Gold and Silver Questions

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Mr. Fri's picture
Mr. Fri
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Gold and Silver Questions

I'm new to the whole Crash Course concepts but as a scientist who enjoys looking at data, it sure makes since.  As such, it seems that it would be wise to put some savings into precious metals.  But, I'm not sure what's the best way to buy gold or silver.

Below are some questions I have about gold/silver buying.  I don't expect one person to answer all these questions but since we all have different experiences I hope these questions create some good discussions which will help others as well.

1) Are coins the best way to buy gold and silver?  (I’m talking a few 10s of thousands of dollars, not millions.)  With coins the gold or silver content is known so I’d expect they would be easier to sell them.

2) If I buy gold/silver coins, does it matter on what country they come from?  I would think something like Krugerrands or US Eagles would keep the same value since they're both one oz of gold.

3) When buying gold/silver coins, does the condition matter?  I'd think you are paying for the metal not the collector's value?

4) Does the percent of gold or silver in a coin matter?  In another post someone said he bought Mexican pesos with a few % gold in them.  I would think that buying something like an Eagle with 1 or 1/2 oz gold might be easier to sell in the future.

5) Is it better to buy gold or silver or a mix of each?  I haven't followed the markets much but I'm wondering things like; Is gold over-valued so silver would be a better investment?  Will silver be harder to sell than gold after an economic crash?

6) Is it better to do "cash and carry" for gold/silver?  If one buys online then your name & address exists somewhere in a database which could be a problem if the government starts demanding we turn in our gold.

7) Does anyone have a link to some good articles on where to hide your gold/silver?  A shoebox under the bed or in the closet doesn't seem safe.  Hiding it in the walls of the house or even a safe wouldn't be good if there's a fire and people start going through the ashes.  And, I'm not sure I would sleep soundly knowing it was buried in the back yard.  Someone must have thought this through and put something on the web.

8) What do you think of the idea of re-financing, taking the equity out of our house and using it to buy gold/silver?  If there's an economic meltdown with large inflation, then the precious metals could be used to buy the house outright.  If the economy recovers and the Crash Course is not as bad as we all suspect, then I'll probably not lose much in equity since the house will grow in value and we still have the house.

9) This is related to the previous question.  If I use my house equity to buy gold, could I be jumping from a housing bubble to a gold bubble and end up loosing on both ends?

leslie2000's picture
leslie2000
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Re: Gold and Silver Questions

Yes go to Goldsilver.com. Very good website to answer your questions.

ao's picture
ao
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Re: Gold and Silver Questions

I like gold coins like eagles.  More portable, more liquid, less easily counterfeited, etc., as compared to bars.  I bought a bunch back in 2001 and not only did the spot price of gold go up but the premiums went up as well.  I like eagles better than krugerrands because of the global political "unpopularity" of South Africa and better than maple leaves just because they're an American coin.  The higher premiums for eagles seem to back up my preference but of course, you're at more of a disadvantage as a buyer because of this.  If you can get krugerrands, maple leaves, kookaburras, or whatever at a good price, however, they're fine.

For silver, I'd just buy a bag or bags of the old pre-1965 90% silver coins.  I wouldn't bother with silver eagles ... too much of a premium. 

The condition matters more obviously if the coins have numismatic or collectible value but even with bullion coins, if they're more worn, their marketability may be affected since they would have a fractional reduction in their gold content.  I'm not a coin collector so I'm sure someone with knowledge about grading might provide you with more helpful information.

The percent of gold in a coin does matter obviously but they're priced accordingly.  You can find out the content on websites like http://www.monex.com/.

Gold and silver pretty much move in lock step in the markets.  Silver would be used for smaller units of exchange, gold for larger.  Silver can take up a lot of space and obviously, it's much, much heavier than an equivalent value of gold.  For example, if you wanted to transport $30,000 worth of silver, at the present spot price, it would weight about 130 lbs.  An equivalent value of gold would be about 2 lbs.  Everyone has their preference but I have about a 10:1 ratio of gold to silver.  I've seen other people have a similar ratio but offhand, I couldn't give you a good reason why (although I remember researching it and having reasons when I made my purchases).  Both are commodities but gold is more of a currency whereas silver is more of an industrial metal.  If I had to pick only one, it'd be gold, hands down.

