticate coins and rate them based upon how closely they resemble a freshly minted coin, making it easier to certify that the coins being traded are in fact investment grade. The presence of these services online gives buyers easier access to information, allowing them to make better-informed decisions.
Electronic registry services which permit investors to register their collections online and compete against others in building the highest graded, most valuable sets have also recently appeared on the Internet.
Discovering Your Options
There are many ways to accumulate precious metals. When considering the acquisition of physical precious metals however, one is able to choose from the purchase of either modern bullion or numismatic coins. The single most important step in purchasing precious metals is learning first what the relative advantages and disadvantages to each type are. Besides that, your purchase should suit your preferences and interests. Accumulating coins should be interesting and fun. Coins are, after all, works of art expressed in precious metal!
The larger of the two markets for physical precious metals is that of modern bullion. The market has flourished since December 31, 1974, when under the Gold Statement of Policy, Americans were once again permitted to buy and sell bullion. Non-circulating modern bullion coins have been produced each year since 1986, and the US Mint has recently been very active in promoting these coins through television and radio advertisements.
If considering bullion bars such as the PAMP Suisse 1 oz. Gold Bar or the Made in the USA 10 Troy oz. Fine Silver Bar, there are a few things to keep in mind. Generally speaking, the price of a modern bullion bar is dictated primarily by the spot price of its respective metal, and not a numismatic value. In addition, the bar, if issued by a minting authority, is likely to be guaranteed as to its quality and composition. These two facts greatly simplify the evaluation process whether you’re looking to buy or sell the asset. For this reason, modern bullion bars enjoy great liquidity on the market. If your eventual goal is to sell your precious metal purchase, and you’re not concerned with the asset earning collectible status, it may be prove wisest to go with a bullion bar.
If modern coins better suit your tastes however, slightly different conditions apply. While most modern coins minted by a government authority are certified as to their quality and composition, and are therefore relatively easy for which to establish some base price, there is the added potential benefit of numismatic value. Each minting of a particular coin is done in some fixed supply. This supply can never be expanded, which means that in the event of an increased demand for a particular issue, the numismatic value of the coin will increase, in some cases over and above the intrinsic value of the coin. The flip side to this is that some precious metals investors will be particular as to which coin they would like to buy. This can decrease marginally the liquidity of your investment. Some of the more popular modern issues include the Gold Buffalo, Gold Eagle, Silver Eagle and the new Presidential Dollar.
Lastly, there are purely numismatic coins such as those minted before 1933. While these assets usually contain a high level of precious metals, they are valued primarily for their numismatic value. It is for this reason that when purchasing such a coin, one will pay far above the intrinsic value of the coin, and when selling it, can expect to collect much more than the intrinsic value of the coin. As should be expected, the market for such investments is smaller than that of the precious metals market on the whole. Depending on market conditions, it may be difficult to find either a buyer for such a coin; if you do however, you can expect to make great returns on your initial investment.
Determining How Much to Buy
The question of how much precious metal to buy boils down to one question: for which reason are you purchasing them? If coin collecting is a hobby of yours, and you enjoy spending the time it takes to learn the intricacies of the numismatic market, it may behoove you to purchase as much bullion as you can afford. You are certainly in the best position to evaluate how much of your time and money is worth investing in this market. If on the other hand, you are purchasing precious metals for the express purpose of investment, there are several factors you ought to take into consideration. Ultimately, how much of your portfolio you decide to dedicate to bullion should be determined by several price levels.
Price of Precious Metals
Perhaps the ultimate indicator dictating how much of any one metal to purchase is its price. How much of the metal can you actually afford? But being able to buy a quantity of an asset is no reason you should. Identifying trends within the price level of the commodity in which you are interested may be helpful in determining whether you want to buy or not. If you expect, based on the trend you have noticed, that the price of the particular metal will rise after you purchase and before you sell, you’ll likely want to purchase as much as you can. To help you stay on top of the spot price of popular precious metals, we have included a ticker on the front page of our website.
