Guide to Buying Gold and Silver Online
There are many things you may want to know before jumping into a physical gold or silver investment, especially if you decide to purchase your precious metals online. Knowing some of the basic facts we will discus on this page before you buy can help you to better understand how the market works in the online retail setting.
Below you will learn the basics of buying gold and silver bullion online. We will begin with explaining spot price to you; the driving factor in the price you will pay for your bullion and one of the most fundamental aspects of investing in precious metals.
What is Spot Price?
Spot price is the current delivery price of a commodity traded in the spot market. In other words spot price indicates what price you should pay for a specific commodity such as gold or silver at any given point in time. To keep things simple here, you can think of this price as the dollar amount people are willing to purchase and sell gold and silver at around the world.
Generally gold and silver spot prices trend in the same direction as each other. These prices change by the second during market hours and are used by dealers to determine what price to charge for a specific product.
With keeping all the above information in mind, it doesn’t mean that you will be paying spot price for your gold and silver bars, rounds or coins. Most bullion products sell for more than what spot price is at any time. This is what’s referred to as a “Premium.” Premiums are necessary because of the production costs the mint or refinery incurs when producing a bullion product. These premiums are passed down from the manufacturer to the dealer and then lastly to the consumer.
How to Get the Lowest Premium for Physical Metal
When investing in precious metals, you may want to avoid paying high premiums for bullion. If you are buying purely for the metal content then you will probably want to get the lowest price per ounce possible. Not only can this save you some money today, but it can also help you get more money back when cashing in your investment. Below we will explain some easy ways to avoid paying high premiums.
One of the best ways to ensure you always get the lowest premium on a bullion coin, round or bar is to stick with one product and buy in bulk. Many dealers offer quantity or “bulk discounts” on their products if you buy a certain quantity. Some dealers offer price breaks on quantities of as low as 20. If you plan on purchasing 100 ounces of silver, by simply purchasing 100 ounces of one product as opposed to buying 20 ounces of 5 different products you can usually save a some money.
Compare Gold Dealers
After taking the above ideas into consideration, one of the most obvious ways to make sure you never overpay is to simply compare gold dealers. Doing some research to see what different dealers are charging for the item you plan on purchasing is never a bad idea. When doing this there are still a few things you should take into consideration. Below we will explain what factors go into a dealer’s pricing on physical gold and silver.
1) Advertised Price vs. Actual Price
Though one dealer might advertise a lower price than another, it doesn’t mean that this the price you will pay for the items you plan on purchasing. Some dealers may advertise their highest quantity price. This means that if you only plan on buying a few coins, there may be a large difference in price.
Another thing you have to look at when considering a dealer is 1 – their shipping rates and 2 – if they charge you any hidden fees (a commission on the sale for example). This is why it is important to always get quoted the “out the door price” after any fees and/or shipping charges are added. Depending on the shipping rates and whether or not a dealer charges commission on each sale can make a significant difference in the final amount you pay. These small fees can add up over time especially if you plan to purchase in smaller quantities.
2) Paper Check price vs. Credit Card price
Most dealers Charge a processing fee when you use a credit or debit card to pay for your order. This fee is usually added automatically to your order and calculated as a percentage of the total. Dealers get charged by third party companies to process credit card transactions which in turn gets passed down to you; the consumer.
By paying with a credit or debit card you usually spend between 2% and 5% more than if paying by check or bank wire. That being said, you can save a considerable amount of money by simply paying by paper check or bank wire for your order.
Bullion Coins as Currency
Many government minted coins are legal tender and carry a face value in the country they were produced. For example; the American Silver Eagle is 1 Troy ounce of .999 silver and carries with it a face value of $1 (though the silver content is worth much more than that in today’s market).
Now that you have learned the basics of physical gold and silver investing feel free to check out some of our favorite dealers: SD Bullion, JM Bullion and BGSAC who each currently have some of the lowest premiums online for all gold and silver bullion products.