"Cash and carry" would prevent one's precious metals from being tracking but a reputable dealer has to keep a record so you'd be in violation of the law.  Also, are you just going to just plop down $30K in cash to someone you don't know in a situation where you probably won't be on your home turf and where there's no recourse?  These are all personal decisions.

In terms of storing precious metals (wherever that may be), I for one would never write something on the web about a secure arrangement that I had.  Here's where imagination and creativity and anticipation of worse case scenarios comes into play.  Good luck.

I would be very careful with the refinancing idea.  Gold is inherently very volatile and timing of purchase is everything.  If you doubt that, look at the swings in the past on http://www.kitco.com/charts/historicalgold.html .  In 2008, it was up to well over 1000 and down to just above 700.  And at the moment, gold is "overheated" and most likely due for a pullback.  If you review the charts, you'll get a sense of when an opportune buying time might be.

EVERY asset eventually overshoots its true value, then undershoots its value when it plummets, and eventually reverts to the mean ... including gold.  I think it's a great investment now, purchased at the right time, but it won't be forever.

Hope this helps.

Brian 

 

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kass47
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Re: Gold and Silver Questions

 

Mr. Fri,

Check out the page that Chris already created on this subject.  I think he answers a lot of your questions.  Good luck!

http://www.peakprosperity.com/buying_gold

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ceci1ia
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Re: Gold and Silver Questions

Welcome to this forum, Mr. Fri.

I buy eagles and maple leaves, one at a time, because I never have enough money to buy several. I also have a stash of old silver coins. I also bought a couple of ounces from local gold miners (in northern California). This gold is in dust and little nuggets.

I have about as much gold as I want. What I wish to invest in now is assets like fencing to keep the deer out of the garden, repairs to vehicles, home remodelling and upgrades, and a nice shelter for my firewood. I have a dream to get my well and water storage together, but I'm not very organized or disciplined. We paid off our home and property a few years back, so that belongs to us free and clear. These are the things that are very important to me, even more important than precious metals.

I bought gold from a coin dealer, but the sales tax was killing me. I recently had a very, very good experience with apmex.com and I recommend them. However, paying with your credit card leaves a paper trail. 

Mr. Fri's picture
Mr. Fri
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Re: Gold and Silver Questions

Thanks everyone for the input. 

I've done some more reading and am learning a lot.  When I get some time, I'll try to sumarize the things I've learned for others who may be where I'm at.

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Re: Gold and Silver Questions

Just another suggestion for reading: There are a number of articles available at www.onlygold.com that appear to me to be a good source of information, especially in regard to debunking some of the commonly held misconceptions which allow many folks to be misled and exploited by the "less scrupulous" of the many gold and silver dealers.  Interesting stuff.

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Re: Gold and Silver Questions

I recently joined and this has been a great eye opener so far, thank you to Chris all the contributors!

On the topic of precious metals, I was wondering if anybody has experience/recommendation in holding physical gold in a self directed IRA ?

Thanks in advance!

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Re: Gold and Silver Questions

Bump.

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Doug
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Re: Gold and Silver Questions

SailAway

[quote]I was wondering if anybody has experience/recommendation in holding physical gold in a self directed IRA ?[/quote]

First, welcome to CM.  You've found a wealth of information and a good source for the latest world events that will help you prepare in a timely manner.

I have PM's in an IRA.  It is physical and stored in Delaware.  Of course, I'm old enough that I can make withdrawals without a penalty.  It has been the best growth asset in my financials for the last couple years, but there is no guarantee that will continue.  I'm still adding to it as insurance in the expectation that the USD will lose value at some point.  Read Chris's latest addition to the Basics of Resilience, Protecting Wealth.

Good luck,

Doug

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ao
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Re: Gold and Silver Questions
Doug wrote:

SailAway

Quote:

I was wondering if anybody has experience/recommendation in holding physical gold in a self directed IRA ?

