I have owned and operated a cash for gold business for many years. People ask me all the time about the best ways to either buy or sell their gold. In this article I would like to share some insider secrets about how to deal with your gold.
Before we dig into the insider tips, I'd like to share my personal philosophy about gold in order to help you decide what is best for you. I have always believed that its a wise idea to own at least some gold (and/or silver) for the purpose of storing value and hedging against economic and political calamity. Gold has been a financial safe haven for thousands of years and continues to offer the same advantage today. With that said, here are the 10 insider tips I promised.
Tip #1: Know why you are buying gold.
There are many reasons you would want to own gold. Some reasons would include:
- A History of Holding Its Value.
- Weakness of the U.S. Dollar.
- Inflation Hedge.
- Deflation Protection.
- Geopolitical Uncertainty.
- Supply Constraints.
- Increasing Demand.
- Portfolio Diversification.
- It is fun and looks cool!
Understanding the reasons why you would want to own gold goes a long way in helping with the investment choices you make going forward.
Tip #2: Know how you want to store your gold.
Understanding why you are investing in gold will help you decide what type of gold you want and how to store it. For example, if you are nervous that some major political fallout is going to happen, you may want to own physical gold and store it in a safe.
There are several ways that you can own and store gold.
1). Own Physical Gold: Purchase the actual metal and store it in a safe or bank safe deposit box.
2). Buy Gold ETF / Mutual Funds / Or Stock Shares: This is paper money and does not give you physical ownership of the asset.
3). Custodial accounts: IRA accounts that are physically backed by gold reserves. You do not have physical gold but the company you hold your account with backs it with physical gold. My favorite custodial account to recommend is Regal Assets.
Tip #3: Shop around with at least three different stores.
This is true whether you are buying or selling gold. Sometimes you can get companies to compete for best pricing. This is especially true when you are dealing with physical gold.
Tip #4: Understand Spot Price and Premiums:
Gold markets operate in a similar fashion as the stock market. The average value that the market is trading at is known as the "Spot Price". Most gold stores charge an extra amount of money above the spot price when you are buying gold. Conversely, when you are selling gold the store will pay you less than spot price. This is how the store makes money. The important thing to keep in mind is that every store has different premiums. For example, one gold store may have higher operating expenses than the next store. Therefore, the first store would need to charge higher premiums. The key is shopping around until you find the store with the best premiums.
Tip #5: Only Buy Bullion:
When it comes to gold as an investment it is best to stay away from numismatic coins. Just remember that gold is gold regardless of how old it is or what condition it is in. Usually, there are significantly lower premiums on plain gold or silver bullion coins.
Tip #6: Know What Makes Gold Prices Move
There are a lot of variables that may move gold spot price up or down. Here are a few of the more common drivers.
-Gold prices often moves in the opposite direction as the US Dollar. If the dollar is strong gold gets weaker, and vice versa.
-Geopolitical tension. AKA...war.
-Supply and demand.
-Inflation: More dollars printed equals higher inflation equals weaker dollar and higher gold value.
***The main point here is that gold is a separate asset class from the US Dollar / Stock Market and allows for more diversification. Understand that the intention of this investment is as a store of value which means that it should maintain its value even when the the value of fiat money is eroding.
Tip #7: Know How Much Gold To Own
The recommendation professionals generally make is to have about 5-10% of your portfolio in precious metals. Not to much, because it is not necessarily a fast growing asset, but enough that it would float your portfolio if there was a downturn in the stock market.
Tip #8: Know Where To Buy From Or Where To Sell
-Private Individual Deals: I believe that the best way to buy and sell precious metals is in private personal deals. You will know pretty quickly who you are dealing with and whether you can trust them. Also, private individuals deals will often be more willing to negotiate and have lower premiums.
-Cash For Gold Stores: Just keep in mind that these stores make their living of the premiums on each deal and they often have a lot of overhead to pay for. There are definitely good places and bad places to deal with. Be sure to do your research.
-Large Precious Metal Companies: These companies often have good reputations but will also have healthy premiums built in. Some of the larger, companies such as Regal Assets, have more services to offer. You could buy/sell physical gold, store your gold with them (for a fee), or open Retirement accounts based on precious metals.
Tip #9: Know The Weight & Purity Before Buying Or Selling
These are probably the two most important pieces of information to know when dealing with gold jewelry. When you are dealing with jewelry most people know that there is 10k, 14k, 18k, and 22k jewelry. These numbers are referring to the purity of the gold.
10k = 41.7% Gold
14k = 58.3% Gold
18k = 75% Gold
22k = 91% Gold.
In addition, most jewelry is calculated in terms of grams. There is 31.1 grams in an ounce. It is a smart idea to know the weight of your jewelry before you sell your scrap gold jewelry. Unfortunately, some gold dealers will take advantage of the fact that you don't understand how gold pricing works.
Tip #10: Consider Melting Your Broken Jewelry Into Gold Bar
If you have broken or un-used jewelry and also are interested in owning gold as an investment you can have it all melted down into a bar. It may cost a small fee (maybe $25) but it will make it much easier to keep track of a bar rather than a bunch of loose earrings or broken necklaces. A lot of jewelers are able to provide this service but you will have to do some shopping around.
Conclusion:
It is important to consider gold as a part of your investment portfolio. However, its more important to know you investment strategy and what you would like to accomplish by holding onto it. Knowing the weight, purity, and what makes gold prices move will help you decide what strategy is best for you.
