A basic guide on how to invest in Precious metals.

PM's are a bit unusual because they really aren't an investment. An Investment is placing your money in a place where it will create a profit. Although PM's will go up in value and will occasionally give you the opportunity to make money, They tend to profit just enough over the long run to keep up with inflation.

So you may wonder whats so great about that? Several years ago you could buy a gallon of gas in my town for one US dollar. Just a few years later it now takes three US dollars to buy that same gallon of gas. This means that your dollar lost two thirds of its purchasing power. Its like someone stealing two thirds your savings and fudging the numbers so that you didn't notice.

If you had placed your money into gold, you would have seen the value of your gold going up every month. It would now be at least two thirds more valuable and your purchasing power would have been protected. This is the reason people invest in precious metals like gold, silver, platinum, and palladium.


Gold goes from $300 to $750 in 7 Yrs

Anyone can buy PM's no matter what your income. Silver is the least expensive of the metals costing $14.00 an ounce. This means you can buy a real silver eagle coin for under $20 or buy a 1/4 Oz. gold coin for only $200. At these prices, even the poorest of us can invest in a few silver coins every month for less than the cost of a few Starbucks coffees.

But that was a very vague explanation. Lets get more specific.

The first thing you should do is some basic homework. You should locate the trust worthy Internet forums for gold and silver coins. There are many good podcasts, forums, and websites dedicated to teaching the novice collector all about gold and silver. These are great resources full of information on different ways to forecast future prices, as well as how to avoid scams.

You must also locate your local coin shops and inquire about any idiosyncrasy that they may have. When I began collecting I was startled to discover that they didn't accept personal checks, credit cards, or debit cards. Almost all of my local gold dealers ran cash only stores. Many local shops also have electronic, buzz to enter, air lock entryways and these stores adhere to strict dress codes. Refusing to open the door to those not appropriately dressed. which is very reasonable considering that they have hundreds of thousands of dollars in gold on site.

So now you know where to learn, and where to buy it, Now lets talk about what to buy. Metals come in several forms. bullion, bullion coins, and numismatics. Bullion is the cheapest of the metals being very close to the price of the metal because of very little mark up. It tends to be either "bars" or "rounds". Bars can come in any size from 100 Oz. to 1/4 Oz. bars and under. Although cheap and easy to store, bars are a tad harder to sell because most buyers will need them appraised due to some crooked gold that circulated in the 1980's. Not as troublesome as it sounds but it does slow down the selling process. Also some sizes require government forms be filled out during the sales transaction. Uncle Sam will have his taxes.

Bullion can also be rounds. A round is a coin that isn't from a government press. Its kind of like a subway token, video game token, casino chip, or award medal. Its simply gold or silver and has no other value than its weight as the metal. These tend to be one ounce and under. There is no real drawback to these as far as I know.

Bullion coins are most modern gold and silver coins minted by a government. It has the gold/silver value and is actual money as far as the government is concerned. They come in size from 1/10 Oz, up to full 10 Oz coins the size of hockey pucks. There is usually a "price over spot", which is simply the mark up that the store places on the coin because of rarity and popularity. For silver its usually under three dollars per coin. For gold its usually under thirty dollars per coin. (as of Dec.2007) Most coin stores are privately owned and the "price over spot" is usually negotiable.

Manhandling bullion is often acceptable as long as care is taken to prevent unusual damage to it. Bullion is collected for the value of the material and not for its condition. Of course any large gouges or serious damage will cost you in value. Because of this, some basic protection is recommended. Silver and gold rounds are often stored in plastic tubes, similar to coin rolls, for bulk storage. no other special care is really necessary.

Numismatics is the collection and fascination with ancient, rare, or unusual coins. These tend to be expensive and often professionally certified coins. Its value, like a rare oil painting, depends on a variety of factors. Its often a mix of rarity, popularity, and perceived value. These coins are never touched on the faces and only lifted by touching the edge. Most dealers will require you use special cotton gloves and provide you a padded felt mat. These coins are never cleaned for any reason as cleaning drastically destroys the value of the coin. I couldn't begin to cover everything about numismatics here because its a world all on its own. For much more than these basics please consider researching all of these topics on your own.

Chris

{Ive been toying with the Idea of making basic "how to" guides covering useful topics that I feel people should know. From how to cut your bills, to protecting your savings with gold, to preparing a "Bug Out Bag" so you have some basic necessities in case a catastrophe leaves you no time to collect your things.
Let me know by PM if you would like to see more of these types of threads.)


Edited by MCSA TEK (12/01/07 02:56 AM)
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