How to Invest in Precious Metals: 5 Ways to Buy Gold and Buy Silver
There are very few assets that have thousands of years of history. Precious metals, like gold and silver, have been stores of value and tangible wealth for civilizations around the globe. In today’s world, with an increasing amount of uncertainty and volatility in asset prices, investors are increasingly seeking assets with a long-standing and proven track record.
Unfortunately, learning how to invest in gold and invest in silver can be difficult. There are several ways, each with their own pros and cons. The following outlines five ways to buy gold and buy silver.
One way to buy gold and buy silver is to purchase bullion coins, bullion bars and bullion rounds. To do this, you will need to find gold and silver products to buy, find a reputable bullion dealer, and purchase products online or through a local coin shop. If choosing to purchase physical gold and silver, OneGold recommends finding a credible precious metals dealer, such as APMEX (www.apmex.com), which been in business for over 20 years and has sold north of $15 billion in precious metals.
Some of the best gold to buy are the most popular gold bullion products, such as the Gold American Eagle, Gold American Buffalo, Gold Canadian Maple Leaf, Gold South African Krugerrand, Pamp Suisse Gold Bars and Credit Suisse Gold Bars. Some of the best silver to buy are also the most popular silver bullion products, such as the Silver American Eagle, Silver Canadian Maple Leaf and Silver Bullion Bars, APMEX Silver Bars and APMEX Silver Rounds.
The largest advantage of physical precious metals is they are tangible wealth. They can be easily passed from generation to generation. Physical metals also have no counterparty risk and cannot be hacked. As some of the densest and shiniest metals on Earth, some investors enjoy the feeling of holding and touching physical gold and silver.
For a new investor, navigating the world of precious metals and determining how to buy gold and buy silver can be difficult. There are tens of thousands of products available, with different premiums and buy sell spreads. Another downside of physical precious metals is risk of theft. Insurance for gold and silver is costly and as a result many investors choose not to insure them. This becomes problematic if an investor has a sizable amount of wealth in precious metals.
Another way to own gold and silver is by investing in mining stocks, or the gold and silver companies that pull the precious metals out of the ground. To start buying mining companies, you must first open a brokerage account with access to the exchanges where the mining companies are traded, as not all brokers have access to international exchanges. Next you must select the best gold and best silver mining company based on your investment profile.
Some of the largest gold mining companies are Newmont Goldcorp, Barrick Gold, Franco-Nevada, and Agnico Eagle Mines.
In some cases, the mining stocks can outperform the physical metal. A mining company may benefit if it finds a new discovery or a more efficient way of pulling metal out of the ground. In addition, mining stocks typically have a higher beta, or investment volatility, than physical gold and silver. For example, if gold increased by 2% in one day, a mining stock may increase by 4% in the same day. Conversely, if gold dropped by 2% in one day, the same mining stock may drop by 4% in the same day.
For some investors, investing in mining stocks may be overwhelming. An investor should understand the difference between the senior minors, junior minors, streaming companies, royalty companies, exploration companies and so on. In addition, an investment in a mining stock is largely an investment in the company’s management team. In some cases, the performance of a mining stock may not be correlated to the gold and silver price. To better understand a mining company, many gold and silver mining stock investors frequently read company 10-Ks and 10-Qs and may even visit the company’s mine site. Another important consideration with mining stocks is the jurisdiction or country that the company is located in. Investing in certain mining stocks may increase an investor’s geopolitical risk.
A third option to invest in gold and silver is to trade futures contracts, by speculating on gold and silver price movements. Successful investors will have a thorough understanding of how futures work. To invest in futures, you must open a brokerage account with margin and understand margin requirements. You will then need to decide the right timing to buy futures and sell futures, as a small movement in price can result is significant changes in asset values. Buying futures allows you to put up a small amount of capital and have a leveraged position in gold and silver. Futures contracts also allow you to take delivery of larger Commodity Exchange (COMEX) approved 400oz gold bars and 1000oz silver bars.
If done correctly, an investor can earn multiples of his or her initial investment by speculating in futures and trading futures. In addition, buying futures allow investors to make money on both increases and decreases in the price of precious metals, by either going long or short in the market.
Futures are typically recommended for more sophisticated investors who have trading experience. Futures are very high risk and may not be suitable for all types of investors. In many cases, newer investors who speculate in futures and trade futures frequently lose all the value in their account. It is even possible to lose more than your initial investment when trading futures.
Exchange Traded Funds (ETFs):
A fourth way to purchase gold and silver is by buying an exchange traded fund or an ETF. An investment in an ETF is typically ownership in a trust, which is backed by gold or silver, held by a custodian. If you have access to a brokerage account, you will most likely be able to buy an ETF.
The most popular gold and silver ETFs are the SPDR Gold Shares (GLD) and the iShares Silver Trust (SLV), respectively.
One advantage of an ETF is the liquidity. Investors can quickly and easily purchase and sell gold and silver. In addition, for investors who hold other assets in a brokerage account, owning an ETF can allow the investor to view all his or her assets in one place.
Unfortunately, there are a lot of negative articles about the GLD and SLV ETFs, from the metal not actually being held at the custodian, to the metal being leased and/or rehypothecated, and to the inability for investors to redeem ETF shares for physical metal. OneGold does not have any insights into the accuracy of these claims but thinks investors should understand all risks before making an investment. Another disadvantage of ETFs is management fees tend to be costly. Over time, these fees compound and could eat away a significant portion of an investor’s return.
Vaulted / Digital Precious Metals:
The final way to purchase gold and silver is buying vaulted or digital gold and silver through a company like OneGold. Founded by APMEX and Sprott, the goal of OneGold was to offer the best of all options above. OneGold gives you direct ownership of vaulted gold, silver, and platinum at an ultra-low cost through a free online account. Gold and silver can be purchased and sold within minutes.
OneGold offers the benefits of physical gold and physical silver. All positions are fully backed on an ounce for ounce basis. Metal is stored at secured facilities at Brinks, Loomis, The Royal Canadian Mint and APMEX. Metal is also fully insured against theft and loss. OneGold also offers the liquidity of an ETF and pricing that is much more competitive than buying physical bullion bars and coins. If you want to take possession of your gold and silver, you can redeem positions for any of the 20,000 products available at APMEX. If you want to dollar cost average into gold and silver like a corporate 401K plan, OneGold offers an AutoInvest feature where you can buy a set amount of gold and silver at regular intervals.
When looking into precious metals, some investors are looking to take on more risk and speculate rather than purchasing gold or silver as a safe haven asset or portfolio hedge. These investors may choose a more complicated investment strategy and look towards buying mining stocks or trading futures contracts. If done correctly and if the investor is able to manage his or her risks, the investor may outperform holding gold and silver through OneGold.
How to Start Gold Investing with OneGold
Tens of thousands of investors have chosen OneGold as their preferred platform to invest in gold and invest in silver. Getting started is simple.
- Create a free account at OneGold.com or through the OneGold Mobile App.
- Choose between a selection gold, silver and platinum at the secure vault of your choice.
- Lock in your order at the current spot price.
- You’re all set. Watch your investments grow.
A guide to investing in gold.
A guide to investing in silver.
A guide to investing in platinum.