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Buying precious metals on a budget - advice, please?

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MacFall Posted: Tue, Jul 29 2008 8:16 PM

I've been meaning to start buying gold and silver for a long time now, and I haven't done very much of it. I own some neumismatic coins worth a total of about $400, and that's about it. But I really want to start getting some precious metal assets stocked up.

My question is, how does one go about doing that when one has very little disposable income? Seems like buying neumismatic coins is a rip-off, but I don't know of anyone who sells bars or rounds at a very affordable price. I realize there is a premium, but there must be SOME way for a person who is not wealthy to get their hands on this stuff.

Do any of you have any leads to reputable vendors who sell at a relatively low premium? Or if not that, any tips on how to go about getting it by other means? Other, that is, than "reputable". In the legal sense, anyway - I know plenty of people who are not of good legal repute but whom I would certainly trust with my money. But they don't sell gold.

Thanks!

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I have the same question.

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Silver is almost always less expensive than gold. For not much money you could get a few old silver coins. It is a good idea to buy a plasic tube to protect them from the elements and human fingers. Unlike gold, silver can oxidize if it is not protected. Find a (reputable) coin dealer and ask if he sells old silver coins. I also sometimes buy U.S. Silver Eagels and Chinese Pandas. When you get enough silver you can sell it and buy gold if the silver and gold rates make it profitable for you to do so.

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MacFall replied on Tue, Jul 29 2008 9:14 PM

Problem is that all - not nearly all - all of the coin dealers I have found in my area are not selling. They are saving.

If they do sell, it is at a very high price.

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Listen to the Lew Rockwell podcast from last Thursday and Friday.

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MacFall replied on Tue, Jul 29 2008 9:45 PM

liberty student:

Listen to the Lew Rockwell podcast from last Thursday and Friday.


I did, and that's what reminded me to ask about this. As I pointed out, I AM NOT WEALTHY. I don't have the means to go through the venues that Mr. Blumert was discussing.

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MacFall:
I did, and that's what reminded me to ask about this. As I pointed out, I AM NOT WEALTHY. I don't have the means to go through the venues that Mr. Blumert was discussing.

Mr. Blumert talked about transactions small and large through local vendors.

If you watch ebay, you can sometimes get a half decent deal on junk silver.  If you're really motivated and smart, you will barter within your region for all manner of junk (non-coin) silver.  Candlestick holders, flatware, trophies, jewelry etc.

The limit is your imagination, and your imagination is your best asset seeing as how you have capital limits.

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Nitroadict replied on Tue, Jul 29 2008 11:18 PM

liberty student:

MacFall:
I did, and that's what reminded me to ask about this. As I pointed out, I AM NOT WEALTHY. I don't have the means to go through the venues that Mr. Blumert was discussing.

Mr. Blumert talked about transactions small and large through local vendors.

If you watch ebay, you can sometimes get a half decent deal on junk silver.  If you're really motivated and smart, you will barter within your region for all manner of junk (non-coin) silver.  Candlestick holders, flatware, trophies, jewelry etc.

The limit is your imagination, and your imagination is your best asset seeing as how you have capital limits.


There's a gift economy meet-up nearby here (the really really really free market: http://en.wikipedia.org/wiki/Really_really_free_market ); i'd imagine taking advantage of such, while beng on a budjet  & slowly amassing silver, might help. 

I'm not sure how useful it would be though; my work schedule tends to get in the way of their saturday meetings, so I have yet to participate first hand :\.

You might be able to get spare silver that way, though.  Yard sales, while more hit or miss, is also another way, methinks. 

You could always beg relatives for any antique silver  Embarrassed

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ChaseCola replied on Wed, Jul 30 2008 1:05 AM

http://www.bullionvault.com/ is great, they hold your gold in a vault in London, New York, or Zurich it is your choice and you can change it, which is good if governments start stealing gold. They are audited daily and you can trade in grams. Also, It is full reserve banking so they charge 0.12% per annum.

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Juan replied on Wed, Jul 30 2008 2:46 AM
I was about to post a link to that site. Now the question is...can these people really be trusted ?

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Burt Blumert says not to leave your gold in other people's hands.  And Mark Thornton advises that one should be diversified in where it is stored, so if one did trust that company, you could keep your gold in all 3 locations, just in case.

