The Beginner s Guide to. Investing in Precious Metals

Transcription

1 The Beginner s Guide to Investing in Precious Metals

2 Since the beginning of time, gold and silver have been recognized as valuable and a sign of wealth. Even today, precious metals hold a strong place in a savvy investor s portfolio. However, the world of precious metals is often misunderstood, and investing is often difficult to figure out if you don t have any past experience or knowledge. Between figuring out how to make a sizable investment, the constant fluctuations in the market and the pressure to buy more, it s easy to see why people are scared to start investing. Buying and selling precious metals such as gold, silver, platinum and palladium can be profitable and fun. When it comes to investing, there are many different options available to you. Investing in precious metals can be a way to help you plan for your retirement, but you also have the ability to expand your horizons and invest in rare coins. We can t all be seasoned coin collectors and precious metal enthusiasts and that s okay. Everyone has to start somewhere. Luckily, there are a few tips that will help you get the most out of your investments. If you re looking into buying precious metals, whether as an investment or a hobby, you re in the right place! The purpose of this ebook is to help you learn how to get started with investing in precious metals and to explain the different options available to you.

3 What are Precious Metals? The world of precious metals is a lot bigger than most people realize. Precious metals are a classification of metals that are considered to be rare and/or have a high economic value. In the past, precious metals were widely used as currency, but today they are mainly investment commodities. There are many different precious metals, but the four most popular are gold, silver, platinum and palladium. Each of these metals is a recognized commodity that has its own place in the trading market. The demand for precious metals is driven by their practical use as well as their role as investments and a source of value. The wo metals t widely u There a Each of preciou

4 Gold Throughout history, gold has been celebrated as a symbol of wealth and prosperity. It has also been used as currency as a way to prop up the fiat money of various countries. Gold is one of the most popular metals to invest in because it is perceived as a store of long-term value. Additionally, many professional investors view investments in gold as a way to protect against the risks of our financial system.

5 Silver The role of silver as an investment asset has grown over the past several years. Silver has the highest electrical conductivity of any metals and is seen as a high-value metal. Although silver is not as rare as gold, it plays a significant role in the investment market. Silver has played a major role in affecting currencies and has moved in tandem with gold prices, although an ounce of silver is often less expensive than an ounce of gold.

6 Platinum Early on, Europeans realized that platinum was more precious than gold. In fact, King Louis XV of France acknowledged platinum s rarity and declared that it was the only metal fit for a king. Platinum s metallic properties make it a highly attractive metal for both commercial and industrial applications, but its rarity also makes it a valuable investment metal. This has led to wild fluctuations in supply and demand. In turn, platinum s price is quite unpredictable, but this creates a huge opportunity for profit.

7 Palladium Palladium was discovered in 1803 by William Hyde Wollaston and was named after the asteroid Pallas, which was first sighted in Palladium is often overshadowed by other, more popular metals such as gold, silver and platinum despite its importance to the economy. Palladium is widely used in catalytic converters for automobiles, and this accounts for half of the annual production of palladium. It is typically less expensive than gold, silver and palladium, which is one of the biggest reasons it s becoming such a popular investment metal.

8 Why Invest in Precious Metals? Many people have trouble understanding why they should invest in precious metals. Throughout history, precious metals such as gold, silver platinum and palladium have served a number of different purposes from industrial applications to the basis of national currencies. Additionally, precious metals such as gold and silver haven t suffered from the high and low cycle that s prevalent in most other investments. For example, if you invest in the stock market, you know that you can make money one day and lose it all the next. The number one reason to consider investing in precious metals is stability. Precious metals are known to remain stable while other items fluctuate continuously. Additionally, precious metals tend to hold their value better than paper currency. Regardless of economic conditions, people always find value in precious metals. Also, since the supply of many coins like the 2010 U.S. Gold Eagle is fixed, its value will only increase over time as more and more people become interested in it.

9 Five Keys to Investing If you re interested in investing in precious metals, it s important to understand what we call the Five Keys to Investing. These five points will help you better understand how investing works and how to get started. Spot Price If you re new to investing in precious metals, it s important to learn and understand some of the commonly used terms. One of the most common mistakes that beginners make is assuming that the spot price for precious metals is the actual price of the physical metal. The spot price is the current market price at which something is bought or sold for immediate payment and delivery, and spot prices are constantly changing. Two other common terms are ask and bid. Ask price is a coin or bar s selling price, while a bid price is a coin or bar s buyback price. Spread is the difference between the asking and bidding price and helps determine what the price needs to be in order to create an investment gain. Premium The next thing you need to know is, what is the premium on the coin? A premium is a dollar or percentage amount that is added to the spot price to arrive at the product price. Each product has it s own premium, and you can find out this information by asking the person or company you re buying from. When buying coins or bullion, try to avoid big premiums. You want to buy as close to the spot price as possible. The higher the premium, the higher the metal price will have to rise in order for you to make a profit.

