"Déjà vu all over again"... Another well-written post with historical context. The quality of writing is exceptional, as it is insightful, timely, and actionable.
I have just started acquiring silver recently. It's about 1/10th of my portfolio, which itself isn't very big (rebuilding after a divorce). Some things I've learned... crash course.
1. I think it's best to buy physical. If you go to usdebtclock.org and look at the right-hand column you'll see the 'paper to silver' ratio - this is the ratio of silver stocks to actual, physical silver. It's currently at 355:1, which to me is a warning that the 'paper' silver is almost like fiat - if there were a 'run on the bank' for silver, there would be a fraction of a percent that each person could get. Plus, it's just nice to be fully in control of it rather than depending on the "system" to play nice if there was some kind of financial crisis.
2. If you look up the price of silver you'll get the "spot" price (which is the global trading price, not a regional thing). When you buy physical there is a "premium" on top of this. Eg 1oz of silver is around $20 spot, but to buy a 1oz coin might be $27, so a $7 premium - it costs money to make and store and transport a physical commodity and the stores need to make money to stay open. Shop around and look at deals to get as close to spot as you can, but buy from reputable online dealers or local coin shops (LCS) as there are lots of fakes especially on Ebay and such. The more 'pretty' a piece of silver is the higher the premium, as it costs more to make it pretty, and the cost goes down the plainer and bigger the piece of silver is. Eg a 100oz, plain, poured bar of silver doesn't look nearly as nice as stacks of beautiful 1oz coins, but the bar is only a little over spot, eg $23/oz for the bar vs $27/oz if you bought coins.
3. The difference between what you can buy a piece of silver for and what you can sell it for is the "spread". One coin might be $27, another might be $25, but the first one might sell for $25 while the second may sell for $22, so a $2 spread with the first one and a $3 spread with the second. Don't just pay attention to the initial purchase price. Some coins and bars are more desirable and will fetch a higher price when you sell. Talking to your local coin shop (LCS) and finding out what they'd pay for different coins or bars can help you figure this out. Buying things that are on sale is a really good way to reduce the spread - shop the sales! $2 off per oz happens fairly regularly. If you buy a coin with a $4 spread, the spot price will need to go up $4 just to break even when you go to sell it, but if you got that coin on sale for $2 off, you've actually made $2 when spot goes up by $4.
4. The silver to gold ratio is the difference between the spot price of silver and gold. In the earth's crust they're about 17:1 silver to gold (for every ounce of gold there will be 17 of silver). The general advice is if the ratio is over 50:1 then buy silver, if it's under that, buy gold. It has fluctuated a lot historically. Right this second, the spot silver to gold ratio is 59:1. You can check on silverprice.org. But silver premiums are higher than gold premiums, so I look at the actual ratio of the physical silver to physical gold including the premiums for each item, which varies depending on what you're getting and if you're buying on sale or whatever. Comparing a 1oz silver coin to a 1oz gold coin will get you a lower ratio than comparing a 100oz poured silver bar on sale compared to that same gold coin. The idea is that when the ratio switches in favor of gold you can trade your silver for gold. I did my buying when the spot ratio was about 90:1, and the ratio for what I was actually buying (factoring in the premium) was 79:1.
5. I don't see silver as an investment but as insurance for a specific scenario - where the fiat currency has collapsed and a new fiat currency has taken its place. I can then trade silver or gold for the new currency and thereby preserve some of my wealth. If there was some kind of social collapse, silver and gold will be terrible to barter with because their value will plummet - a 1oz gold coin that you bought for $2,000 might only get you a sack of rice. If you're worried about that kind of apocalyptic scenario, buy stuff that's cheap now but would be very valuable in that situation - toiletries, water purification tablets, first aid supplies, non-perishable foods, that kinda thing. If no collapse ever happens, I expect my precious metals to at least hold their value against inflation, though even this varies a lot, especially silver, so in that way it's a bit like a stock where you might need to wait 5 to 10 years to sell at a good price if it's in a slump. Don't buy or hold silver if you will need that money in less than a year or two.
