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- A buying opportunity is coming
- Why I own precious metals
- The bullion I buy
As I wrote on
Monday, I believe that Ben Bernanke’s Federal Open Market Committee
(FOMC) announcement on November 2-3 will result in a sell-off for gold and
silver.
This potential selloff is good news for people like me – who
have been dollar cost averaging into precious metals for years – but it also
represents a solid buying opportunity for investors who have never bought any
physical precious metals.
I’m looking at the FOMC announcement as another buying
opportunity, and I urge you to do the same.
If you’re interested in buying precious metals, but haven’t
ever felt comfortable buying from “mainstream” retailers that you see
advertised on TV, hear about on the radio or get emails about, then today’s
letter is for you.
In this issue (and continued in tomorrow’s) I
will explain exactly how to buy precious metals, how to store them, as well
as when, how and why to sell.
But before I get
into those details, I want to quickly go over the reasons WHY to own physical
gold and silver today.
The rules of investing extend into the world of precious
metals – so don’t make any rash decisions about gold or silver. You need to
have a plan for your investments, whether you’re buying a small business, a
stock, a bond, real estate, collector’s items or precious metals.
So before you buy anything, ask yourself, “What’s my plan
for this investment?”
It’s something you need to understand right now: the only
reason to own physical gold and silver right now is capital
preservation.
You can’t expect to get rich buying physical gold and
silver. It might happen! But the realistic expectation for gold and silver is
that they will gain in price commensurate with the devaluation of world
currencies.
In other words, if the dollar loses half of its value, I
would expect that gold and silver will gain 100% in the dollar denominated
price. I’m not really any richer if the dollar falls and gold gains. But I’m
happy to preserve the total worth of the initial capital used to buy the gold
or silver.
If it takes twice as many dollars to buy the same commodity
as it did 5 years ago, you’re really not richer for owning the
commodity.
As I said, it’s not unreasonable to expect to make some
percentage gains from gold or silver – but that’s a speculation. My plan is
to preserve the capital I have from the ravages of a prolonged currency
crisis – and that’s why I buy silver and gold.
With that plan in mind, I’ll now describe the exact types of
gold and silver products I buy, and why. I don’t have much use for
collector’s coins or extremely rare or old coins. I’m not buying the artwork
or the rarity of a specific coin.
I buy gold and silver to protect my capital – not to
speculate on the relative rarity of one coin over another, plain and
simple.
I buyregular old
reliable bullion.
Bullion refers to a coin or bar that’s minted with a
specific purity and weight content.
For silver, I prefer one ounce coins, as well as 10 and 100
ounce bars. I like having different denominations – because in the event of
an all out currency crisis different denominations will be useful.
My silver coin of choice is the one ounce eagle. It’s
arguably the most recognizable silver coin in existence, and in a pinch you
can easily sell this coin to any retailer, pawn shop or collector.
You can also buy what’s known as “junk silver” which is
simply a bag of United States silver coins (nickels, dimes, quarters, half
dollars and whole dollars) minted for circulation up until the early 1960s
when the silver content was reduced. These coins have the same kind of
high-recognizance as the silver eagle.
As for bars, a variety of precious metals vendors offer
several different sizes of bars from different mints. The important thing to
remember with bars (and coins, for that matter) is to buy from reputable
vendor. I’ll be going over some of the vendors I use in tomorrow’s issue of
the Resource Prospector.
For gold coins, I prefer one ounce gold eagles – for the
same reason I like the silver ones: they’re highly recognizable, and likely
to be trusted and known by anyone interested in buying gold.
I also like British gold sovereigns. These coins have been
minted for over 500 years by the British government – and they’re easily the
most identifiable gold coin in the world, and they’re only ~1/4 ounce of
gold, so they’re much more affordable for investors without very much
expendable income (like me).
Tomorrow, I’ll go into exactly HOW to buy these bullion
products. The good news is, we have a little bit of time to adjust our
finances to make sure we’re ready for Ben Bernanke’s announcement. But make
sure you look for the other half of my bullion buying guide tomorrow morning
so that you’re ready and able to pull the trigger when the time comes early
next month.
In the meantime, if you have any specific questions about
vendors, please shoot them my way: [email protected].
Good investing,
Kevin McElroy
Editor
Resource Prospector