First, welcome to CM.  You've found a wealth of information and a good source for the latest world events that will help you prepare in a timely manner.

I have PM's in an IRA.  It is physical and stored in Delaware.  Of course, I'm old enough that I can make withdrawals without a penalty.  It has been the best growth asset in my financials for the last couple years, but there is no guarantee that will continue.  I'm still adding to it as insurance in the expectation that the USD will lose value at some point.  Read Chris's latest addition to the Basics of Resilience, Protecting Wealth.

Good luck,

Doug

Hi Doug,

I'm just curious ... do you know how long it takes to liquidate your PMs in your IRA?  Specifically, from the time you make the call (or fax the written request), do you know exactly how long it is until your PMs are converted to cash?  I'm assuming you're with Goldstar or Sterling?  Also, are your PMs insured for theft, fraud, etc. at the Delaware depository and do you know who provides the insurance and how fiscally sound they are?

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SailAway
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Re: Gold and Silver Questions

Hi Doug,

Thanks for your reply. Sorry for not being so clear, my question was not about the wisdom of buying gold at this point in time. Instead it was more about self-directed IRA experience itself.

Since my post I have done some reading and research on this topic. For those who don't know the concept, a self-directed IRA (or 401-K) allows to invest in almost anything such as precious metals, real estate (even outside the USA), startup or established businesses, securities and many other type of investments. There are IRS restrictions and rules but you still have far more investment options compared to the usual stocks, bonds and mutual funds in your traditional IRA/401-K.

There are actually two self-directed IRA flavors. The first one requires a custodian that approves every investment decisions that you make.

In the second case you can form a "self-directed IRA LLC" and you are essentially in control (sometime named "checkbook control").  The LLC has its own bank account and you can make your investment decisions as quickly as you want. Any money generated by your investments stays within the LLC and enjoys the same tax rule as your regular IRA(or 401-k).  (tax free or tax differed depending if it’s a Roth or traditional account). If you want want total control of your retirement investments or/and you are worry in case of a catastrophic financial crash about what would happen to your paper money in your traditional broker account, this self-directed IRA LLC seems (to me) to be the best option. You can BTW roll-over your existing IRA/401-K into a self-directed IRA/401K.

I found the link below very informative if you are interested . Hope this help.

http://www.pgiselfdirected.com/

 

 

 

 

 

Doug's picture
Doug
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Re: Gold and Silver Questions
ao wrote:
Doug wrote:

SailAway

Quote:

I was wondering if anybody has experience/recommendation in holding physical gold in a self directed IRA ?

First, welcome to CM.  You've found a wealth of information and a good source for the latest world events that will help you prepare in a timely manner.

I have PM's in an IRA.  It is physical and stored in Delaware.  Of course, I'm old enough that I can make withdrawals without a penalty.  It has been the best growth asset in my financials for the last couple years, but there is no guarantee that will continue.  I'm still adding to it as insurance in the expectation that the USD will lose value at some point.  Read Chris's latest addition to the Basics of Resilience, Protecting Wealth.

Good luck,

Doug

Hi Doug,

I'm just curious ... do you know how long it takes to liquidate your PMs in your IRA?  Specifically, from the time you make the call (or fax the written request), do you know exactly how long it is until your PMs are converted to cash?  I'm assuming you're with Goldstar or Sterling?  Also, are your PMs insured for theft, fraud, etc. at the Delaware depository and do you know who provides the insurance and how fiscally sound they are?

ao

Sorry I took so long getting back to you, I wanted to get a clarification on the insurance question.

Quote:

The DDSC is insured by Lloyd’s of London.  The Delaware Depository maintains $300 million in “all-risk” storage insurance coverage and $100 million in contingent vault coverage.  The policy provides coverage for all risks of physical loss and/or damage to insured property howsoever and wheresoever’s caused including theft, mysterious disappearance and/or unexplained loss and shortage.  Loss or damage from fire, flood or other natural disaster is covered.  Loss from acts of war, terrorism, cyber attack, radioactive contamination, and chemical, biological, biochemical and electromagnetic weapons are excluded.

