Basics of Buying Gold & Silver
As a “Precious Metals Dealer” we are seeing a lot of new customers coming in asking the same basic questions about Gold and Silver.
- How does this work?
- Should I buy Gold or Silver?
- Should I buy Coins or Bars?
- What are the reporting requirements?
- Am I buying too late?
- Will the price of Metals go up or down from here?
Well, let’s take these questions one at a time.
How does this work?
All Precious Metals are traded on various “Futures Exchanges” 24 hours a day, across the World, throughout the week, with a breather between Saturday and Sunday. The price action of the Exchanges is reflected in the continual Bid & Ask of Traders which results in “Spot Prices” on a Real Time basis.
As a Dealer, we view a live feed of the action and base all transactions on the current Spot Prices.
The sale prices of all “Precious Metal Products” are determined by adding a “Premium” to the Spot Price. This Premium will differ depending on:
- Metal (Gold, Silver, Platinum and Palladium),
- Product (Bullion Coins, Collectable Coins and Bars),
- Producing Country (US, Canada, Mexico, England, Switzerland, S. Africa, Australia, China, Austria, Panama and Private Mint),
- Size of the Product (Fraction of an oz, 1 oz, 10 oz., 100 oz, Kilo), and
- Quantity (500 Silver Eagles, 40 Gold Eagles).
This may sound confusing, but in just a few minutes we can discuss your options and help you focus in on what makes sense, based upon what you would like to achieve. To help us, please give some thought to your Storage Options, total amount of value you would like to exchange and over what period of time.
Should I buy Gold or Silver?
One consideration, as I mention above, is your Storage Options. Currently the ratio of Silver to Gold is around 50 to 1. In other words, it takes 50 ounces of Silver to buy 1 ounce of Gold. Taken another way, you can easily hold $35,000 worth of Gold (20 1oz. coins) in one hand while an equivalent value in Silver would weight 70 pounds and take up 50 times the space. There are a variety of places to store your precious metals ranging from a small hidden place in your home to bullion depositories across the world. Privacy in holding Metals is recommended.
A second consideration is its relative value based upon supply and demand as well as uses. Gold is a much more rare metal than Silver. The ratio of Silver to Gold in the Earth’s Crust is about 16 to 1. This ratio has been generally reflected in the Historical Price Ratio between Silver and Gold at 20 to 1. As mentioned above, the current ratio is 50 to 1 which may be an opportunity if the ratio resets in the future closer to the Historical Ratio. On the demand side Gold has limited practical uses such as jewelry and electronics while Silver is considered both a Precious Metal as well as an Industrial Metal. The Industrial uses of Silver are significant and the majority of Silver mined is consumed by industry on a yearly basis.
Should I buy Coins or Bars?
This generally depends on personal preference. Most Bars are produced by private mints, and most Coins are produced by Government Mints, however there are exceptions. One ounce Silver Rounds and Barsare private mint products of pure Silver with a wide variety of designs and generally lower premiums. One ounce US Silver Eagle or Canadian Silver Maple Leafcoins are more widely recognized, are in higher demand and therefore command a higher Premium. Larger Bars usually carry the lowest Premiums. There is generally a higher buy back Premium on the Government Minted coins.
What are the reporting requirements?
As is the case for Banks, Dealers are required to report Customer Cash Purchasing Transactions of $10,000 or more. Smaller cash transactions in a short time frame that add up to $10,000 are considered one transaction and are reportable.
Customer Selling Transactions of Precious Metals is reportable when in certain amounts such as:
Reportable Item Fineness Minimum Reportable Amount
Gold Bars .995 Any size bars totaling 1 Kilo (32.15 troy oz.) or more.
Silver Bars .999 Any size bars totaling 1000 troy oz. or more.
Platinum Bars .9995 Any size bars totaling 25 troy oz. or more.
Palladium Bars .9995 Any size bars totaling 100 troy oz. or more.
Gold 1 oz. Maple Leaf as minted 25 1-oz. coins
Gold 1 oz. Krugerrand as minted 25 1 oz. coins
Gold 1 oz. Mex. Onza as minted 25 1-oz. coins
U.S. 90% Silver Coins as minted Any combination of dimes, quarters, or half-dollars totaling
$1,000 face value or more.
US Minted Gold and Silver Eagles are Not Reportable in Any Amount.
Am I buying too late?
“Who knows”. There are millions of investors asking themselves that question on a daily basis and the result is telegraphed in the price action of the Futures Markets across the world.
Will the price of Precious Metals go up or down from here?
“Yes”. Precious Metal Commodities are a very volatile group and are not for the faint of heart. They will rise and fall based upon any number of economic indicators, world events, political elections and of course “Fed Speak”. Like any asset class, it is incumbent on you to have some understanding of what effects its value and why you would want to own it, which will be a topic for a future Blog.
If you are just getting started and are on a limited budget, understand that in Louisiana a Dealer must charge 8% tax on all Precious Metals transactions that are less than $1,000 which may amount to $80 (almost 2.5 ounces of Silver). Any sale over $1,000 is tax free.
On the other hand if you are a seasoned purchaser of Gold and Silver, then you know this is a very competitive market. The Gold Xchange competes head to head with the internet based sellers of Precious Metals.
The Gold Xchange Advantage
Our locations in Lafayette, and Lake Charles are convenient retail locations with easy parking.
- 1812 W PINHOOK RD, STE 202
- 3619 C AMBASSADOR CAFFERY PKWY
- 4510 NELSON RD
In each of our stores, we Buy, Sell and Trade most any precious metal item. Whether it is Jewelry, Bars, Bullion Coins, Numismatic Coins or Sterling Silver Serving Sets we have an established and well earned reputation for Fair Pricing. We also Buy Diamonds, either loose or in settings.
Instead of dealing with an internet based company or a traveling show set up in a motel lobby, come into our stores and we will demonstrate how we evaluate your item and then provide you with a fair quote for your consideration. No pressure, no hype. Take your time and make the right decision.
We base our pricing on the Current Market Price (Spot Price) of each type of Precious Metal using our Live Market Feed. The price of Gold and Silver changes constantly so wouldn’t it make sense to use the current pricing? It’s the way we do business.
Come in and bring your items for a quote. We set the standard for quality service and fair pricing.