6. I don't do "numismatic" (collectible) coins, only bullion coins. It's just too much of an unknown for me what will be desirable in 20 - 30 years or if collector coins will be a 'thing' any more. Just look at stamp collecting. Also, I may find myself in a situation where finding someone knowledgeable enough about what I'm selling to give me the collector's price for it will be much harder than just selling bullion coins.
Ok, there, that's my 2oz! Hope that helps anyone getting started!
Thank you! I was just balancing out my finances today and could use a bit of advice. Are there any precious medals sites you’d trust, speaking for U.S. viewers? I saw you mentioned one for the EU :) Thanks guys!!
SD Bullion, JM Bullion, Apmex, Privident... also, check your local coin shop (LCS). Your LCS can often meet or beat the online dealers depending on what you're getting. Also, consider that when you sell you're probably going to sell to your LCS, or at least ask what they'd give you, and they're more likely to give you a good price if you've been a regular customer and have a bit of a relationship with them than if you just show up with stuff you bought online. Also, buying in person means that (if they have what you want in stock at least) you can walk out with your purchase instead of waiting for it to come in the mail and worrying it could be lost or stolen. Also, while purchases over $300 or so might get you free shipping online, if you just want to get a few coins there won't be any shipping cost when you buy from your LCS.
One thing I don't know as much about is the taxes on bullion (I'm in Canada where there are no taxes or capital gains, yay!). It varies by state so look up the tax rules where you live, and maybe the states around you if you're willing to travel to get out of paying higher taxes. It may be that certain coins like silver eagles are tax free, or over a certain dollar amount, eg if you purchase over $1,500, could be tax free. Also, some states consider bullion the same as any other investment when it comes to capital gains, while others see bullion as a collectible and charge more for any gains you make when you sell. Pretty universally, gold or silver that is in the form of jewelry or other pretty trinket is taxed completely differently than bullion. Hope that helps!
Great content and presentation. The historical contents makes your arguments undeniable. Keep up the good work!
Pleasure! Thanks for reading.
Anyone in Australia in this group?
LOADS of Australians here. I think maybe 10% of the audience. Including me, of course!
"Déjà vu all over again"... Another well-written post with historical context. The quality of writing is exceptional, as it is insightful, timely, and actionable.
I have just started acquiring silver recently. It's about 1/10th of my portfolio, which itself isn't very big (rebuilding after a divorce). Some things I've learned... crash course.
1. I think it's best to buy physical. If you go to usdebtclock.org and look at the right-hand column you'll see the 'paper to silver' ratio - this is the ratio of silver stocks to actual, physical silver. It's currently at 355:1, which to me is a warning that the 'paper' silver is almost like fiat - if there were a 'run on the bank' for silver, there would be a fraction of a percent that each person could get. Plus, it's just nice to be fully in control of it rather than depending on the "system" to play nice if there was some kind of financial crisis.
2. If you look up the price of silver you'll get the "spot" price (which is the global trading price, not a regional thing). When you buy physical there is a "premium" on top of this. Eg 1oz of silver is around $20 spot, but to buy a 1oz coin might be $27, so a $7 premium - it costs money to make and store and transport a physical commodity and the stores need to make money to stay open. Shop around and look at deals to get as close to spot as you can, but buy from reputable online dealers or local coin shops (LCS) as there are lots of fakes especially on Ebay and such. The more 'pretty' a piece of silver is the higher the premium, as it costs more to make it pretty, and the cost goes down the plainer and bigger the piece of silver is. Eg a 100oz, plain, poured bar of silver doesn't look nearly as nice as stacks of beautiful 1oz coins, but the bar is only a little over spot, eg $23/oz for the bar vs $27/oz if you bought coins.
3. The difference between what you can buy a piece of silver for and what you can sell it for is the "spread". One coin might be $27, another might be $25, but the first one might sell for $25 while the second may sell for $22, so a $2 spread with the first one and a $3 spread with the second. Don't just pay attention to the initial purchase price. Some coins and bars are more desirable and will fetch a higher price when you sell. Talking to your local coin shop (LCS) and finding out what they'd pay for different coins or bars can help you figure this out. Buying things that are on sale is a really good way to reduce the spread - shop the sales! $2 off per oz happens fairly regularly. If you buy a coin with a $4 spread, the spot price will need to go up $4 just to break even when you go to sell it, but if you got that coin on sale for $2 off, you've actually made $2 when spot goes up by $4.
