Tips on Buying Physical Silver Locally, by Frank B.

Twenty years ago a friend of mine came to me and said I should be buying silver. He took the time to show me what he’d bought with a small inheritance he’d received that year: 900 troy ounces of silver rounds. He packed them up in a couple of .50 cal. ammo cans and  spent the next 20 years moving them around [buried caches in] his back yards. Back then he paid something under $4 per ounce for an investment total of under $3,600. Twenty some years ago I had at least a hundred other things I could have done with $3,600, let alone buy silver. Twenty some years later I find that I wish I had taken his advice earlier.

It took some time, but I finally got around to buying silver. I was at a truck stop in the mid-west and saw a case with one-troy-ounce silver medallions for sale (we always speak in terms of troy ounces when talking silver or gold). They were priced at $19 each and I went ahead and purchased ten of them without any real consideration. I had heard a few news stories about silver going up in price and thought it was convenient to get them.

After buying the silver rounds I went online to learn silver was trading at $14.58/oz (spot price). This didn’t make me feel real good at the time; thinking that I paid too much. After doing some research I learned that I could buy online from silver brokers and get silver for just 50 cents over spot price if I purchased 50 ounces or more at a time. So I went ahead and set up a trading account, locked in my price, sent my check overnight, and bought some silver through the broker. This was an interesting experience for me.  I have spent a lot of money through online sales before but not like this. The silver I bought must not have even been mined yet. It took 10 weeks before it was delivered to me. That was a long ten weeks. It wasn’t that I was not told about the 8-10 week shipping time up front; I was told. It was more that I was out a chuck of money with nothing but a big promise that the silver would be delivered to me.

The way this works is that, with the extra time involved, I was also given an opportunity to sell the silver back to the broker at a higher price (if silver had gone up in value). As it happened, silver did go up in value but I wanted the silver in my hands for a long term investment.

This is only one of the ways you can buy physical silver. I say physical silver in that I have the actual silver in my hands. It is not just a piece of paper that says I own silver that is in a vault somewhere else for safe keeping. I have it with me at home and I like it that way. After trying the broker method of buying silver I decided to look for silver locally.

Reputable silver dealers will price their silver based on what is called the “spot” price. Commonly they will then add a “premium” to the spot price which represents their profit on the trade. The “spot” price can be found in many places online and can change minute by minute depending on what the demand for silver is worldwide. Premiums can change as well, depending on how much the dealer actually paid for the silver he is selling you. If the price of silver went down several dollars an ounce after he bought silver, he would likely raise his premium to cover the loss. If silver went up just after his purchase, he might keep his premium low. Dealers also can give lower premiums to higher volume buyers.

As I’m writing this, the silver spot price is $37.99. This is a good deal more than the $4/oz my friend wanted me to buy in at. His $3,600 investment is now at about $34,000! Not a bad backyard investment.

When buying physical silver or gold let you “fingers do the walking” and do an online search for coin dealers in your area. I have found that coin dealers and jewelers are good places to find silver bullion. If you were to do a web search “silver bullion”, or “coin dealers“  in your area (largest city near you) you’d find several places to call.

When making a phone call to the coin shop it would be best to know what the current “spot” price was before you call. Look it up online first. Call the dealer and ask him if he has any silver bullion on hand. He might ask you how much you were looking for since he bases his premium on volume as well as spot price. Know how much you want to buy before you call. He may have 1, 5, 10, or even 100 ounce rounds/bars for sale. Know what you want before you call.  Ask him flat out what his premium is for 20 ounces (or what ever you are ready to buy). He’ll tell you per ounce what he charges as a premium. Ask him if he charges sales tax on the exchange. Know that you can buy 1 or any number of ounces of silver at a time. Don’t fret over not being a “big” customer. These dealers are happy to have new customers no matter what size they are. Don’t be afraid to ask questions about how he prices his silver but try to ask them all over the phone rather than at his shop.

Call several dealers and ask the same questions. Soon you’ll know which one has the best deal for you. Don’t waste time. Tell him when you’ll be in and ask him to hold the silver for you. Don’t miss this appointment! Get in there with cash money and do the deal.

It is important to note that some areas charge sales tax on silver sales. When you meet with the dealer, he will be able to tell you the local rules/laws. I have found that in some areas of the country, if you buy over $1,000 of silver or gold bullion there is no tax. Some dealers also understand that our Constitution allows for silver and gold bullion as currency and when I go into a shop, I state that I want to do a currency exchange: i.e.; $400 Federal Reserve Notes in exchange for 10 ounces of silver. This is in effect the same as walking into the gas station and asking for change for a newspaper machine. These dealers (those who understand our Constitution) do not charge a tax on the exchange. Note that a “sale” might require a tax but a “currency exchange” may not. [JWR Adds: Many states exempt bullion sales from sales taxes. Be sure to research your state’s laws.]

Also, it is worth noting that while these dealers want new customers, they are not looking for new distractions in their shops. The first thing you will notice when you arrive is that there are bars on the doors and windows. Some of the shops I have been to require the shopkeeper to “buzz” me in through his security door. Controlled access is a must for this type of business. His attention must be on the transaction to prevent mistakes or theft. The busier the shop, the less time he will have to chit-chat. These are not a real chatty businesses.

If you follow these simple rules you’ll be his best new customer.

Know the “spot” price as of that day.
Know what you want ahead of time.
Have an alternative in mind in case he doesn’t have what you want.
Bring cash money. No credit cards. No ATM cards. No checks.
Call ahead and tell him what you want and when you’ll be there.
Keep your appointment.
Ask to do a currency “exchange”. (Results will vary)
Go in, complete the deal, and leave.

He will remember you as a no-nonsense customer and it will show on follow up visits.

I have been buying silver and gold now for about 18 months. I started with 1 oz rounds and have since moved into 10 oz bars. It is all personal preference.
There is only one rule: Buy it and take it home. [JWR Adds: Don’t trust promises of bonded vault storage. Nothing beats taking delivery and well hidden at-home storage.] Sometimes I buy just a few ounces and other times I have bought 10, 20, or even 100 ounces at a time. Sometimes the dealer doesn’t have what I want and I buy gold instead. I have some US Silver Eagles and some generic rounds from various private mints. As for gold, I do have the opinion that 1/10th oz US Gold Eagles are the only way to go.

If silver and gold bullion go to where even some mainstream economists are stating, I am not sure what I’d be purchasing with a $10,000 gold coin but I can see using a $1,000 gold coin. For this reason I am only buying 1/10th oz gold coins.

If silver goes as high as some of the top predictions I have seen, a 400 oz stash could pay off a $300,000 mortgage (taxes not factored).

All said, the U.S. Dollar looks like it is losing its buying power at the same rate silver and gold appear to be going up in value. Putting my extra cash into silver and gold bullion just makes sense to me and even at $38/oz I still see it as a bargain. How much further will the dollar drop?

After a collapse I can see a return to gold and silver as currency. Yes, ammo and chickens will be traded too but once you have acquired all the ammo and chickens you can use, you’ll still need to accept an exchange currency if you plan to continue selling your goods or services. Our world has an historical and Biblical precedent set with gold and silver which we will ultimately return too. I also believe that it would be easier to bug-out carrying your wealth in gold rather than in chickens