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Using CASH to Purchase Your Precious Metals
You’re here today because you have already decided to add Gold to your investment portfolio. The hard decision has been made. Or has it?
You should diversify your portfolio and Gold is a good option. Between 1996 and 2022 Gold increased in value by over 350%. Can you imagine any other precious metals investment having that same kind of return?
Buying Gold with CASH is for those who have no earned income or those who are looking to buy physical assets. Buying bullion can be done with CASH and we have several good choices online you can talk with that are reputable and provide good education on gold and silver investments. But understanding and making good choices are all on you.
We are going to explain different aspects of purchasing Gold with cash and provide some education and resources. Investing in gold with cash is no different than investing through a Gold IRA, you as the investor, have to complete all the due diligence necessary to make an informed decision.
This resource is to help you think about gold investment and to help you move along the information highway. We may cover some areas that will help you choose the right source or sources for your gold purchasing.
Overall, you will get a better understanding of Gold as an investment.
Understanding Pricing – Spot Price & Premiums
Spot Price –
Spot pricing reflects the price the commodity can be transacted for at that IMMEDIATE MOMENT. Both Gold and Silver spot price are based on one ounce and can vary over a few seconds to a few days.
Factors that drive spot pricing include current and future mining contracts, along with economic data, political news or events, Federal Reserve actions or comments, and other factors. Supply and demand are also a big influence on the pricing of bullion.
Spot pricing is the price today and is the price one can transact the precious metal based on a willing buyer and willing seller at that moment.
Premium prices are priced over the spot price. The premium could be based on several factors including; who minted the coin and if they have middle companies completing portions of the process.
Royal Canadian Mint controls the refining process – lower premium
U.S. Mint contracts with private mints to refine – higher premium
Invest in Gold Using Dollar–Cost Averaging Investment Strategy
When investing in physical assets or electronic stock prices one should consider buying over time and not investing all their money at one time.
When you buy over time it is called “dollar-cost averaging”.
Dollar-Cost Averaging or DCA is an investment strategy and one that is viable when buying any precious metal. You purchase your gold or silver coins or bars over some time in an effort to minimize any volatility in the overall price.
You purchase over time, no matter the price. If the price of precious metals goes up or down you still invest avoiding the mistake of making one large purchase that could be poorly timed.
As a note, dollar cost averaging works better when an asset is increasing in value. With Gold or Silver we see times of level pricing, however, over the past 50 years prices have increased. The investing strategy does not safeguard drop in prices, but it will help balance the investment over a longer period.
Dollar Cost Averaging is a viable method of investing in Gold or Silver Coins and when you're using cash versus a retirement account you can purchase without liquidating other stocks or mutual funds.
Buying Gold or Silver to Hedge Against inflation?
To understand if Gold or Silver is a viable hedge against inflation, we first need to understand the definition of “inflation hedge”. As defined by Investopedia – an inflation hedge is an investment that is considered to protect the decreased purchasing power of a currency that results from the loss of its value due to rising prices either macro-economically or due to inflation. Further defined; it typically involves investing in an asset that is expected to maintain or increase its value over a specified period.
Okay, what are we taking away from this definition: we understand that we are hedging against the rising inflation. Therefore, if inflation is at 7% but your investment return is at 5% then you are losing 2%. If the dollar goes down in value (inverse of inflation price, you cannot buy as much with the same dollar today) because of inflationary pricing, then gold can see an uptick in price and become more expensive because it is gaining value at the same rate as inflation is rising.
Precious metals pricing is variable and therefore has been long considered a hedge against inflation in the United States. Several sources indicate that gold is not the best counter to inflation and maybe ETFs or Mutual Funds be a better choice.
We acknowledge that gold and silver investments, either by purchasing with CASH or within a Gold IRA, can have their limits as a hedge against inflation. The precious metals niche is still a viable investment and a good diversification for your portfolio when you consider the cost of mining gold or silver will increase, the quality of the gold and silver stays consistently high, and the longevity of the investment has increased over the last 25-50 years. Wouldn’t you like to hold an asset that increases over time, but is a physical asset that has monetary value all over the world?
Where to buy my Gold or Silver?
Buying gold and silver online is one of the easiest and most hassle-free methods when purchasing from a credible source. There are several hundred online vendors and now with the internet, you can purchase from any local coin shop just by finding their number online.
We believe that you should stick with some of the most common and reputable businesses. Businesses that have a high stake in keeping their customers happy and satisfied have shown their integrity with thousands of reviews.
Many larger bullion sellers have a larger variety of coins or bars to transact. However, these businesses are not rare coin sellers and typically are selling the more popular gold or silver coins or bars.
Here are a few online options to consider for purchasing your coins or bars online:
These businesses work with investors directly that are looking to buy precious metals with CASH or inside an IRA. Given their reputation and history, you can be certain they are selling the product that works best for your portfolio.
How to Vet Online Gold or Silver Businesses?
When dealing with an online company of any size and for any investment, vet their existence. We start by looking at the state corporation commission to verify the business is legit. Next, we look at the BBB (Better Business Bureaus) as they handle both accredited and non-accredited business complaints. The BBB will rate a business based on the information they obtain and provide information on reviews and complaints. Next, we consider a few other sources of reviews including their business’s Google Business Profile with reviews, Trustpilot, or Trustlink.
A few gold and silver businesses will get you your purchases within a 7-10 day period and some have a short window to return without penalty if an investor is not satisfied.
Make sure you get specific metal information to understand the gold or silver content and the value of the gold or silver along with the value of the asset as-is. Sometimes a coin will have more value as-is than if you valued only the asset as a raw material.
