Things Investors Need to Know Before Buying Precious Metals

Purchasing a physical silver or gold as an investment is not always as simple as it sounds. Newcomers in this type of investment often get lost in different options. Should they purchase a sovereign coin or a minted bar? Maybe those limited-edition coins can be an excellent investment?

A sensible and smart investor will evaluate their bullion options by its price and premium on these item’s spot price. But these premiums are only a part of the equation. It does not usually mean that you will get the premium back when sold. Worst case scenario, fraudulent dealers are selling fake products in the market.

These sellers will try to trick unsuspecting buyers into buying coins and other collectibles that have significant premiums and will not retain their value over time. Because of this, it is crucial to know everything about precious metals before entering into the world of precious metals investment. In this article, we will answer some questions that people want to invest, ask before purchasing precious metals.

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Ways to invest in precious metals

People can invest in these items by purchasing physical metals like bullion coins and bars or through financial products like gold ETFs or Exchange-Traded Funds.

Each method has its advantages and disadvantages

While investing in these kinds of products through Exchange-Traded Funds or ETFs sounds very appealing because of its convenience, there are some essential issues that investors need to know concerning this type of investment. For example. If you are investing in silver or gold through Exchange-Traded Funds, you do not physically own the product.

You can’t claim the metal within the fund. It means that you can’t take delivery of the product if you needed them. In contrast, the main advantage of purchasing items like coins or bars is that you own the products physically. Not only that, you own a valuable asset that can be stored outside the influence of the financial system. It will minimize the risk of the counterparty.

Counterparty risk is a risk that other parties in the agreement will fail or default to live up to the obligations. When people purchase these items through Exchange-Traded Funds, they will rely on financial institutions or banks to deliver on those obligations — because of this, purchasing the product physically is a practical option.

Major takeaways:

People who are into precious metals investments can get exposure to the product in two ways: financial products like Exchange-Traded Funds or physical products like coins and bars. With Gold and silver ETFs, you do not physically own the product.

While both metals have excellent features, gold is a lot better than silver or other metals when it comes to investment in the eyes of a regular investor; gold has a broader liquid market that is mostly driven by jewelry demand and investment. The price is also less volatile compared to silver. Meanwhile, silver has a stronger relationship with economic activity and more speculative than gold.

It is because they have a lot of industrial uses. Because of this, silver can be very attractive during the downtime when the price of other metals is very cheap. The significant advantage of this metal is that it is a lot more affordable compared to gold. That is why it is more accessible to novice and small investors.

Major takeaways:

It is an excellent investment compared to silver for a lot of investors.

The price of gold is less volatile compared to the cost of silver.

Which is better, bullion coins versus bullion bars?

Bullion coins like Gold American Eagles are considered as the best type of valuable metals for a lot of investors. It is because sovereign coins like GAE are easy to trade, can be sold at higher premiums than gold bars and easily recognizable.

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You can purchase smaller bars like a one-ounce bar, but they are harder to sell back, and the cost of the transaction is much higher. For people looking to buy in large quantities or institutional buyers of precious metals, large bars are a more realistic and reasonable option because of lower premiums.

Major takeaways:

A lot of experts consider coins as the best way to purchase valuable metals.

Coins are straightforward to trade and highly liquid

Bars are more suited for investors who have money to buy on a large scale.

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