Have you ever wondered about the choices you face when you decide to invest in precious metals? There are plenty of them, and it’s best to think them through before calling a dealer to make a bullion purchase.
Of course, we’re beginning with the assumption that you have set some capital aside in order to buy physical metals (PMs), not gold-mining stock, silver ETFs (exchange-traded funds), or stock options on mining company shares.
Here’s the rundown on the pros and cons of each of the “Big Four” precious metals. Remember, there’s no law that says you have to purchase only one. Many investors accumulate different combinations of PMs for all sorts of reasons. Anyway, here are the key points to keep in mind when you set out to make your first PM purchase.
Gold, along with silver, are the most popular metals that investors buy. The main advantage of gold is that you can sell it any time you wish. There’s no shortage of buyers. Plus, storage space is not a problem unless you’re very wealthy. Why?
It’s because gold is currently selling for about $1,900 per troy ounce. So, even if you bought $10,000 worth and stashed it all in a safe-deposit box, the entire “pile” would only consist of about five round coins that are each roughly the size of a half-dollar. That’s not much space.
The downside of buying gold is that if you want to liquidate just a portion of your holdings, you’re usually stuck having to sell at least an ounce of it, which is a considerable amount of money.
Yes, you can buy and store half-ounce, quarter-ounce, tenth-ounce, and even twentieth-ounce gold bullion coins and bars. However, when you buy small, incremental pieces, less than an ounce in weight, you pay a much higher premium for them.
Many first-time PM investors prefer silver because you don’t have to “commit” to a large dollar-value purchase. For instance, the current per-ounce price of silver is about $28, with most dealers charging anywhere from a $1 to $5 markup on sales of rounds or bars.
But, the big advantage is that even if you only have $150 to invest, you can still buy five ounces of silver and hide it away somewhere. Safe-deposit boxes are the smartest location for any of the PMs. Storing metal at home is a lose-lose situation. In a fire or flood, you could lose track of your precious assets.
Likewise, thieves are very clever these days. Many of them break into homes where they know metals are stored, use high-powered metal-detectors to locate the location of the stashes, and make off with your hard-earned savings. Lesson: if you own PMs, store them in a bank’s safe-deposit vault.
What’s the downside of silver? Storage space. Say you take the same $10,000 from our above example and, instead of buying gold, you opt for silver. You’d have to stuff 356 ounces into your safe-deposit box. That’s a lot of metal, about 11 pounds worth.
At the very least, you would have to get a larger box, one that can hold that much weight. The volume of that much silver is also considerable, taking up a space of about 8 inches long, 8 inches wide, and 3 inches deep.
P & P
Platinum and palladium are the other two PMs you can buy from most dealers. Right now, platinum is going for about $1,150 per ounce, and palladium for about $2,775 per ounce. Many folks refer to these as exotic metals because they come with a few unique aspects.
You might have trouble finding buyers for your platinum and palladium bullion on occasion. Also, some dealers don’t handle it, so you might have trouble finding someone to purchase it from.