Questions about Investing in Bullion

[astrostu]

I've read the scant threads over the last 6 months or so, especially in mid-May, about people here who've invested in bullion. As someone who loves money but doesn't want to get too burned, I was considering buying about 10-20 oz of silver 1-oz rounds or 1-oz bars and seeing what happened over the next 6 months.

 

I'm interested in it as a short-term "investment," and I'm looking to make a little bit of money. For example, I've noticed that over the last 6 months, silver's gone up about 20%, and that over the last year it's gone up about 40%. This is much better than my money market account is doing, but I also realize that it's a highly volatile market, and much riskier than a traditional investment, which is why I'm looking to start small.

 

So I suppose my questions are: For you folks experienced in this, does my idea sound like a reasonable way to get started in this? Are there any quirks to investing in precious metals (or silver, in particular)? It seems incredibly easy to buy, but how easy is it to sell? It seems as if consumer buying price in the quantity I want to buy is about $1.20 over spot, and consumer selling price is about $0.40 over spot (at least on apmex.com) ... can I do better than this, or is there a good online place you'd recommend buying from?

 

Any and all advice here is appreciated!

 

Edited: Okay, it looks like I was reading something wrong .... it seems as though me buying would be paying about $0.80 over spot (and it seems as though rounds are cheaper than bars, at least on apmex), and selling (to a place like kitco.com) would be selling about $0.15 under spot. Are there better deals out there, or is this about the going rate?

 

Edited Again: No, I read right, where, at least on apmex, they're buy price looks to be about $0.15 OVER spot (vs. kitco where it's UNDER spot). But the question above still stands: Is this about the going rate, or should I look elsewhere? And hould I only get certain rounds or bars, or is one as good as another?

[zrlevin]

I don't know about the cheapest place to buy, but the BST forum here and across the street has been a good place to buy and sell.

 

I have about thirty ounces in silver, because like you, I only wanted a small investment. I wouldn't reccomend bars and rounds, unless they really appeal to you in some way. I have all of my silver in low grade pre-1965 US Coins, and in ASEs and Maple Leaves. Because of their numismatic values, they are sold above spot, but you can often sell them over as well. The plus side of silver coins is that they can never be worth nothing, as they have a face value.

 

If you want it easier to buy and sell, and don't want to hold the physical silver, maybe you should look into iShares Silver Trust Fund (SLV). Each share is equivalent to 10oz of silver, and you never need to worry about where to sell it. You do need to pay comissions though. There is also a gold trust (GLD) who mirrors the spot price of 1/10 oz of gold.

 

Happy investing!

Zach

[jtryka]

I am not much of a bullion investor outside the roll of ASEs I buy each year. That could be a way to go, as ASEs have a liquid market and generally hold a premium over spot. You should also consider buying 10-ounce bars as the premium is generally smaller than 1-ounce rounds or bars. Also, you should check into eBay to see what stuff is selling for there, you might find a bargain. In addition, check your local coin shop as even with a higher price, you might make out on the shipping. If you pay $5 shipping for 10 ounces, that adds 50 cents/ounce to your cost. If your local shop is only 25 cents higher than the online sources, you'd be better off saving the shipping. Also, if you are just interested in the metal 90% junk silver coins are always a nice alternative too, often with a lower premium. Whatever you do, don't invest more than you're willing to lose!

[WinstonWare]

I bought some silver a while back, maybe 6 months ago and sold it when it got near $14. It was such a small quantity though I only made a few bucks. If I was going to do it again, and I probably will at some point, I would just buy the 10 oz bars instead of 10 1 ounce ingots and rounds. That whole experience was on ebay. I have heard good things about Kitco but haven't dealt with them myself.

[astrostu]

The reason that I didn't want to go with coins is that I know I'd never want to part with them, especially if they're pre-1965 90% silver US coins or SAEs. That's why I was planning on going for rounds or bars. But, since I really don't collect Canadian coins, I suppose I could go for the silver maples.

 

I'm starting a computer fund for myself to buy a new desktop next August, and though most of it's going to go into a money market account, I thought I'd try putting 10% of it into silver and see what happens ... so since I'm only in it as an investment and not as a collector is why I wasn't planning on going for coins.

 

Has anyone had any issues selling for a fair price? As in, if I'm going to get into this, I want to be able to liquidate, too ... and it looks like, for example, apmex will buy back silver rounds or bars, but not the SAE or maple leaf. And if anyone can suggest a good place to buy, that'd be appreciated, too.

 

And the blanket request for "advice" is still out there.

[Regis44]

astrostu,

If you want to take "possession" there will be an expense (shipping, commission, etc). I have pre '65 silver purchased from bullion broker here in town which is significantly cheaper than coin dealers in this area. I also buy/sell bullion in the silver pool at Kitco. Kitco pool seems to be a low overhead cost to trade (about 2.6%) .

