Gold and Silver are the most common Precious metal Investments. The history of these metals goes back thousands of years and they come in all shapes, sizes, and forms: bars, Coins, Stocks, ETFs, Trusts, even Cryptocurrencies.
But what is the best way to invest in Gold and Silver?
Let’s find out.
The Best Ways to Invest in Gold and Silver by Asset Type
To start, sellers price Bullion higher than the metal’s spot price. These premiums cover mining, minting, and distribution costs. Once the Silver and Gold is in your hands, you’ll have to consider (and pay for) proper storage and insurance costs to secure your assets against loss and theft. When it’s time to sell, you’ll find that buyers expect a discount to spot price and that some types of Bullion are less liquid than others.
Then there are tax considerations. The IRS taxes most Precious metals at the collectibles tax rate, meaning you’ll pay up to 28% of your capital gains to the government.
Government-minted Bullion is usually eligible for IRA Investments which means you can use your tax-advantaged retirement savings to invest in physical Gold and Silver. With an IRA you can avoid the 28% tax rate and know that your metals are securely stored with an IRS-approved Custodian.
To learn more about Precious metal IRA accounts request an investor kit from one of the companies that offer these unique vehicles. For Investments over $50,000, Augusta Precious Metals is your best choice. If you have $25,000 to $50,000 to invest, Goldco is the best company available. Below $25,000, contact Birch Gold and they will take good care of you.
Collector’s Coins carry additional value on top of the price of the included metal. Some of the highest-priced Coins were minted prior to the U.S. government removing Gold Coins from circulation in the 1930s. These Coins, typically referred to as “pre-1933 Gold Coins”, can attribute half or even more of their price to their current desirability as a collectible item. Collector demand is a variable factor that clouds the valuation of these Coins.
If you want to add Precious metal Coins to your IRA, you’ll have to be much pickier: the IRS doesn’t permit collectible or Numismatic Coins as retirement Investment assets. Instead, you’ll have to choose regular Bullion Coins and these Coins must meet strict IRS purity, weight, and country of origin requirements.
Most IRA-eligible Coins are minted in recent years and priced closer to their actual valuation. Their IRS-approved status means they’re more widely-circulated and thus more liquid. Examples include these Gold and Silver Coins: American Eagles, Canadian Maple Leafs, and Austrian Philharmonics.
Gold and Silver Stocks
There are, however, some drawbacks to investing in Precious metal stocks. To begin with, their prices tend to be volatile. They rise and fall along with metal prices, but investor sentiment and company success (or lack thereof) also affects their valuation.
Also, there are more than 2000 companies involved in exploring for and mining Precious metals. Only a handful of these companies are (or will be) successful. Sorting the wheat from the chaff requires specialized knowledge so most investors in this sector should stick with well-known, proven companies.
While Stocks are riskier than buying physical Precious metals, they do provide another way to potentially profit from Silver and Gold.
Gold and Silver ETFs, Mutual funds, and Trusts
Bullion funds or Trusts, take another route. These vehicles purchase large amounts of physical Gold and Silver Bullion and store it securely. Then, the Trust issues market shares worth a specific amount of Bullion. As Bullion prices fluctuate, so do share prices, linking value to tangibility.
ETFs, Mutual funds, and Bullion-backed Trusts are popular methods to invest in Precious metals without having to store and insure physical assets yourself. The costs incurred by these vehicles (management, storage, insurance) are spread across all investors, potentially lowering your overall cost burden.
It is important to note that some Precious metal ETFs and Trusts are taxed as collectibles, meaning you won’t benefit from lower long-term capital gains rates. You may also be surprised with an unexpected tax expense caused by the ETF or Trust selling assets.
Gold and Silver futures and options (derivatives)
Most investors, however, don’t get that far. The bulk of futures profits are tied up in buying and selling the contracts themselves as prices fluctuate. Very few futures buyers take delivery of physical metal. For buyers that do hold contracts to maturity, sellers typically settle in cash and deliver the metal to a registered Depository.
By contrast, options on futures contracts give buyers the right, but not the requirement, to buy an asset under similar conditions. In this way, options contracts provide the same leverage as a futures contract without the risk of being forced to take delivery of the Precious metals.
Both types of derivatives are considered risky and speculative, and typically should be left to advanced investors.
Gold and Silver certificates (Promissory notes)
Certificates come in two styles:
- Allocated (fully reserved) certificates set aside a specific quantity of Bullion that is stored in your name
- Unallocated (pooled) certificates don’t correspond to specific Bullion – when you redeem your certificate Bullion is pulled from the mint’s operating supply of metal
Some investors buy certificates because they cut down on the burden of owning physical Bullion (storage and insurance costs, risk of theft, etc.). However, certificates are not risk-free: as glorified IOUs, they are not legal tender and they are only redeemable at the issuing mint. Additionally, Bullion banks don’t always have enough Bullion on hand to back their certificates.
Digital Precious metals (Cryptocurrencies)
Several online marketplaces now permit investors to securely buy, sell, and redeem digital assets backed by Gold and other Precious metals. They strive to marry Precious metal fundamentals with the ease and modernity of blockchain-based technology.
What is the best way to invest in Gold and Silver?
We believe the best way to invest in Gold and Silver is to have a little bit on hand and then trade some of your paper retirement assets (Stocks, Bonds, Mutual funds) for the security of physical metal.
You can purchase physical metal at your local Coin shop and this is the method that we prefer. Develop a personal relationship with the store and they will take good care of you. You can also purchase Precious metals online from Bullion dealers like APMEX or JM Bullion.
There is only one way to purchase and hold Silver and Gold using your tax-advantaged savings: a self-directed Precious metals IRA.
With a Gold and Silver IRA, you can invest in physical Precious metals using your tax-advantaged savings. Although you can’t touch the Bullion in your IRA until retirement, you can rest easy knowing it’s pure and safe in an IRS-approved Depository.
Here at Satori Traders we have researched the Gold IRA companies and identified three that meet our criteria. If you are investing $50,000 or more then Augusta Precious Metals is the best company available. For Investments of $25,000 to $50,000 choose Goldco. Below the $25,000 threshold you will find that Birch Gold is your best choice.
About Satori Traders
Hi, my name is Bryan Post and I love the shiny stuff - Silver and Gold.
I've been investing in the Precious metals and mining stocks since 2002 when I realized that Gold is the only real money on the planet.
Here on SatoriTraders.com I share everything I've learned about the metals, Financials markets, trading, Technical analysis, and the numerous games that central banks play with fiat currencies.