JWR:
When I first started investing in precious metals, I was very unsure of how to do it. My first problem was to find a place that sold them. That is no mean feat in Canada.
Naturally my first response was to buy paper metals. As an investment, these were cheaper and more convenient to buy and sell than taking physical possession. When I decided that it was important to take physical possession, I was faced with the problem, how do I buy an ounce of gold without getting burned by fluctuating prices. For the last five years, I have been using a combination of paper and physical that seems to work pretty well.
Jeff’s Gold Lay-Away Plan:
1. I ended up using Kitco as my precious metals provider. They are a Canadian company (no cross-border issues for me), and they offer both paper and physical [precious metals]
2. Every month, I write a cheque for the same amount of money and send it to my provider. They put the amount on my account.
3. I order the most paper gold that I can. My provider tracks the paper to four decimal places of an ounce. Some people will recognize this as dollar cost averaging.
4. Eventually, I have a full ounce of gold in the account. At this point, I sell the paper, and use the funds to buy the physical and have it shipped to me.
This has several benefits:
1. In the event of the company going belly up, I never have more than an ounce of gold at risk.
2. I am regularly saving. It doesn’t hurt to put a little away every month.
3. By buying regularly in small amounts, I don’t get burned by regular fluctuations. I buy less when it is more expensive, and I buy more when it is less expensive (dollar cost averaging)
4. In the event of the price of gold going steadily up, I am not sitting around with a bunch of dollars, watching the gold become less attainable.
This worked for me, and I think the general principal is a sound way of going about it. Naturally, there is plenty of room for refinement depending on your situation.
One little refinement I have involves silver. Really, when I send the cheque, I put half toward gold and half toward silver. Silver is expensive to ship because you get so many more pounds per dollar. To reduce shipping costs, I wait until I have an ounce of gold, and then I cash in both my gold and silver. This meant that I am getting less frequent shipments, but also less expensive (dollars to pounds). – Jeff C.
Hi Mr. Rawles,
FYI, I bought (back-ordered) a half bag of junk silver (about 26 pounds) on Friday, May 21st ($500 face = approximately $6,500. That is 75 cents per ounce over the spot price of silver). It’s cheap now like you said, especially in relation to gold’s premium ($1,178 spot, $1,272 Am. Eagle 1 oz., on Kitco, and over $1,325 in coin stores)
The owner is an honest, mellow, like minded guy I’ve been buying from for many years. A good man. He said he’s been talking over the last 15 years to a family friend, a $2m/yr stock broker. The guy always said gold was old fashioned, just a relic left over for “survivalists like those nuts that run up into the mountains”. This week the guy called him and said, “buy me $100,000 in gold. I’ll mail you the check.” My guess – Now he just wants to protect his wealth from the fiat erosion.
It’s a very small store that’s doing $50,000 to $250,000 per day, six days a week! Business is up several times over last year.
He had just two gold coins (other than numismatic) left in the store for over the counter sale, they sold while I was there. Most sales are back-ordered.
Silver eagles are advertised on Kitco at $3 over spot, ($17.66 = $20.72/oz, a 17% premium). But can you get them? The coins he can get are about $22. (about $5/oz. over spot). I saw a man take deliver of 100 of them while I was there. Clearly, junk (pre-’65) and bullion (as in silver rounds and 100 oz. bars) are the bargain. Still, people that won’t or can’t buy gold seem to like those Silver Eagles.
According to this coin merchant bottom line- it’s concern, not fear or greed. he’s “seeing folks that (I) never saw before, lots of them, buying one or two coins at a time.” (that means they’re paying tax). “They say they’ll never sell them, won’t even watch the price – they want to save for their kids and grandkids. They just don’t trust the dollar.”
Thank you for you efforts sir. God bless, and keep you safe, – G2