Personally, I think people should focus on

(1) Being debt free

(2) Having some of their liquid assets in metals, for exchange in emergencies

(3) Investing in a variety of goods or assets that hold value, not just metals.  I think someone here recommended buying a case of Rum in the event there is a depression.  I think it is well established that cigarettes are a popular means of exchange in lieu of legal tender.

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Stolz2525 replied on Wed, Jul 30 2008 8:39 AM

MacFall:

Problem is that all - not nearly all - all of the coin dealers I have found in my area are not selling. They are saving.

If they do sell, it is at a very high price.

So why limit yourself to local dealers?  It isn't like you are wanting to transport a pallete of gold or silver somewhere, FedEx should work just fine.  Find someone outside town, buy an ounce of silver to get it checked out without much money invested, then use them for however much you're going to buy.

http://bullion.nwtmint.com/

Those people will deliver to you too, though I've found their shipping charges are a little prohibitive.

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I have recently used American Precious Metals exchange.

www.apmex.com

Here is why I settled there:

1.  Low premium over spot.

2.  Low shipping cost ($24.95 US per shipment, regardless of size (for me so far))

3.  They advertise both their sell and buy price for most forms of bullion.  You can see price above spot and the spread for various forms.

4.  24/7 interface and price locking mechanism, excellent internet interface.  (nice since I am in China.)

5.  Numerous payment forms accepted (but I have always used bank wire).

I would personally like to buy with no record of the purchase, but since I live in China this really isn't an option for me.  Buying from a remote store will also entail shipping, which affects you less and less the larger in value each individual purchase is.  My "stash" so far is mostly the "if it all goes to hell in a handbasket" hyperinflation hedge (for that pesky $74 trillion future obligation hanging out there).  I am drastically reducing my exposure to "cash" in traditional bank accounts, leaving only enough highly liquid "money" for day to day expenses.  I am doing what I can to furl the sails and batten the hatches.

I have mostly chosen bullion forms that I feel will be highly liquid for use as money if the dollar fails us.  For example, the kruggerrand (1 oz of gold) coin is just about as widely known and recognized as a gold coin can be.  I have also purchased generic silver rounds (1 oz silver).  Why?  You can't buy a loaf of bread with a kruggerrand.  But at a value to weight ratio of 45 or 50 to one, if you want to carry or store much value you will need about 50 silver ounces for every gold ounce.  If you are buying as a pure hedge against inflation, and not on a shoestring budget, you might buy in forms that are higher value per piece (5 oz, 10 oz, etc).  But the bigger the chunk, the less liquid it is.  It takes a pretty specialized buyer to purchase a 400 oz gold bar (currently $365,480 on kitco).  You can study the spread per unit value of many forms of bullion on the APMex web site.

I can tell you though, there has been a substantial weakening of gold and silver in the past few days.  Keep an eye on

http://www.kitco.com/charts/livegold.html

http://www.kitcosilver.com/charts.html

Very nice charts and historical data, but their price above spot is substantially higher than apmex, and so is shipping.  Since I seem to be plugging web sites, www.smartmoney.com/marketmap is a good tool for quickly visualizing the stock market.  I also read Jeffery Hoenings' Tradecraft column on smartmoney.com, too.  Most of their free site is a collection of information from other sources.

You might also think about the guns necessary to protect your valuable assets both the criminals that come at night and the criminals that come every April.  Remember, Remember, FDR and the siezure and confiscation of US citizen's gold that happened in 1933 and '34.

The suggestion for other... liquid... stores of value is well taken.  Luxury goods like bottles of Jack kept hundreds of people alive in the hotel in Rwanda.

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My mother was actually thinking of purchasing Krugerrands when she goes to South Africa again - are they a good investment then?

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I will say this in response - I believe the krugerrand to be a well known and therefore highly liquid form of personally held gold.  It also is a coin more designed for circulation, since the coin is 0.916 fine it will handle more abuse than .9999 gold coin.  Note that the actual coin weight is 1.0909 oz, which is how there is 1 oz of gold in the coin.

I will leave the assessment of whether it is a good investment to you.  But if you were asking if it is the sort of thing I buy, if I want a highly liquid form of gold to own, then the answer is yes.

As I mentioned above, you don't have to go to South Africa to get them.  Though it would make for an interesting trip!  You would also have to declare at the US border above a certain amount, or face prosecution and confiscation.  The Feds need to know who has the real money, you might be trying to fund terrorists.

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I'm originally from there (and live in Europe now), so it isn't much of a thing to go there. Thanks for the advice.