Buying gold and silver at your local Coin shops and pawnshops
The local coin shops are one of the most popular choices for buying gold or silver coins. We highly suggest you understand pricing, material, and individual coin(s) before making any purchase.
If you are an investor in rare coins or bullion, then having contact with local coin shops and pawnshops is vital to be the first call when a rare item is available for purchase.
When dealing with your local business, start with the same process as buying online. Look at the state corporation commission, are there any complaints filed, what is the BBB rating, Google Business Profile reviews, Trustpilot, and TrustLink.
Vet the business, find out their procedures and policies and make sure you understand what you are buying. If you are not deeply knowledgeable about precious metals or rare coins, go into the transaction understanding you don’t need to buy that particular item and be willing to walk away.
Are you buying for enjoyment or investment? If you are investing, you need to understand the risks. If a seller says they haven’t had a buyer for a coin in 3 years, then maybe the price is wrong or maybe there is no market for that item. Don’t buy on emotion, buy on logic after all you are an investor.
What or Who to Avoid?
When you are new to buying gold or silver as an investment then consider avoiding auction websites, third-party sellers, sellers on social media, self-proclaimed “brokers”, Chinese websites, or any other seller who does not appear reputable.
There are always concerns about buying coins or bars that are counterfeit. When you buy with a reputable business then there are ways to confirm their reputation and have trust in what they sell is true to what’s being marketed.
Any reputable seller of precious metals products will have a willingness to buy back the product they are selling. If a seller is not willing to buy back the item at current prices, then they most likely are not a business you want to be dealing with.
Understanding the risks involved in precious metals investing will help you keep your investment and maybe increase its value over time. Remember the gold and silver market prices fluctuate and therefore the assets could decrease in value.
IRA Gold and Silver vs CASH Gold and Silver
Should you purchase your gold and silver with CASH or inside your retirement IRA?
We are discussing buying with cash in this article. But we will touch on both options. Get more information on buying with a self-directed IRA when you check out our page.
Buying Gold with Cash
Buying Gold within an IRA
Are Gold and Silver Physical Assets Good Long-Term Investments?
While there are varying opinions on this topic, it is believed that gold and silver are both good long-term investments if you are looking to diversify your portfolio and hedge against inflation.
Silver tends to have more volatility than gold and therefore we see gold as a better option for your portfolio. We discussed the factors that the price of gold or silver can change and purchase on the possibility of appreciation, but physical gold can hedge inflation.
So yes, if you are looking to diversify your portfolio for stability against the stock market, then place a percentage of your investment dollars in gold or silver.
What are some Alternative Ways to Purchase Gold or Silver as an Investment?
What about buying gold or silver in an ETF?
If you’re looking to diversify your portfolio and invest in gold but don’t want the hassle of opening a self-directed IRA or are concerned with holding gold at home, then ETF’s are a viable option. When you buy ETF’s you are buying into the niche without opening up a retirement IRA or buying physical gold and dealing with storing and reselling the metal.
ETF’s can invest in the direct market price of gold or in gold mining companies.
The process involves an issuing company buying stock in gold companies or buying the bullion directly and storing it as you would in your personal IRA. You as the investor would buy shares and your ETF’s value would increase or decrease based on the underlying value of the company invested in or the price of gold itself.
If you are interested in a Gold ETF then you would go to your broker’s website, research the Gold ETF companies and then choose one that has a return of your liking.
Like holding gold as a physical asset in a retirement account IRA, ETF’s have annual fees that are passed through to the investors
Can I buy Gold or Silver in a Mutual Fund?
Yes, there are several mutual funds that are based on Precious Metals. When investing in a mutual fund based on precious metals you are buying minor shares in mining stocks. However, some funds will purchase physical assets themselves and take advantage of any appreciation.
Buying in a mutual fund you are buying based on a larger company’s volatility and viability. If a company has a rough year, or if the price of gold or silver plummets, you are still riding the spot price for the metal.
The benefit of buying precious metals through mutual funds is the investments can be diverse. The managers could invest directly into a mine, they could buy bullion and hold, they could invest in an emerging market or company and therefore your returns could be better than purchasing physical assets yourself.
Take the time to investigate the history of returns, the divested money, and the expense ratio to get a clear picture of the cost and investment return opportunity.
Are there Gold or Silver Stocks?
Yes, you can purchase stock in a gold or silver mining company. Investors buying stock in these companies are typically looking at the potential growth from the investment than the potential income. The price of the stock falls in line with the market and can fluctuate based on the price of gold or silver.
As an investment option, owning stock can be like owning physical precious metals. As the price of the stock increases, most likely because the economy or the value of the dollar is down, the stock price can have a similar up or down directional change.
Self-Directed IRA is it A Good Option?
As an alternative to buying your next gold bullion with cash, consider opening a precious metals IRA. When you own your asset in an IRA you get all the great tax benefits including asset appreciation and you can buy and sell precious metals and delay your tax liability till you start withdrawing your money.
We have reviewed several qualified gold and silver IRA companies. Review these as viable options for gold or silver investment inside a retirement account.
By diversifying your portfolio or purchasing coins as a hobby you can definitely look at both options as good investment options. Given your financial situation and any tax incentives, you may want to start purchasing coins or bars for your portfolio.
There are definite concerns with investing in Gold or Silver. Market volatility and lack of significant appreciation in the short term are major concerns.
If you are looking at holding physical gold for the long term, i.e., 10-25 years, you are investing to get appreciation over that period of time. If your hope is for a quick appreciation of value and income in the interim, then precious metals are not the investment option for your portfolio.