4. The silver to gold ratio is the difference between the spot price of silver and gold. In the earth's crust they're about 17:1 silver to gold (for every ounce of gold there will be 17 of silver). The general advice is if the ratio is over 50:1 then buy silver, if it's under that, buy gold. It has fluctuated a lot historically. Right this second, the spot silver to gold ratio is 59:1. You can check on silverprice.org. But silver premiums are higher than gold premiums, so I look at the actual ratio of the physical silver to physical gold including the premiums for each item, which varies depending on what you're getting and if you're buying on sale or whatever. Comparing a 1oz silver coin to a 1oz gold coin will get you a lower ratio than comparing a 100oz poured silver bar on sale compared to that same gold coin. The idea is that when the ratio switches in favor of gold you can trade your silver for gold. I did my buying when the spot ratio was about 90:1, and the ratio for what I was actually buying (factoring in the premium) was 79:1.
5. I don't see silver as an investment but as insurance for a specific scenario - where the fiat currency has collapsed and a new fiat currency has taken its place. I can then trade silver or gold for the new currency and thereby preserve some of my wealth. If there was some kind of social collapse, silver and gold will be terrible to barter with because their value will plummet - a 1oz gold coin that you bought for $2,000 might only get you a sack of rice. If you're worried about that kind of apocalyptic scenario, buy stuff that's cheap now but would be very valuable in that situation - toiletries, water purification tablets, first aid supplies, non-perishable foods, that kinda thing. If no collapse ever happens, I expect my precious metals to at least hold their value against inflation, though even this varies a lot, especially silver, so in that way it's a bit like a stock where you might need to wait 5 to 10 years to sell at a good price if it's in a slump. Don't buy or hold silver if you will need that money in less than a year or two.
6. I don't do "numismatic" (collectible) coins, only bullion coins. It's just too much of an unknown for me what will be desirable in 20 - 30 years or if collector coins will be a 'thing' any more. Just look at stamp collecting. Also, I may find myself in a situation where finding someone knowledgeable enough about what I'm selling to give me the collector's price for it will be much harder than just selling bullion coins.
Ok, there, that's my 2oz! Hope that helps anyone getting started!
Party like it's 1512
So good!
Thank you! I was just balancing out my finances today and could use a bit of advice. Are there any precious medals sites you’d trust, speaking for U.S. viewers? I saw you mentioned one for the EU :) Thanks guys!!
Any recommendations on where to buy precious metals in the US?
SD Bullion, JM Bullion, Apmex, Privident... also, check your local coin shop (LCS). Your LCS can often meet or beat the online dealers depending on what you're getting. Also, consider that when you sell you're probably going to sell to your LCS, or at least ask what they'd give you, and they're more likely to give you a good price if you've been a regular customer and have a bit of a relationship with them than if you just show up with stuff you bought online. Also, buying in person means that (if they have what you want in stock at least) you can walk out with your purchase instead of waiting for it to come in the mail and worrying it could be lost or stolen. Also, while purchases over $300 or so might get you free shipping online, if you just want to get a few coins there won't be any shipping cost when you buy from your LCS.
One thing I don't know as much about is the taxes on bullion (I'm in Canada where there are no taxes or capital gains, yay!). It varies by state so look up the tax rules where you live, and maybe the states around you if you're willing to travel to get out of paying higher taxes. It may be that certain coins like silver eagles are tax free, or over a certain dollar amount, eg if you purchase over $1,500, could be tax free. Also, some states consider bullion the same as any other investment when it comes to capital gains, while others see bullion as a collectible and charge more for any gains you make when you sell. Pretty universally, gold or silver that is in the form of jewelry or other pretty trinket is taxed completely differently than bullion. Hope that helps!