Of Gold & Silver

You can buy gold online, often for better prices than you can find locally (if you can even find gold bullion locally right now), but you need to be sure to buy from a reputable dealer.

You do need to decide whether you want your gold sent to your home so you can have physical possession of it or whether you want to buy your gold and have it stored inside or outside of the country (both are possible, but there are fees involved).

Some reputable online sites where you can buy gold are:

• Kitco
• American Gold Exchange
• Blanchard
• USA Gold

Don’t buy from eBay (people bid up to amounts ridiculously over spot) and be leery of folks on Craigslist or whatever who want to meet you and trade their gold for your cash.  For all you know, you’ll get robbed.

In most cases, you’ll need actual cash (check, bank wire, etc.) to buy gold.  I’ve yet to see a dealer that accepted credit cards.

If you’re just going for straight investment purposes to save your money from inflation, you’ll get a better deal buying larger bars than coins.  Do get bullion that is stamped from a well-known mint, though, as that makes it easier to sell or trade later.

Investing in gold can be a good bet if you can get in at the beginning of a commodities boom or if, as is believed right now, the economy is headed for down times with paper currency losing its value due to inflation.  You don’t want to risk losing your investment, though, if your government starts confiscating gold.

This has happened in various countries throughout history, and it happened not all that long ago in the U.S. For years after FDR outlawed the private ownership of gold it was actually illegal to hold gold in the United States, and if you had it in a safe deposit box (read more on why it’s not a good idea to hold gold in a bank safe deposit box), the bank could legally take it from you.

Will this happened again? No two currency crises are exactly alike, so it’s hard to say for sure, but there are financial experts (Peter Schiff from Crash Proof: How to Profit From the Coming Economic Collapse and Michael Maloney of Rich Dad’s Advisors: Guide to Investing In Gold and Silver who believe it’s a distinct possibility.

The safest way to protect your gold investment is to store only part of it in your home and none of it at the bank or a storage facility in your country.  Instead considering opening an account with an institute such as Goldmoney.com, which allows you to store your gold in the UK or Zurich, or buying and storing your gold at the Perth Mint in Australia (Australia has no history of confiscating gold).

For more on the history of government gold confiscation, you may also wish to read The Collapse of the Dollar and How to Profit from It: Make a Fortune by Investing in Gold and Other Hard Assets (the book has a chapter entitled The Confiscation Threat).

When you’re investing in gold, silver, and other precious metals, it’s a good idea to store some at home.  This may go against your natural inclination to hold it in a bank safe deposit box.  Let’s look at three reasons why you may want to avoid storing your gold and silver at the bank.

1.Safe Deposit Boxes Aren’t Insured — People make the mistake of believing that safe deposit boxes are insured.  They’re not.  The funds you keep in your bank account are FDIC insured, but the contents of your box are not.

That’s okay, you may say, banks are super secure.  Or not…

People tend to think of safe deposit boxes as being indestructible, but a couple of searches online will reveal all sorts of stories who have had their belongings disappear from safe deposit boxes.  Banks are only as secure as the people who work in them.

Also, safe deposit boxes are often stored in basement vaults, in areas that may be prone to flood damage.  While your gold may survive underwater, any documents you’re storing within could be irreparably damaged.

2. Bank Holidays — If you store your precious metals in a safe deposit box, you’re at the whim of bank hours.  Not only do banks have a lot of holidays, but they can be closed when you need them most, in an emergency.

For instance, in the U.S. after the terrorist attacks of 9/11/01, the banks were closed all week.  Gold rose 9% that week while silver rose 11%, but you couldn’t have gotten your paws on your gold even if you did have the key to your safe deposit box.  On the other hand, coin dealers and bullion dealers were all open, so you could have walked in and handed over some of the gold you stored at home and walked out with dollars any time.

3. The Government Can Keep the Banks from Giving You Your Gold –

Perhaps the most scary ideas is that of having your gold taken away from you.  It can happen.  If the government outlaws the private ownership of gold (this has happened before in the United States), the bank will be under orders not to hand your gold over to you! The government has confiscated gold from private citizens before, so why take a chance?

An Alternative to Storing Precious Metals in a Safe Deposit Box

So, what’s the alternative?  A in-floor safe in your own home.  You can get fireproof and even flood proof models, and you’ll never feel safer than with your gold and silver where you can keep an eye on it!

