How to Buy Gold and Silver

There are a number of ways to invest in gold and silver; coins, bullion and stocks/shares. Each have their upsides and downsides.


Coins

Pros

  • Easy to take personal possession of.
  • They can be totally private.
  • No account/storage fees.
  • Their quality is guaranteed by the mint. That means they will be readily accepted as payment during a currency crisis and you don't need costly assays to determine their metal content.
  • You own physical metal, not paper contracts that could go up in smoke.
  • They're a convenient, liquid and easily divisble way of spending during a currency crisis.
  • Easily divisible for inheritance purposes and free from government scrutiny and/or tax.
  • Difficult to confiscate.

Cons

  • Costly way to own metal in the form of a high premium over spot rates.
  • Need to be secured/insured privately.
  • More effort required to convert them back to currency, so during non currency crises when they're not legal tender and not widely accepted by the public they are less liquid.
  • Slightly more knowledge required to obtain non-bullion coins (older coins that once contained silver for example) that do in fact contain precious metal and not simply nickel, Cupronickel or zinc.

Bullion

Bullion can take the form of small bars, which in many ways need to be considered like bullion coins with the added advantage that the premium you pay over spot it less, but with the disadvantage that they may need to be assayed before someone will buy them from you. In all other respects the pros and cons for coins apply.

By bullion I really mean buying gold and silver and paying a custodian to store it for you. There are many different ways to go about this and this is explained in more detail here. But roughly....

Pros

  • Low premiums over spot rate mean you get more metal for your paper money.
  • Professionaly secured in a vault and fully insured means you don't need to worry.
  • You own physical metal, not paper contracts that could go up in smoke.
  • Easy buying/selling allows you to keep your money out of paper cash and banks, but available when needed.
  • Some custodians operate digital gold/silver currencies, allowing you to pay other people with gold account in metals rather than cash in much the same way as PayPal accounts operate.

Cons

  • Entrusting your gold with someone else. Confidence in your custodian needs to be established.
  • Storage/Insurance costs.
  • Easier to confiscate. It's happened before in various forms, but is less likely now because so few people actually have any. For a more detailed discussion of this topic in click here.

Stocks/Shares

Pros

  • No annual account fees.
  • Can earn money through dividends.
  • Potential for profits many times greater than holding physical metal.
  • No security or insurance required.
  • Fairly easy to convert back to paper money.

Cons

  • Potential for bigger losses due to falling prices, particularly for short term traders who are over-leveraged. As with any financial instrument or transaction, the greater the possible rewards, the greater the risk.
  • Companies can go bust and your stocks/shares go with it.
  • Entrusting your wealth to the people managing the company rather than the market forces (in isolation) that you determined are blowing in the favour of precious metals.