On the question of liquidation, as it turns out, I sold some a couple weeks ago.  My dealer bought it and handled the paperwork, and I had a receipt the following day.  Of course, it was made easier because my dealer had sold the PM's to me to begin with and knew exactly what was there.  Also, I didn't take delivery of anything, so the money is still there for when I want to buy more. 

Hopefully, El Quaida doesn't decide to attack the depository.  Everything else appears to be covered.

Doug

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Doug
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Re: Gold and Silver Questions

Sailaway

Sounds like you did your homework.  The self directed IRA gives you a lot of independence in what you do with the assets.  As I understand it, the assets always have to be with a custodian, except possibly for a short term transfer from one custodian to another passing through you.  Good luck.

Doug

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Kansaslandscape
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I can buy pre1965 coins in

I can buy pre1965 coins in smaller lots. What would you put as an average value per each coin? Exclude rare or unique features, keeping it simple.

Doug's picture
Doug
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guesstimate
Kansaslandscape wrote:

I can buy pre1965 coins in smaller lots. What would you put as an average value per each coin? Exclude rare or unique features, keeping it simple.

There's a formula to figure out the value of a 90% silver coin.  .715xface value of coin (.1 for a dime, .25 for a quarter)x spot price of silver.

Today a dime is worth .715 x .1 x 33.50= $2.39 (approx) + premium.  The premium on a 1 oz. silver round is about $.85 today.  So 1/10 of that is 8.5c.  Maybe $2.50, depending on the dealer.  That's a guesstimate, but more volume should lower the premium per coin.

Hope that's helpful.

Doug

ao's picture
ao
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Posts: 2220
this information has me spooked
Doug wrote:
ao wrote:
Doug wrote:

SailAway

Quote:

I was wondering if anybody has experience/recommendation in holding physical gold in a self directed IRA ?

First, welcome to CM.  You've found a wealth of information and a good source for the latest world events that will help you prepare in a timely manner.

I have PM's in an IRA.  It is physical and stored in Delaware.  Of course, I'm old enough that I can make withdrawals without a penalty.  It has been the best growth asset in my financials for the last couple years, but there is no guarantee that will continue.  I'm still adding to it as insurance in the expectation that the USD will lose value at some point.  Read Chris's latest addition to the Basics of Resilience, Protecting Wealth.

Good luck,

Doug

Hi Doug,

I'm just curious ... do you know how long it takes to liquidate your PMs in your IRA?  Specifically, from the time you make the call (or fax the written request), do you know exactly how long it is until your PMs are converted to cash?  I'm assuming you're with Goldstar or Sterling?  Also, are your PMs insured for theft, fraud, etc. at the Delaware depository and do you know who provides the insurance and how fiscally sound they are?

ao

Sorry I took so long getting back to you, I wanted to get a clarification on the insurance question.

Quote:

The DDSC is insured by Lloyd’s of London.  The Delaware Depository maintains $300 million in “all-risk” storage insurance coverage and $100 million in contingent vault coverage.  The policy provides coverage for all risks of physical loss and/or damage to insured property howsoever and wheresoever’s caused including theft, mysterious disappearance and/or unexplained loss and shortage.  Loss or damage from fire, flood or other natural disaster is covered.  Loss from acts of war, terrorism, cyber attack, radioactive contamination, and chemical, biological, biochemical and electromagnetic weapons are excluded.

On the question of liquidation, as it turns out, I sold some a couple weeks ago.  My dealer bought it and handled the paperwork, and I had a receipt the following day.  Of course, it was made easier because my dealer had sold the PM's to me to begin with and knew exactly what was there.  Also, I didn't take delivery of anything, so the money is still there for when I want to buy more. 

Hopefully, El Quaida doesn't decide to attack the depository.  Everything else appears to be covered.

Doug

Doug,

Thanks for the answer.  I think I had missed seeing this post of yours at the time.  This answer spooks me.  Think about how little insurance $300 million really is.  For a company that handles precious metals storage for investment banks, brokerage firms, refiners, manufacturers, commodity trading houses, major retailers, coin dealers, and retail investors world-wide, that is a piss poor amount of insurance coverage.  I just checked their site and I guess the number is up to $1 billion but even that number is woefully inadequate in my estimation.  I'm going to have to check into this further.  Thanks again.  

