What Physical Precious Metals Should I Buy?
What should I buy is a common question among those new to investing in precious metals. The reality is that there is no one size fits all when it comes to buying physical gold, silver or other precious metals. Here we will provide a quick guide, however, to help you decide what products may be best for your needs. Please keep in mind that no investment advice is being given or implied.
What are your goals?
Why are you buying precious metals? Is it simply for the bullion content, collectability or other reasons? Knowing the why can help you buy the most suitable products. For example, someone looking to own physical silver may be best off sticking to the basics such as silver bullion bars and bullion coins or rounds. Someone interested in the collectability of numismatic gold coins, however, would look at entirely different products. Those looking to buy coins for their precious metal content will likely stick with bullion coins, and those looking to buy coins for their scarcity or collectability may buy numismatics. Knowing why you are buying precious metals will help steer you in the right direction.
What is my budget?
Different precious metals products carry differing dealer premiums. As an example, a basic one ounce silver round may carry a premium of less than $1.00 over the spot silver price, while a one ounce Canadian silver maple leaf bullion coin may carry a dealer premium of $2.25 to $5.00 or more over the spot silver price. For those looking to acquire as much gold, silver or other precious metals as possible, sticking with lower premium rounds and bars may help you get more bang for the buck.
Where will I store my metals?
Storage is another important consideration to take into account. If you will be storing your precious metals at home, coins, rounds and small bars may be a good choice. If you are looking to buy larger quantities of precious metals and are thinking of buying larger bars such as the 100 ounce or 400 ounce, you may want to consider a safe deposit box or depository. These can be sources of additional cost, and should be considered when making a purchase.
Is liquidity important to me?
Liquidity refers to the relative ease or difficulty of buying and selling a product. For example, one ounce Canadian silver maple leaf coins are very liquid-one can buy them or sell them to dealers easily. On the other hand, very large bullion bars or numismatic coins may be less liquid-or less easy to buy and sell. If liquidity is important to you, you may want to stick with smaller, more popular bullion products such as bullion coins, rounds and smaller bullion bars. Some examples of these products include:
- One ounce Canadian gold or silver maple leafs
- One ounce American gold or silver eagles
- One ounce silver rounds
- One ounce gold or silver bars
- 10 ounce silver bars
Do I want to diversify my precious metals holdings?
Diversification is usually a good thing, and precious metals holdings are no different. Different precious metals products will have differing premiums attached to them, and may experience periods of relative scarcity. Premiums can and do fluctuate, just like the values of the precious metals themselves. As with other areas of investment, one may want to consider diversifying their precious metals portfolio. For example, one could build a portfolio on the most popular and liquid bullion products and then add some additional larger or more collectable products. One could buy bullion coins issued by different countries or by different mints. One could also buy varying sizes of bullion bars. There are many ways to diversify a precious metals portfolio, and this may be another thing to consider.
Of course there are additional issues to think about. This simple guide, however, should help you lay the groundwork for your precious metals purchases and help you narrow your product search.