Price of the Dollar
Gold, and to a lesser extent other precious metals, has often been referred to as “the anti-dollar.” Rather than being some ominous suggestion as to the role of these assets in times of economic turmoil, the term outlines quite simply the relationship precious metals have with the U.S. dollar.
In general, the price of these assets is observed to make moves of proportional magnitude in an inverse direction. That is, if the value of the dollar against other trade-weighted currencies falls, one can expect the value of precious metals to rise, and vice versa. This is thought to be the result of a multitude of investors enjoying the comparative liquidity and robustness of dollar-denominated assets during times of a strong dollar, but taking refuge in the comparative safety of precious metals during times of a weak dollar.
The simple principle of supply and demand is at work here, stating that as more investors move to a particular asset, demand for the other will fall, and so will its price. Determining, based on trends in the value of the Dollar, how much of a particular asset to buy can be tricky. Experiment with smaller fractions of your portfolio until you’re confident you have a handle on common price-altering mechanisms.
Price of Other Commodities
Precious metals are certainly not the only popular commodity into which one can invest his money. There exists a myriad of options open to potential investors including oil, cereals, softs, and of course, financials. Keeping on top of price levels within these individual markets insofar as they divert attention from precious metals is generally advisable when looking to invest. In much the same way as dollar-denominated assets can absorb potential investment funds, so too can other commodities.
A Word About Quality
Regardless of which form of modern bullion you decided to purchase, quality ought to be of concern. Coins, even those of the same grade, often show significant variation in eye appeal. This is true because some characteristics of a coin, such as light copper spots or reduced luster, do not necessarily affect a coin's grade. For example, if a selection of Double Eagles having the same grade were placed on a table for your examination, you would certainly notice many for their exceptional color, luster, and condition. You might also notice that while some share the same grade they appear slightly duller to your eye or have small black spots in their prime focal areas. You might conclude, quite correctly, that the exceptional coins are on the "strong side of the grade" and those less attractive to you are "below average for grade." Determining the quality of a potential purchase is an imperative step in deciding how much to purchase. Not only will this affect the purchase price of your investment, but it will almost certainly affect its re-sale value as well.
How to Purchase Precious Metals
After deciding first to purchase precious metals, and which type to buy, and in what quantity, one is faced with the very real problem of where to do it. There are obviously a number of venues through which to make the purchase, including banks, mints, and local coin shops. The fact of the matter is, however, that none of these sources are able to offer in individual the information, selection, or competitive pricing structure of an online precious metals broker. As there are a number of online brokers, it may be difficult to decide on one.
Why Choose Gainesville Coins Inc.?
Our experience, pricing, quality and service are second to none.
Gainesville Coins Inc. is a large online coin dealer. We are well-known throughout the coin industry for employing exceptional talent, offering world-class service, providing customers with a widest selection of high quality precious metals.
Our customers range from the part-time collector/hobbyist, to commercial businesses and individuals of high net worth who know we provide excellence at narrow premiums. Our financial strength and extensive dealer network allow us nearly unlimited capacity to meet our customers’ needs. Whether for the purchase of an individual Silver Eagle or a multi-million dollar acquisition of the finest bullion, Gainesville Coins Inc. is here to assist you from start to finish.
More About Us & References
Gainesville Coins Inc. sells primarily via telephone and internet transactions. As a result, our customer base is spread throughout the globe. Despite their geographical differences, each Gainesville Coins Inc. customer knows we strive to provide them with the finest bullion available at the best possible price delivered with exceptional customer service. We maintain an A+ rating with the Better Business Bureau and are the only perfect 5 star rated dealer by the National Inflation Association.
Gainesville Coins Inc. is a proud member/dealer of the following:
- Certified Coin Exchange
- Independent Coin Grading Company
Orders are shipped fully insured by the United States Postal Service and UPS.
Remember, your Gainesville Coin trader will always explain any aspect of a transaction to your complete satisfaction. Coin details, pricing methods, purchase suggestions, delivery options and storage methods are all welcome topics for discussion.
Please visit us at www.gainesvillecoins.com or give our traders a call at (813) 482-9300. The Gainesville Coins Inc. team is standing by to assist you in any way possible.