A Guide to Buying Physical Gold and Silver

Dear Retail Investor,

Back in 2011, I was convinced that gold was headed to $5,000 an ounce.

Silver?

An easy $100.

So I bought eight 1-ounce American Gold Eagle coins and 160 American Silver Eagle coins.

All told I spent close to $20,000.

I was working in marketing for legendary contrarian investor Doug Casey at the time.

The guy was (and still is) a huge advocate of storing much of your wealth in physical gold and silver.

Doug Casey’s logic went something like this

  • The Fed’s quantitative easing in the face of the 2007-2008 financial crisis had dumped trillions of dollars into the economy, which was certain to create serious inflation
  • That inflation would incite the masses to protect their wealth with physical gold and silver
  • The influx of all these new precious metals investors would cause gold and silver prices to explode

In mid-summer 2011, Casey’s thesis seemed to be unfolding.

And that’s what inspired me to drop $20K on all that gold and silver.

Sadly, I bought my metals at the peak.

And over the next few years, I watched the value of my gold and silver coins erode.

Worse, I’d also bought some gold and silver mining stocks.

Of course, they tanked.

To say I was disgusted would be an understatement, so I sold the stocks and all my gold.

But I kept my silver

And it looks like that may pay off.

Since March 1, 2021, silver’s shot up from $11.94 to $26.58 an ounce (as of July 8, 2021) – a gain of 123%.

At the same time, the iShares Silver Trust (SLV) — an ETF that seeks to replicate the performance of silver — has gone from $15.53 to roughly $24.

Yes, gold and silver have been chopping around for the past few weeks.

But I think these metals will eventually reward investors big time.

Why I’m bullish on precious metals

  • Investors historically seek safe havens like gold during periods of high stock market volatility (which we’re experiencing today)
  • The fear of political instability is running hot right now. That makes people uncertain about the future (political uncertainty is usually bullish for precious metals)
  • The fear that the dollar and other currencies will continue to lose value, and thus fuel inflation, is also very high today (we have unprecedented money printing from central banks and governments to thank for that)

For these reasons and more, public demand for gold and silver bullion has caused a precious metals shortage.

This is seen in the premiums you must pay on top of the spot price for the metals.

Precious metals premiums are sky-high

My brother had to pay over $30 an ounce for his 1-ounce silver American Eagles earlier this year.

At the time, the spot price was about $25 an ounce.

That amounts to a hefty 20% premium.

The situation for 1-ounce American Eagle gold coins isn’t much better.

Their average premiums range between 10 to 13%.

The reason for these high premiums?

Government mints around the world can’t keep up with demand

Yet at the same time, the markets are flooded with precious metals derivatives, like futures.

Institutional investors who don’t hold the physical metals (and have no interest in taking delivery) control these instruments.

Ed Moy, the former director of the U.S. Mint, has an interesting take on this development.

He believes these institutions are betting the economy will recover from the COVID-19 pandemic… and that recovery will cause precious metal to go down.

In other words, these institutional investors are shorting gold and silver.

But Moy says all that shorting is artificially suppressing the price of precious metals.

But those short contracts will eventually expire.

And as they do, he thinks increasing demand for physical gold and silver will put upward pressure on their spot prices

I agree.

And that’s why I think buying gold or silver coins right now – before prices pop in earnest – is a smart way to protect some of your wealth.

It’s sort of like an insurance policy in case SHTF.

Of course, you’ll have to decide whether to store your metals on your property or pay for storage.

I recommend keeping some gold and silver in a safe place at or near home

For maximum SHTF protection, you should keep the equivalent of a few months’ living expenses stored at or near home.

Once you’ve done that (assuming you want more of your wealth stored in bullion), you could hire a reputable precious metals purchase and storage facility.

You want one you can manage online.

There are several reasons why:

  • It allows you to easily buy and sell gold and silver
  • It typically results in paying less in premiums than you would at your local precious metals dealer
  • And you can trade your metals as quickly – but unlike investing in a bullion-backed fund, you really own the metal

As for what precious metals purchase/storage companies to use, there are many to choose from.

Just make sure whatever company you sign up with stores your metals in fully audited and insured independent vaults.

Also make sure they can deliver your precious metals to you anywhere in the world through a bonded, insured carrier.

And above all else, make sure the company you choose does NOT pool your gold and silver with others.

You want your precious metals to be YOURS.

That’s it for today.

Always looking for a silver lining,

Doug Fogel
Contributing Editor, Dear Retail

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