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I covered why one would want to invest in precious metals as a hedge against inflation, and now I share how to invest for success with silver and gold. This article is written based on the principle of investing in gold and silver as a hedge against inflation, by stacking. This is not an article about being a coin “collector”, or trading paper commodities. If you are interested in owning some precious metal assets, in order to optimize leverage during times of economic inflation, then the following are my set of fundamental rules you should keep in consideration to get the most bang for each buck you invest.
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Rule #1 – Do Not Become a “Collector”
Stay far away from numismatic coins and those who are trying to sell them as a profitable investment, if your focus is to hedge against inflation. Numismatics are a niche category of the silver/gold community, and is the collection of coins (paper currency as well) based on the study of the currency. The bottom line you need to understand about numismatic coins is that you are not investing in precious metal content, but rather the story attached to it. Some of the features that will boost the premiums of any precious metal investment are:
· Where the coin was minted
· The year of the mint
· The history of the coin
· Proof Grade
The purpose of rule number one is to keep in mind that you are buying precious metal assets as an investor, not a collector. Stay away from numismatics to avoid paying unnecessary and counter-productive premiums that will quickly gobble up the equity of your precious metal assets.
Rule #2 – You Better Recognize
We want to keep our premiums low, but this doesn't mean you should go cheap and load up on any old generic round that is priced just pennies over spot. Since the rise in popularity in the silver and gold market over the past few decades, there is a legitimate reason to believe there are subsequently more counterfeit operations than ever before. This is why you should buy bullion that will be recognized in general as deriving from a reputable source, like government issued mints. The key here is whether or not people will recognize the bullion mint. A bunch of generic third party minted collector rounds may limit your leverage in a bartering situation, or liquidity in an auction. For instance the resell value of any Country’s minted coin (Silver Eagle, Maple Leaf, Etc.) if you brought them to a dealer/jeweler, would be wherever spot price is at for that day. You will pay a lower premium on generic rounds, but their resell value will be under spot if you try to resell to a dealer. This is why I stack the premium coins while the price is low, and as the price throttles I sprinkle in more of the generic stuff like rounds and junk silver. Here is a list of safe bet bullion you could invest in, bearing in mind my two fundamental investing principles, to retain liquidity through recognition and minimize overhead premiums:
Junk Silver
- U.S. Silver dollars 1935 & earlier
- U.S. Half dollars 1970 & earlier
- U.S. Quarters and Dimes 1964 & earlier
- U.S. War Nickels (1942-1945)
Government Minted Bullion
- The Canadian Silver/Gold Maple Leaf
- The American Silver/Gold Eagle
- Britain’s Silver/Gold Britannia
- Mexico’s Silver/Gold Libertad
Generic Rounds
- Buffalo Rounds
- Sunshine Rounds
Trusted Private Mints and Dealers for Bars/Coins
- PAMP Suisse
- Engelhard
- Perth
- JM Bullion (or Johnson Matthey)
- Apmex
Rule #3 – Buy Local or Buy in Bulk
If you are going to stock up on government minted coins from your country, then I say the best place to invest would be a local jeweler, pawn shop, coin shop, hobby shop, and other commercial outlets. Be wary about engaging in private deals. Buying local is best for accumulating at a low premium, but if your local dealers do not carry what you are looking for then you can order online. If you are going to buy online, then I suggest you save your money first, until you can buy what you want in bulk (remember shipping and handling premiums). Sometimes online dealers will offer free shipping deals, so keeping an eye online as you continue to accumulate locally would be a good practice to make a habit of.
Stay far away from numismatic coins and those who are trying to sell them as a profitable investment, if your focus is to hedge against inflation. Numismatics are a niche category of the silver/gold community, and is the collection of coins (paper currency as well) based on the study of the currency. The bottom line you need to understand about numismatic coins is that you are not investing in precious metal content, but rather the story attached to it. Some of the features that will boost the premiums of any precious metal investment are:
· Where the coin was minted
· The year of the mint
· The history of the coin
· Proof Grade
The purpose of rule number one is to keep in mind that you are buying precious metal assets as an investor, not a collector. Stay away from numismatics to avoid paying unnecessary and counter-productive premiums that will quickly gobble up the equity of your precious metal assets.
Rule #2 – You Better Recognize
We want to keep our premiums low, but this doesn't mean you should go cheap and load up on any old generic round that is priced just pennies over spot. Since the rise in popularity in the silver and gold market over the past few decades, there is a legitimate reason to believe there are subsequently more counterfeit operations than ever before. This is why you should buy bullion that will be recognized in general as deriving from a reputable source, like government issued mints. The key here is whether or not people will recognize the bullion mint. A bunch of generic third party minted collector rounds may limit your leverage in a bartering situation, or liquidity in an auction. For instance the resell value of any Country’s minted coin (Silver Eagle, Maple Leaf, Etc.) if you brought them to a dealer/jeweler, would be wherever spot price is at for that day. You will pay a lower premium on generic rounds, but their resell value will be under spot if you try to resell to a dealer. This is why I stack the premium coins while the price is low, and as the price throttles I sprinkle in more of the generic stuff like rounds and junk silver. Here is a list of safe bet bullion you could invest in, bearing in mind my two fundamental investing principles, to retain liquidity through recognition and minimize overhead premiums:
Junk Silver
- U.S. Silver dollars 1935 & earlier
- U.S. Half dollars 1970 & earlier
- U.S. Quarters and Dimes 1964 & earlier
- U.S. War Nickels (1942-1945)
Government Minted Bullion
- The Canadian Silver/Gold Maple Leaf
- The American Silver/Gold Eagle
- Britain’s Silver/Gold Britannia
- Mexico’s Silver/Gold Libertad
Generic Rounds
- Buffalo Rounds
- Sunshine Rounds
Trusted Private Mints and Dealers for Bars/Coins
- PAMP Suisse
- Engelhard
- Perth
- JM Bullion (or Johnson Matthey)
- Apmex
Rule #3 – Buy Local or Buy in Bulk
If you are going to stock up on government minted coins from your country, then I say the best place to invest would be a local jeweler, pawn shop, coin shop, hobby shop, and other commercial outlets. Be wary about engaging in private deals. Buying local is best for accumulating at a low premium, but if your local dealers do not carry what you are looking for then you can order online. If you are going to buy online, then I suggest you save your money first, until you can buy what you want in bulk (remember shipping and handling premiums). Sometimes online dealers will offer free shipping deals, so keeping an eye online as you continue to accumulate locally would be a good practice to make a habit of.
