Wednesday, July 2, 2014

Buying Gold or Silver…and How?

It often seems like investors either love gold and silver or hate them.  I’m constantly seeing articles about how these metals are soon going to “pop” or how they’re about to “drop”.  And in my opinion, silver often gets overshadowed as a metal investment by its bigger brother, gold. 

A recent MSN Money article notes, “Traders often substitute silver for gold because the two have a strong correlation with each other. However, the commodities are very different and should not be used interchangeably despite the seeming correlation.”

So which way do I go in this debate.  Well, I’ll tell you; and I have several reasons to back up my choice.

Gold or silver?
As I’m not a person of means, it’s not easy for me to go and buy a couple ounces of gold.  Meanwhile, I can quickly and easily pop in the local coin shop or buy a few ounces of silver online for around $23 (at current market prices plus markup over spot value) an ounce (at current prices) if the mood hits.  So personally, I’m more a fan of silver than gold. 

I also like that silver is used for a variety of industrial purposes, is often offered in US minted coin form (pre-1965 dimes and quarters as well as certain half dollars and war-time minted nickels) with such coins being easily recognizable to the average person, and it is still widely available in coin form.

Paper or physical
The nice thing about buying metals in paper form through an ETF or mining stock is that there is the option to trade it relatively quickly, which is great for short-term investors.  You can buy on a dip and sell on a rise or buy and hold for a while in hopes of greater returns.  The commission or fees on such trades might be lower as well as compared to dealing in physical metals.

With buying physical gold and silver, it could be a little more difficult as you might have to find a buyer/seller of such items either at a physical location such as a coin or pawn shop or trade show or buy/sell online.  Either way, it can take a bit more time and effort than it does to just hit a few buttons on the computer or call a broker.  And there can be commissions involved on both the purchase and sale of the physical goods, which can take a large chunk of any profits.

Still, as someone with a longer-term outlook, I prefer the physical metals since they provide something of actual value in return for my money, is educational for the kids, and can maintain a collector’s -- or numismatic -- value in addition to the dollar value of the actual metal itself.

Bars are, well…meh
Gold and silver bars might look pretty, but when it comes to the excitement factor, well, they’re just not all that interesting.  There’s really no numismatic value (unless they’re from a Spanish galleon or have some sort of provenance factor attached to them), they typically don’t have interesting images or dates, and unlike coins, they can be bulky, heavier and more difficult to transport.

Therefore, when I look to buy, I tend to go with coins.  Their dates give them a sense of history and a potential story.  Their look gives them come character, and their size makes them easy to transport and share with others or even sell online if or when the time comes.

The author is not a licensed financial, commodities or metals professional.  The information provided in this article is for informational purposes only and does not constitute advice of any kind.  Any action taken by the reader due to the information provided in this article is solely at the reader’s discretion.

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