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There is some irony in that the enemies of the state are more inclined to use sound money.

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bullfrog replied on Wed, Jul 30 2008 11:26 AM

Buy gold only. Skip silver and the other metals. Silver can be very volatile. And silver, unlike gold, behaves more like a commodity. It is used mainly for industrial purposes. Should the industry or economy slump, so can the price of silver.  Same goes for palladium and platinum. Not that gold can't fluctuate. But it shouldn't be as bad as the other metals.

You can purchase from NWT. They are a large bullion dealer and they have a website. You could also purchase from eBay. Once you accumulate large holdings, I would diversify where I would keep them -  some at home, some at my local bank, and some in a Swiss bank. Also, don't buy mining stocks or futures contracts. Just buy the real thing.

And ss someone has already mentioned, pay off your debts first before investing.

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fsk replied on Wed, Jul 30 2008 12:42 PM

I wrote a post on buying gold and silver.  I haven't personally bought any gold or silver myself, although I did my research.  Some vendors will sell you only a few ounces of silver online, but charge you more per ounce.

At coininfo.com, you may search for coin dealers near you.

The pros of buying online are that prices are cheaper compared to stores.  The con of buying online is that you don't have anonymity.

The pros of buying in a store are that you may pay cash and have anonymity.  However, I don't know what the reporting requirements are.  They keep strengthening them.  According to what I read, only transactions larger than a certain size are reportable, both for buying and selling, with more restrictions on selling.  You'd have to try buying/selling coins in a store and seeing if they ask for ID.

I have my own blog at FSK's Guide to Reality. Let me know if you like it.

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Stolz2525 replied on Wed, Jul 30 2008 1:00 PM

fsk:
According to what I read, only transactions larger than a certain size are reportable, both for buying and selling, with more restrictions on selling. 

This depends of course on the place you buy it too.  The two dealers I have used in town aren't very government friendly if they can avoid it, so I imagine getting around this wouldn't be too hard.  The one I've been going to recently will wave sales tax if you pay in cash, so I'm positive he isn't keeping records anywhere, and he doesn't even know my name.

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Stolz2525 replied on Wed, Jul 30 2008 1:04 PM

bullfrog:
Buy gold only. Skip silver and the other metals. Silver can be very volatile. And silver, unlike gold, behaves more like a commodity. It is used mainly for industrial purposes. Should the industry or economy slump, so can the price of silver.

Do you have any examples of this?  I've been watching both of them for a while now, and they stay pretty much in lock step with each other from what I've seen.  I've bought only silver up to this point because I prefer to go buy a little each time I get a paycheck instead of holding it for a few weeks until I can buy gold with it (I've found it dissapears for other things if I don't go buy the metal right away).  If this is true though, I'll definitely start divesting toward gold.

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fsk replied on Wed, Jul 30 2008 1:08 PM

Stolz2525:

This depends of course on the place you buy it too.  The two dealers I have used in town aren't very government friendly if they can avoid it, so I imagine getting around this wouldn't be too hard.  The one I've been going to recently will wave sales tax if you pay in cash, so I'm positive he isn't keeping records anywhere, and he doesn't even know my name.

Sales tax on bullion coins?  I haven't heard of that one.  I thought that sales tax only applied to nusimatic coins, but I guess the law varies by state.  With sales tax added on to your coin purchase, that's a heavy purchase premium!  In that case, I'd set up an off-the-books gold/silver barter network.

Even though the coin store guy doesn't have your name, at any time the bad guys could say "Install a hidden camera in your shop or we'll violently shut you down.  We want to know who your customers are."  On the other hand, a barter group would have the same risk.

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fsk replied on Wed, Jul 30 2008 1:15 PM

bullfrog:
Buy gold only. Skip silver and the other metals.

Has anyone had a problem with forget metal coins?  There are alloys of cheaper metals that have the same specific gravity as silver.  This makes it easy to forge silver coins and bars.

Gold is harder to forge, but I heard that gold-plated tungsten works.

Is it possible to forge platinum, which is denser than gold?

Has anyone had a problem with this, or are forged coins rare?

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Stolz2525 replied on Wed, Jul 30 2008 1:24 PM

fsk:
Sales tax on bullion coins?  I haven't heard of that one.  I thought that sales tax only applied to nusimatic coins, but I guess the law varies by state. 