10 Five Keys to Investing, Continued... Commission On top of the spot price and premium, you will also pay a commission fee to the dealer. Before finalizing the purchase, make sure you know what commission fees the dealer is charging. This will help you have a better understanding of the price you re paying. Delivery Once you ve committed to purchasing coins, bars or bullion, the next thing you ll need to know is how you ll receive your precious metals. Will you take home your metals that day? If you re buying in-store, will it be shipped to the store? Or will it be shipped to your home? If you re buying online, find out how long it typically takes for a shipment to arrive, and be wary of long shipment times and delays. Don t be afraid to ask these types of questions during the buying process. Doing so will make you a more educated buyer. Buy back When looking at different bullion dealers, one thing most new investors never consider is a dealer s buy back policies and procedures. Bullion dealers are in the business of buying and selling bars, coins and rounds, and most of the time, dealers are happy to buy bullion from you. However, buy back policies vary from dealer to dealer. It s important that you find out a dealer s policy any time you go to make a purchase. Some dealers will buy back your metals, but they may charge a fee. Other dealers may offer to buy back your coins if they re in the same condition as when you bought them. You also may come across a dealer that will only offer you store credit for your buy back.

11 Ways to Invest When it comes to investing in precious metals, the best way to truly invest is to actually purchase and possess the physical metal. Even though this is the best way, it isn t the only way to invest or make a profit on that investment. Investments are often grouped into two categories: physical and paper. Option 1: Physical Investment A physical investment means that you physically own the precious metal in the form of bars, rare coins or rounds. There is no substitute for owning physical precious metals. When you buy and own the metal, you gain all of the benefits of physically owning a valuable commodity, and there s no middleman taking a cut of the value. Here are the most common ways to physically own a precious metal: Numismatic Rare Coins: Numismatic coins, also known as rare coins, are a type of coin that typically has a higher value than the face value of the coin. This is largely due to the historical information about the coin as well as limited mintage, rarity, condition and age. Some examples of rare coins include the 1985 Barber Half Dollar, the 1933 S Liberty Walking Half Dollar and the Stars Liberty Head Large Cent. Bullion Coins: A bullion coin is valued by its weight in a specific precious metal. Unlike numismatic coins, investors who purchase bullion coins are looking for a simple way to own and invest in gold, silver, platinum or palladium. Examples of bullion coins include the Gold American Eagle, the South Africa Krugerrand and the Canadian Maple Leaf. Rounds: Rounds look similar to rare coins, but they have Bars: Bars are an easy way to accumulate more metal for your dollar. Bars often weigh between 1oz to 100oz, although there are larger and smaller bars on the market. no face value and can be minted by both government and private mints. The value is almost entirely derived from the melt value of the round.

12 Ways to Invest, Continued... Option 2: Paper Investment There are a number of third-party methods for buying precious metals. These methods are typically known as paper investments. Here are the three most common methods: Precious Metals Certificates: You can buy precious metals certificates from a number of banks, and the certificate states that you own a specific quantity of a specific metal and that it s held by the bank on your the precious metal never occurs because traders usually cancel out their position before the actual settlement date. Exchange-Traded Funds (ETFs): Exchange-Traded Funds (ETFs) are trusts that hold physical precious metals. You can buy shares in the trust, and the price of those shares is directly tied to the spot price of gold, silver or another precious metal. When you buy shares in an EFT, you don t actually own any physical metal, and you can t exchange your shares for physical delivery of the metal. behalf. Precious Metals Futures Contracts: A Precious Metals Futures Contract is an agreement between two parties for future deliveries of precious metals at a specific price. In this type of investment, sellers of futures contracts agree to deliver the set amount of precious metal on a specific date. In the United States, these contracts are almost always traded on the New York Commodities Exchange (COMEX). Most of the time, actual physical delivery of

13 Getting Started Investing in precious metals is a way to expand your horizons, pick up a new hobby and plan for your financial future with an investment that has stood the test of time. The key to investing is to educate yourself about precious metals to avoid making mistakes when it comes to your investments. Gulfcoast Coin & Jewelry offers seminars about how to get started investing in precious metals, and we re always here to help anyone who needs it. We buy and sell gold, silver, platinum and palladium and have a wide range of bullion and rare coins. Ready to get started? Contact us today!