People are increasingly citing gold as the best long-term investment for their portfolios. Recent polls show that those who consider gold the #1 long-term investment have risen by 11% between 2022 and 2023. Today, 26% of investors name gold as their go-to.
Silver’s doing pretty well, too. Silver and gold buyers love it because of its low upfront cost and high intrinsic value.
If you’re looking to take the leap and invest in precious metals, there are some things you should know first. Read on to learn some important tips and tricks to consider before investing.
Understand the Market
Before buying precious metals, it’s important to understand the concept of a tangible investment.
Some investments, like stocks and bonds, aren’t things that you can see and touch. They exist as concepts, and their worth is dependent on the value assigned to them. This means that they can lose value as quickly as they got it, making them high-risk purchases.
Tangible investments are lower risk because their value is inherent. Real estate, jewelry, and precious metals like gold and silver all have intrinsic value because of what they are. People can use gold or silver to make beautiful jewelry, build industrial machinery, or trade for desirable items.
This value will never go away, making precious metals a great low-risk hedge to diversify any portfolio.
The prices of both gold and silver fluctuate regularly based on factors including:
- Short-term supply and demand
- Market conditions around the globe
- The costs of precious metal mining
- Geopolitical events that impact imports
On a macroeconomic level, the price of gold has consistently been increasing since the 1980s. While there are obvious fluctuations in short-term costs, gold that you purchased 10 years ago will sell for significantly more now.
Many people consider silver an even better investment than gold. It costs less upfront because it’s a less traditional investment, but it has more common uses in several industries. There’s a lot of demand for silver since it’s used in building industrial machinery, architectural structures, and consumer goods.
There are dips and peaks in every market, but the short-term volatility of precious metals is something you can use to your advantage. Buy gold or silver when the market value is low and hold onto it until the market reaches a high again. You can sell it at a profit this way.
It’s important to know your budget whenever diversifying your portfolio. Paying too high an upfront price means that you won’t have enough money to diversify further. You won’t see any payoff until you sell your precious metals down the line, and you’ll make more when you wait longer for the market value to increase.
Silver costs less than gold. It’s also getting increasingly rarer than gold, so the investment is likely to pay off in the long term. Plus, it has more practical uses, which means higher demand.
On average, gold has a higher upfront cost. However, it historically also sells for more money. If you want to play it safe, gold is a great choice.
It’s important that you understand spot prices vs premiums when buying precious metals.
Gold and silver’s spot price decides the value of raw metals. You can purchase raw ore for the spot price. Just make sure that you research these prices and determine whether it’s worthwhile for your specific needs.
In many cases, though, refineries buy precious metals as raw ore from mining companies. They refine it into the form in which you will likely purchase it.
This process is challenging and takes a long time. This also makes it costly.
The spot price is also known as the “market price.” It’s going to be fairly low, but this often isn’t what an investor will pay. When you buy silver or gold, the premium is often what you should look at.
In the simplest of terms, a “premium” is the amount that a precious metal asset increases in value after going to the refinery.
Let’s say that the spot price for a one-ounce silver bar is $20. When given to a refinery, they might purify it and increase its value by $6.
This $6 is the premium. You’ll find the gold or silver bullion, coin, or bar on the market for $26. Basically, to calculate the premium of a metal investment, just subtract the spot price from the end product.
The premium is basically the price you pay for buying the product in a more convenient form. While the spot price is lower, you’d need to personally refine it to maximize its value.
Know Different Types of Precious Metal Purchases
One of the most important tips for silver and gold buyers is “know your options.” This is because precious metals come in many forms. Each has its advantages, so you should know what you want to purchase.
Coins are one of the most popular forms in which people buy metal. They tend to have the highest value of all investment types because they have a denomination and currency face value in some economies. Their designs are all unique because they belong to a country’s economic system, so they’re ideal for collectors and those selling to them.
Rounds are shaped like coins, but they don’t have any face value as currency. Their worth comes exclusively from their gold or silver content. They usually have lower premium rates than coins, but they’re worth less.
Coins are ideal for investors looking to display assets and sell them for a high price. However, rounds are a great alternative for new investors who want to pay lower upfront fees.
Silver and gold bullion bars are yet another investment option. They’re formed into a rectangular shape that makes them easier to store. They’re also great for bulk purchases because of their low premiums, so you can buy and store them easily in high quantities.
Consider Buying Junk Coins
As a precious metal investor, buying junk coins is one of the best options available to you. This is true whether you’re a seasoned investor diversifying your portfolio or a new one getting your foot in the door.
“Junk coins” are not junk. They’re a misnomer. They’re called this because they don’t have collectible value despite having the intrinsic value of the metals that make them up.
This makes them similar to rounds or bullion bars! However, they’re generally sold at an even lower price than these alternatives.
Junk coins all have different gold or silver content. Most are 90% made up of the precious metal. Some, however, can only be 35-40% gold or silver.
The rest will be made up of copper and other low-worth metals. Knowing the content upfront will let you know how much of a profit you can sell them for later. It will also let you purchase them at a fair price.
Reputable distributors like CMI will let you know the contents of junk coins right off the bat. You’ll know exactly what you’re purchasing.
Junk coins are easy to buy, store, and sell. This makes it a popular option for those considering home storage of precious metals. It’s also great for people who don’t want to buy large lock boxes at banks.
Unlike bars and rounds, junk coins do have value as legal US tender. If the intrinsic value falls over time, they still have face value. You can spend them at stores or deposit them into the bank.
Scams are a big problem in the world of precious metal investment, and avoiding them is one of the single most important tips for investors. You need to know what you’re buying to ensure that you don’t get ripped off.
The best way to avoid scams is to buy metals from a reputable source like CMI. Do a background check online before buying anything by assessing reviews and product quality. Don’t just buy from some random Joe on eBay or a weird-looking independent website.
Check out the price of any gold or silver piece before buying it. The price should reasonably match the current market value. If something seems like a “steal” or is too good to be true, then it’s probably a scam.
Once you get an online order, buy a test kit and test the metals at home. You can also take it to a jeweler and ask for a free test. This will confirm that the purchase is authentic so that you know you can safely and confidently buy from that retailer again.
Beyond Tips for Silver and Gold Buyers
While silver and gold buyers always make a great investment with intrinsic value, it’s important to know some tips and tricks for buying precious metals the right way. Now that you know how to maximize your investment’s worth, it’s time to begin comparing prices and shopping for coins, bars, rounds, and more.
CMI Gold and Silver is committed to offering dozens of options for both new and seasoned investors. We track market trends and display prices online so you’ll know exactly what you’re purchasing. Contact us with any remaining questions you have about making a smart investment.