 

Grover's picture
Grover
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Posts: 800
Coins or Rounds?

Hi all,

Hopefully someone can answer a question or at least give an opinion. I was in the store last night to get some supplements. I happened to walk by the clearance bin and saw a bottle that I wanted. The store had a sign that said, "50% off lowest clearance price." When I checked out, I looked at the receipt and saw that the price was marked down to $5.57 and a credit of $2.79 was applied to my bill. The sales tax was applied to the total price (with the credit already subtracted,) not the price without the credit; otherwise, the tax would have been higher. It got me to thinking about precious metals and prices.

As Doug pointed out, the current melt value of pre 1965 silver coins is about 24 times face value. www.coinflation.com has up to the moment melt value of coins. So, what would happen if you bought something for $24.00 and worked out an agreement with the vendor to take 4 silver quarters? Would the transaction (and sales tax) be based on the $24.00 value or the $1.00 final sale?

I'm thinking that this may be a good reason to buy locally denominated coins rather than bars or rounds. Exchanging bars and rounds for a product would be equivalent to barter so to be totally legal, the exchanged value is what would be taxed (wink, wink.) If money hadn't been inflated away for the past 98 years, the question wouldn't need to be posed.

Grover

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thc0655
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Buying with junk silver

Great question, Grover!  I think a logical case could be made for taxing $24 or taxing $1.  But I think someone in government would have a hard time proving in court that if I literally and physically paid $1.00 with four quarters (legal tender) that I had to pay tax on $24.  I think the secret will be finding 1) a merchant who will take silver coins with the understanding of their true value and exchanging goods/services on that basis, and then 2) convincing him/her to charge and report tax on the face value of the silver coins.  I'm looking forward to that in the not too distant future, but I'm not actively looking for those merchants yet.  However, if I ever see or hear of one I'll make a beeline to establish on ongoing relationship before it becomes necessary.

Doug's picture
Doug
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Posts: 3125
Utah

It will be interesting to see how Utah deals with the taxation issue now that they recognize PMs as money.  I'm pretty sure the IRS and state tax authorities will catch up the the true value in a hurry if trading in junk silver becomes more prevalent.

Doug

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Grover
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Tax consequences of choices
thc0655 wrote:

Great question, Grover!  I think a logical case could be made for taxing $24 or taxing $1.  But I think someone in government would have a hard time proving in court that if I literally and physically paid $1.00 with four quarters (legal tender) that I had to pay tax on $24.  I think the secret will be finding 1) a merchant who will take silver coins with the understanding of their true value and exchanging goods/services on that basis, and then 2) convincing him/her to charge and report tax on the face value of the silver coins.  I'm looking forward to that in the not too distant future, but I'm not actively looking for those merchants yet.  However, if I ever see or hear of one I'll make a beeline to establish on ongoing relationship before it becomes necessary.

thc0655,

At this point in time, I'm still accumulating PMs; however, there will be a time when I need to exchange these for other things. If you are purchasing (anything) with cash, the only time the price matters is when you buy and/or when you sell. The trip between those points may be interesting, but doesn't matter. Taxes, a fact of life, need to be accounted as part of the price of a good (along with transportation, insurance, restocking fees, etc.) If you can reduce the tax consequences by using coins rather than bars or rounds, wouldn't it be wiser to focus on limiting the probable effect when choosing which form of PM to purchase? That's my logic for preferring locally denominated coins. Silver Eagles say they contain one ounce of silver and are worth One Dollar. Who am I to argue?

I've rummaged through junk dealer's stores enough to know they like to barter. They'll usually accept anything of value in trade for something they value. The vigorish depends on how easy they think they can sell your item. PMs should have a very low discount, while a broken hair dryer would have an extremely high discount. I'm sure that someone has developed a pyramid of categories of barterable goods similar to Maslow's heirarchy of needs. http://en.wikipedia.org/wiki/Maslow%27s_hierarchy_of_needs. If it exists, I haven't seen it.

Grover

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