The first question about the precious metals markets always comes up: How do I get started? The second question is what strategies should one use when building up their portfolio of precious metals? And those are very good questions! So, let’s discuss the basics of the gold and silver buying process.
The first thing we need to figure out is how to know what the price of gold and silver is when we want to buy them. This is an easy thing to do. What we are looking for is something called the ‘spot price’.
The spot price is determined on a financial market called COMEX (The Commodity Exchange). This market trades nearly 24/7 around the world and uses electronic trading called the GLOBEX. Thousands of international traders have joined COMEX and used the technology to trade the gold and silver futures markets.
These markets are what precious metals miners, end-product retailers, and other financial entities go to trade gold and silver paper contracts. That trade is what sets the gold and silver prices we see every day. And with that knowledge, you are now ready for the next step: figuring out what type of gold or silver you want to buy!
When you visit an online metals dealer like JM Bullion, you will quickly notice the wide range of products that are on sale. From bars to coins to rounds and specialty products, most online dealers will stock a wide variety of precious metal products to appeal to the wants and needs of their customers. The great news is that enhancements in technology have allowed the industry to provide customized products designed to meet the range of needs of the consumer market.
The first step towards setting up your precious metals portfolio is determining what type of metals you want to buy. Often the first purchase for first-time investors is in bullion, which describes the most common types of products including sovereign coins, rounds, and bars.
Most investors will choose a favorite size of bar or coin, most often beginning with a single-ounce coin. Coins come in many types, some from national mints, such as the Royal Canadian, while others may come from a private mint or even in some very rare cases directly from a silver mining outfit. Given all the options, it is most often that investors purchase their precious metals from online dealers.
From that point, investors who choose to add to their portfolio will often look at multi-ounce products such as bullion bars. Bars often come in 5, 10, 50, 100, or even whopping 1000-ounce sizes. The largest of these is how the industrial market on the COMEX trades, where a single trade is equal to 5 of the 1000-ounce bars!
The other common type of physical precious metals investment is called collectibles, or more officially in the industry, numismatics. A collectible coin is one that has some higher subjective investor value or rarity associated with it that separates it from regular bullion. And they come in two basic varieties which we will discuss next.
Within that space are both semi-numismatics and numismatics. Semi-numismatic refers to coins that have part of their value expressed as the bullion value plus an additional level of value given for quality, rarity, and historical significance.
For example, a proof American Silver Eagle coin is one that has near-perfect quality and has not been circulated in the market. Often, they are shipped in protective cases to help them keep their near-perfect quality.
Another example of semi-numismatics is the pre-1933 gold Double Eagle coin, which is a staple of my own precious metals investment strategy. I love them both for their historical significance, as these coins were once used primarily as money, as well as for their rarity as many of them were turned into the government and melted down into bars for sale to the general market.
Numismatics means ‘of and relating to coins’, as in the study and categorization of coins throughout history. The value of numismatic coins relates mainly to the historical and rarity aspect of coin collecting. While numismatic coins could contain high amounts of metal value, they typically are valued more for their collectible value than for the metal content.
There is a crossover, or grey area, between semi-numismatics and fully numismatic coins. That is the area where the rarity value and the metal value are somewhat equal, enough to make the designation of semi or full numismatic somewhat debatable. In any case, both types of collectible coins are very popular and trade on a robust secondary market consisting of coin shows, auctions, and online sales platforms.
Gold jewelry often makes very popular gift items. Who wouldn’t like a gorgeous, hand-hammered gold bracelet? Jewelry is often revered for its gorgeous appearance and has been the backbone of the Asian gold love trade for many centuries. Says Frank Holmes, CEO and Chief Investment Advisor of US Global Investors:
“The great gold Love Trade appears to be alive and well, despite gold having a down year in 2021. India, the second largest consumer of the yellow metal after China, reported spending a record $55.7 billion on gold imports last year. That’s more than double the amount from 2020 and surpasses the previous record high of $53.9 billion, set in 2011.”
Jewelry is a significant portion of annual gold sales. As we can see from the following chart from the World Gold Council, jewelry sales have been a significant portion of the gold market for a long time. And signs point to the demand for gold jewelry steadily rising as people begin adding more gold to their personal portfolios.
This article is a good first step to learning about all the ways you can invest in gold and silver. While most prefer regular bullion, and that is not a bad choice at all, it is always wise to know the other options for investing in the precious metals market.
As you continue down your journey of owning the metals, it is likely you will begin to expand outside of regular bullion and into other forms of physical ownership. The great news is JM Bullion has the full selection of products you will need to fulfill your plans for physical ownership of the precious metals.