Supposed to be on everything here I think.  I tried a couple coin dealers before I found one willing to waive it.

fsk:
With sales tax added on to your coin purchase, that's a heavy purchase premium!

Agreed, that's why I pay cash, as I don't care so much about the anonymity.  Nice thing is for bullion he charges the spot price in the paper so if I notice it's gone up toward the end of one day I'll run in and get some after work.

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fsk replied on Wed, Jul 30 2008 1:31 PM

Stolz2525:
Nice thing is for bullion he charges the spot price in the paper so if I notice it's gone up toward the end of one day I'll run in and get some after work.

When buying, does he charge you spot, or spot plus a % markup?  When selling, what is the discount to spot?  There's always a bid/ask spread.

I have my own blog at FSK's Guide to Reality. Let me know if you like it.

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Stolz2525 replied on Wed, Jul 30 2008 1:32 PM

fsk:
Has anyone had a problem with forget metal coins?  There are alloys of cheaper metals that have the same specific gravity as silver.  This makes it easy to forge silver coins and bars.

I think forged coins (especially of the bullion variety) are very rare.  I can't imagine that silver coins are even worth bothering about unless you are buying 100 or 1000 oz bars.  I would think most of the forging would happen with collector coins and bar bullion.

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Stolz2525 replied on Wed, Jul 30 2008 1:34 PM

fsk:
When buying, does he charge you spot, or spot plus a % markup?  When selling, what is the discount to spot?  There's always a bid/ask spread.

When I'm buying I pay spot.  If I wanted to sell back to him, I think he takes off 5-8%, but I'm not sure.  I've never sold back to him and I don't plan to so I wasn't too worried about it.

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MacFall replied on Wed, Jul 30 2008 5:36 PM

bullfrog:

And ss someone has already mentioned, pay off your debts first before investing.


That's the trick though, isn't it? I owe $14,000 to American Education Services for one year of totally useless education. That's why my disposable income is so slight; I'm trying my damnedest not to let the interest pile up on that.

Unless I manage to get a novel published or encounter some other, similarly unlikely (and for me, completely unprecedented) stroke of good luck, it will take me more than ten years to get out of debt.

For all I know, the dollar won't exist anymore by that time. Hence, this thread.

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MacFall replied on Wed, Jul 30 2008 5:41 PM

Oh, thanks for all the advice everyone. I'm taking notes furiously. :)

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fsk replied on Wed, Jul 30 2008 6:01 PM

MacFall:

bullfrog:

And ss someone has already mentioned, pay off your debts first before investing.


That's the trick though, isn't it? I owe $14,000 to American Education Services for one year of totally useless education. That's why my disposable income is so slight; I'm trying my damnedest not to let the interest pile up on that.

The correct answer actually depends on what rate of return you get on your investments.  Your student loan probably is at an interest rate of 8%.  True inflation is 20%-30%.  If you invest in gold or silver, your expected return is 20%-30%.  Therefore, it's rational for you to make the minimum payment on your loan and invest the difference.

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Yes, metals and commodities generally go up and go down together. What I'm really saying is that the other metals tend to be more speculative and volatile than gold. I can point to 1980, when silver topped out at $50 an ounce, then crashed to $4-5. It stayed in that range for years and still to this day hasn't recovered. Gold hasn't fallen as badly during that time - $850 peak in 1980 and traded around $400 much of the time since.

The vast majority of silver is used for industrial purposes and only a tiny portion for coinage. If industry slumps, I suppose silver would take a big hit. Gold would go down to, but not as badly. Gold has traditionally been the currency standard and the primarly metal that's been held by large banks and government.

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bullfrog:
I can point to 1980, when silver topped out at $50 an ounce, then crashed to $4-5. It stayed in that range for years and still to this day hasn't recovered.

You could point to that, but it wouldn't be very honest of you.  The Hunt Brothers made their run trying to corner the silver market in 1980 and ran up the prices.  This is a once in a lifetime fluke that failed, and could have happened in any commodity just as easily.  As for having not yet recovered, I would think that would be a reason FOR investing in something, not avoiding it.  Part of the reason the silver price hasn't recovered yet is the number of short positions currently taken on it. 

To quote the Mogambo who quotes Theodore Butler...

"it seems that the commodity exchanges routinely allow their little buddies to sell fictitious commodities, like "paper" silver, for example, until we are talking about a short position in silver that is (according to Theodore Butler) "an amount of silver equal to all the known silver bullion in the world.""

 

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