Silver Gold

You may not realize how easy it is to learn how to invest in Gold or Silver. You may hear peculiar terms like “Precious Metals” or “Bullion”. They are describing some form of Gold, Silver, Platinum, or Palladium. But we will only be talking about Gold or Silver, from now on. These metals are traded on the stock market, and their values rise and fall second by second. These values are actually the price for ETF’s, or paper notes that can later be “cashed in” for the physical metals.   For current pricing, you may visit this link: https://www.kitco.com/market. Notice the “Bid” price- AKA “Spot Price”. That is the U.S. dollar value for ONE Troy ounce of that metal, at that very moment.

Throughout the years, Gold and Silver have held their value. Some believe that these values rise and fall against the strength of the US dollar (USD Index) and have a direct correlation. Because of the stability of gold and silver, many choose to hold, and “hedge” their investment against the dollar’s inflation.

Where to buy- There are different avenues to purchase Gold and Silver. A few are: coin shops, pawn shops, jewelry stores, private sellers, or reputable Ebay/ online sellers. You have to trust the seller- there are a lot of scams out there. Knowledge of the product is necessary. One of the first things you should buy is a small digital scale, and an Acid Test Kit!

Bullion – Rounds – Coins – Silverware – Scrap

Bullion refers to block- shaped (typically rectangular) pieces of metal

Rounds are coin-shaped, but not an actual minted government minted coin

Coins are actually minted by a government, and have a face-value stamped on them (usually $5-100). Many coins are numismatic, and may be valued way above the precious metal contained within them.

Silverware- Eating utensils made of Sterling Silver (92.5% silver content. The remaining usually copper or nickel). There may be an intrinsic value to actual silverware. Flatware contains no precious metal.

Scrap metal is usually older, “out of circulation” coinage that are not 100% pure. They may be mostly made of precious metal, but would need to be smelted in order to extract that metal. Other items, such as silverware, miscellaneous jewelry pieces, or nuggets (raw ore), may fall under this category. There is a cost for the end-buyer to do the extracting, so they usually offer a lower price for these things. 

Basic calculations- Know your weights & measurements before buying! As I’ve explained, all precious metals are calculated by the stock market fair value. The current price right this very moment is called the “Spot Price”. The metal’s value you see listed at an exchange is measured in Troy Ounces. So, one Troy ounce (TOZ) is equal to: 31.1 grams (GR), or 20 pennyweights (DWT). Many sellers will try to confuse you by measuring in Gram or Pennyweight. Not to confuse…just remember those two numbers (31.1 and 20).

Here’s an example: Youre going to buy 23 grams of Gold, (in one-gram bars). The spot price is $1650 (per TOz). 1650 divided by 31.1 x 23 = $1220.25 – the total value of the 23 (1-gram) bars.

Another example: Youre selling some miscellaneous pure gold scrap. The buyer weighs it all at 50 pennyweights (DWT). He makes you an offer of $3400. You now need to figure out if this is a good deal. So you calculate 1650/ 20 x 50= 4125. Ahh. You almost got taken! Lucky you know how to calculate now.

Most bullion and rounds are sold in increments of 1 oz to 100 oz. Coins usually range from 1/20 oz to 1 oz.

Jewelry- The vast majority of gold jewelry is not pure Gold. The reason for this is that 100% pure Gold is soft. The jeweler mixes copper, nickel, or other base metal to give the item strength. The actual gold content of the jewelry, or purity, is stamped, or marked on each piece, and is known as the “KARAT”. Some quick references are: 10k= 41.6% pure, 14k= 58% pure, 18k=75% pure. Sterling silver jewelry is often called “925” because it contains 92.5% silver. By law, all jewelry containing precious metal must have a mark stamped onto it.

Testing- In order to determine whether you are buying real gold or silver you will need some basic test tools: An acid test kit & stone, a digital scale, a strong magnet, and jeweler’s loupe. Ill break these down.

Acid test– This kit comes with 10, 14, 18, 22k, and 925/ sterling silver acids. Scratch the gold (or silver) onto a scratch stone, so the metal flakes off onto it. Next, place a drop of acid (the same karat acid than karat stamp on jewelry). If the metal flakes disappear, the gold is not the karat listed on the stamp. If the gold flakes remain, the karat is at least as high as the test acid. This test may not be needed for coins.

Scale- You may weigh the coins or bullion to check for validity. Some fake or plated items will be off by a few ounces or grams.

Magnet- use a strong iron magnet by holding it next to the gold or silver. There should be NO magnetic attraction, since real gold and silver are non-ferrous. Using a neodymium type magnet may attract slightly, if there is iron mixed into the jewelry (happens sometimes with pendants made in Mexico- they add iron shaving into a hollow portion of the raised icon).

Loupe- Use a 10x magnification glass to inspect the surface of the gold or silver. Very shiny clean gold is usually plated. Same goes for silver. Under the loupe, you should notice small scratches on the metals. This is because these precious metals are soft, in comparison to base metals like copper or nickel.

*Bullion is the most popular among counterfeits. They fill the bars with tungsten, which has a similar weight and density as gold.  Many buyers drill a small hole right through the bar in order to do a thorough test. Coins are not faked too often because they are meticulous when created, making it a difficult process to copy.

How to buy- When buying precious metals, Cash is King. Many sellers will offer a lower price when paying this way vs by check or credit card (at a store). But realize that you will pay above spot-price for all precious metal purchases! These inflated prices are called “Premiums”, or “Mark-up”. This is how the seller makes money in most cases. When buying, you may ask how much “over spot” they are selling for. The mark-up can range from 2% to 30%, but commonly, 3-5% for gold, and 10-15% for silver. So, for example, if an ounce of gold is worth $1600, than the marked-up price at sale could actually be $1680.When to sell- As explicated, precious metals are a hedge against inflation, and they probably aren’t a good “get-rich-quick scheme”. But their value is stable against fiat-currency (paper money) inflation. It’s best to hang onto the gold or silver for as long as possible, but if it becomes a necessity to sell, check the current market price and add a premium onto that. Buyers are everywhere, and not hard to find, but it’s usually best to sell to a reputable person or company.

When to sell– As explicated, precious metals are a hedge against inflation, and they probably aren’t a good “get-rich-quick scheme”. But their value is stable against fiat-currency (paper money) inflation. It’s best to hang onto the gold or silver for as long as possible, but if it becomes a necessity to sell, check the current market price and add a premium onto that. Buyers are everywhere, and not hard to find, but again, it’s usually best to sell to a reputable person or company.