If you’re interested in investing in gold–or just putting your money into it for a while to avoid inflation–then you’ll want to look at gold bullion.  This is what investors buy.

What Is Gold Bullion?

Gold bullion is highly pure gold, and while the purity varies from issue to issue, 99.999% is considered the best.  (100% pure bullion isn’t possible, so beware of someone trying to pass off their gold to you as 100% pure!)  You’ll often see the 99 dropped off and the bullion marked as .999 (the 99% part is assumed).

Gold bullion doesn’t refer to the shape of the gold itself, but you’ll usually find it poured into bars or coins.

Bars can be any size from 1 gram to 400 troy ounces, with 1 ounce bars being common.

There are a number of investment-grade gold bullion coins out there.  Examples include one-ounce Canadian Gold Maple Leaf coins and American Eagle Gold Bullion coins.

Where to Buy Gold Bullion

If you’re ready to get started investing in gold, then you may be wondering how to buy some.  I have to confess that I bought my first ounce from eBay.  The online sites I was checking were all sold out, or had very large unaffordable bars for sale (sorry, I couldn’t afford a kilo for my first purchase!).

eBay was a mistake, though, because I paid well over spot and also had to pay for shipping.

You’ll probably get the best deals by finding a local coin dealer.  After I’d purchased my overpriced gold on eBay, I thought to check for dealers in my area and found out there was not only a coin dealer but a mint less than 50 miles from where I lived.  I could purchase gold and silver bars or coins made in their mint (the best deal, but sometimes it’s better to purchase from a bigger mint that is recognized worldwide), and they also had bars and coins from well-recognized mints.

When you buy bullion, you can expect to pay higher than spot ($30 is common but it can be more when precious metals are being snapped up and are harder to come by), since the dealer has to make his cut, but don’t pay ridiculous amounts.  When it comes to investing, bars are just as good as coins, and they are usually less expensive.

Thinking of investing in gold?  Then it pays to know a bit about this special metal.  Below are some “gold basics” worth knowing:

Features of Gold

Gold is valuable for more reasons than its beauty.  Here are some of the basic features of gold that have made it appealing for thousands of years:

• Rarity – Part of gold’s value comes from its scarcity.  In the entire history of the world, only 150,000 tons or so have been produced (and mankind has been mining gold for more than 6,000 years).
• Recyclable – Gold doesn’t easily corrode, and nearly all the gold mined is still in existence — it just gets recycled and reused for new purposes.  Thousands of years after it’s been mined, it still shines with luster.  This adds to the metal’s value and desirability.
• Malleability – Pure gold (24 karat) can be shaped into just about anything.  Compared to other metals, it has a low melting point, which makes it easy to work with, and craftsmen can craft it into jewelry and other objects of beauty.

Uses for Gold

When you think of uses for gold, your mind probably goes to gold in jewelry.  This does indeed account for a large portion of gold demand, but there are other uses as well.  Examples include…

• Monetary – Gold has been used as money many times in the past, and some argue that it may once again come into play as a currency (or backing for paper/electronic currency) since the fiat currencies around the world may be headed toward big time inflation.  In some countries (such as South Africa and Canada) gold coins are still considered legal tender.
• Dentistry – While you don’t see many people wandering around with gold teeth today, dental gold is still in use, thanks to the metal’s natural resistance to corrosion.  It is alloyed with silver, copper, platinum, etc. to create durable and lasting dental fixtures.
• Electronics – Not only does gold resist corrosion, but it also efficiently conducts electricity, which makes it popular in electronics.  Gold can be used as a semiconductor in circuit boards and integrated boards, so it is used in everything from TVs to computers to cellphones.

How Gold Is Measured

Gold is measured and weighed in a unique measurement called “troy ounces.”  One troy ounce is equal to 31.10 grams.

As you might guess, an ounce isn’t necessarily an ounce.  Purity is a consideration.

You’ve doubtlessly heard of karats. Karats measure the purity of gold, with the purest form of gold being 24 karat (24K), which is considered 100% pure.  From there it goes down with lower karats representing lower percentages of purity.

• 24K = 100% pure
• 22K = 91.67%
• 18K = 75%
• 14K = 58.3%
• 10K = 41.67%
• 9K = 37.5%

Sources: Commodities For Dummies (For Dummies (Business & Personal Finance))