 

Please remember that you may or may NOT do better than your money market. I see 2 ways to profit and one way to loose in bullion.

 

Winning strategy

- Study market and it influences and then trade (buy & sell) very often.

- Dollar cost average into the market and plan on holding for years.

 

Loosing strategy

- Jump into market when it is popular & in the news and have to sell at a particular time (like to buy your computer next August).

 

Regis

[Brotherman]

I did the exact same thing you are talking about a year and a half ago. I sunk about 1,200 bucks or so into silver, gold, platinum, and palladium over about a nine month period. I’m happy to report that sold it all for $1,800 just after silver hit 14 bucks.

I used APMEX as well and mostly enjoyed the process. I say “mostly” because when it came time to sell they were too busy to deal with a little guy like me. My first attempt was on a Friday morning - silver was at $14. I called them up got an email to send a list of bullion that I wanted to sell. They said they would call me with a confirmation number. They never called back. I had to wait until Monday to try again. Monday came and the exact same thing happened that day even though I called them 4 or 5 times that day. Tuesday SAME THING. I got frustrated and decided to make the 3 hour drive to my coin shop to sell my bullion, but got bogged down with work and couldn’t make the trip. By the time I was ready to make the trip, a week had past and silver had dropped almost 2 bucks. I gave APMEX another call and got right through this time and made the deal - BUT silver was down to $12.50 by then. When I shipped it to them - the packaging, insurance, and postage was about 50 bucks. I lost almost 100 bucks because they couldn’t deal with me when silver was at its peak. All the shipping I paid them to buy all the bullion in the first place came to another 100-150 bucks. So you see, I didn’t actually make the money I originally thought I did. If my coin shop was closer I would buy and sell it there. You don’t get the better pricing that way, but you do get better service and no shipping and insurance fees.

 

Hays

[jtryka]

You could just buy shares in the silver ETF, no delivery, each share equals 10 oz. But with such small amounts I wouldn't mess around with it, just put your money in an online savings account and earn 5% with no fees.

[astrostu]

I think I found a "local" (40 minutes away) place that buys/sells bullion, so I'm thinking of calling them this weekend and seeing how their prices compare with places online, with shipping/insurance included. I found one place online that has a steeper markup but no shipping ... but their extra premium is more than other place's shipping ... so a local place would be great.

 

I'm also more strongly considering going for Canadian maples (I'd just go for 2006 ones) since they will both increase due to spot and very slightly due to their numismatic value.

 

And this is opposed to what my parents think, where my dad this afternoon was saying, "I'd rather you invest in earthworms." Which is why I'm thinking that the coins would be better, as long as I can liquidate, which hopefully I'll find out this weekend.

 

And, as jtryka pointed out, I don't think the buying shares is a great idea because of the relatively tiny amount that I'm planning on putting into this.

 

In response to Regis44, I don't think the market is popular at the moment ... it was 2 months ago, but it seems to have settled since then. And I would look to liquidate starting a month or two before that August date, so I wouldn't be quite as stuck in selling on a particular day.

 

As to Hays - that sucks. And that's why I'm hoping to try this local place, due to your experience.

[Regis44]

astrostu,

Don''t be supprised if you cant reach them on the weekend. The bullion broker here is only open when the market is open (in NY). Coin dealers have regular retail hours.

 

Did you look at pool accounts at Kitco?

 

Regis

[astrostu]

astrostu,

Don''t be supprised if you cant reach them on the weekend. The bullion broker here is only open when the market is open (in NY). Coin dealers have regular retail hours.

 

Did you look at pool accounts at Kitco?

 

Regis

 

 

I checked their site, and they're open 'til 3 on Saturday. And I looked at the pool accounts on Kitco, but their shipping is incredbily high compared with other sites ... so I want to see what the local place is selling at (apparently they have 3 locations near me, and the one that's open on Saturdays is actually only 30 minutes away).

[Regis44]

With pool account, you don't get the bullion delivered. You simply buy and sell when you want and your money & bullion stay at Kitco. NO shipping. As far as I know, it is the least overhead means of investing directly in gold & silver (2.6% I think). You can put few hundred $$'s there and buy low & sell high ...again and again. When you want, you can withdraw your money. Of course, if you want to handle the silver/gold then shipping is a problem.

 

Regis

[troy-migration]

I think if you are going to buy silver and want to consider buying bars. 1oz bar are the way to go. Why? Because if you look on ebay most of the 1oz bars being sold are going between 20 to 200% over spot. Most of the bars are being collected because the art bars are nice to look at and collect. You can get regualar bars by Englehart etc for about 13.00 each. In may they were at 18.00 or so and the art bars (tons of them) go between 11.00 (depends on spot) as high as 75.00 per bar. Art bar collectors pay high prices for these bars to comlete thier collection just like coins. Hope this helps. By the way if you want to get started I have some extras I can sell you at a reasonable rate. You will not get burned these are just extras of a collection I have. Take care