For Serious Gold And Silver Investors Only! – Part 2

| February 12, 2014 | 0 Comments

gold-silver-bullionAs you may remember, I’ve been discussing the basics of gold and silver coin investing in recent articles.  Let’s pick up where we left off Friday, where I started discussing gold and silver bullion.

In case you missed that article, both government and private mints produce bullion.   Now, that may seem like an obvious fact.   But understanding who produces different types of bullion before you buy can save you a lot of money- and possibly a lot of heartache.

Now that you know who produces bullion, let’s look at the different types…

First, let’s talk gold and silver bars.  Bars available to the public typically range in size from 1 to 10 ounces for gold, and 1 to 100 ounces for silver.  Since private mints make the vast majority of bars available to the public, bars usually offer the best way to buy gold and silver while keeping transaction costs low.

Now remember, unlike the government-minted products, privately minted bullion does not come with an official guarantee of weight, content, and purity.  As a result, privately minted bullion is typically sold with a relatively small premium from the dealer.

If you’re interested in bars, make sure you shop around.   Different dealers offer various premiums- make sure you don’t pay too much for privately minted bullion.

Now, here’s where it gets tricky….

As far as coins go, various types often confuse first-time buyers.  It’s essential to understand that gold and silver “coins” actually come in two forms- rounds and coins.

The most important thing to remember is that government mints produce coins, while private mints make rounds.

Let me say that again…

Coins are only made by government-run mints.   And as a result, gold and silver coins usually have legal tender status in their respective countries.  In other words, you can exchange an American Silver Eagle with a $1 face value for a pack of gum at your local convenience store.

With that said, you obviously wouldn’t want to do such a thing.  The current market value of the .999 fine silver inside an American Silver Eagle makes it worth at least $20 at today’s prices- well beyond the face value of the coin.

Now stick with me here…

A “round” is typically made by a private mint.

Gold and silver rounds come in all sorts of designs and patterns.  But since they’re not legal tender, and their authenticity not backed by a government, rounds sell at a significantly smaller premium than coins.

In fact, the price you pay for silver rounds should be within $1 of the current market (spot) price of silver.   If you find a dealer is trying to charge you a $5 premium for silver rounds, shop somewhere else!

The takeaway…

When shopping for gold and silver bullion, do plenty of research to make sure you understand what you’re purchasing.   There are literally hundreds of different types of coins, rounds, and bars that can make the decision making process a challenge.

If you find yourself confused and unsure, just remember what your goals are.  If you don’t care about the collectability of coins, stick with bars or rounds.  If you don’t mind paying a bit higher price, go for the security of government minted coins.

Stay tuned for my next article on coin investing where I discuss the scams you absolutely want to stay away from!

Until Next Time,

Justin Bennett

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Category: Precious Metals

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.