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Now May Be a Very Good Time to Invest in Precious Metals

It’s obvious how collecting and investing in rare coins is related to investing in precious metals.  Bullion coins are the premier form in which people own physical precious metals.  Bars and ingots are another form of ownership, which are also available from coin dealers.

However, what I’ve noticed over the years is that while people who collect and invest in high-end rare coins understand that it’s a good idea to diversify their investments into precious metals as well, they often haven’t gotten around to making their bullion purchases.  Now might be a very good time to take the plunge and make your precious metals purchases because prices have taken a dip recently.  But after slipping, they’ve also shown some short-term support.

Silver has been bouncing between about $27 and $35 per ounce during the past year and a half.  It’s now back in the high $20s after holding above $30 for many months.  It reached its all-time high price level of around $50 again during spring 2011 – the first time since 1980.  Gold has been bouncing between the mid-$1,500s and nearly $1,800 per ounce during the past year and a half, after reaching its all-time high at the $1,900 level during late summer 2011.  Now it’s slid back to the mid-$1,500s again, where it’s found support recently and has turned back in a slightly upward direction.

Both rare coins and precious metals have historically shown that they perform well financially during times of inflation, which is something the economy hasn’t had to seriously deal with since the late 1970s and early 1980s.  Instead, we’ve gotten used to steady, minimal price rises for years – except for the huge price rise in gasoline we all felt a few years ago.

Most people are concerned with the rising debt bubble our Federal government keeps pumping up, and a great many people think this balloon will burst someday…resulting in very high rates of price inflation, just like we experienced during the 1970s – or worse!  One concern is the $85 billion per month in bond purchases the Fed has been making since last year in order to keep interest rates low.  These bonds will be sold, perhaps sooner than later, causing interest rates and prices to climb.

When that happens, it will most likely trigger precious metals prices to rise.  But while people know they should own precious metals, the tendency is to buy after prices begin to rise.  However, very often when precious metals prices begin to climb, they do so very rapidly and people “miss the boat.”

Don’t let this happen to you!  Buy during these price dips.  Obviously, no one knows if prices will drift lower, or when they’ll suddenly turn around and advance.  Therefore, by spreading out your purchases over time, you can take advantage of long-term trends by cost averaging.

Precious metals are more liquid than rare coins and sometimes perform better as an investment than rare coins; other times it’s the other way around.  But importantly, precious metals products are very liquid and their prices can easily be tracked at any time of day, online or in the mainstream media.  Rare coin prices often have to be researched and compared; and to sell them, they often have to be shopped around, consigned to an auction, or sold to a dealer at wholesale prices.

If you are experienced and understand the market for rare coins, you may feel very comfortable with them as a long-term investment and you’ll have fun in the process.  But it’s hard to beat precious metals for liquidity purposes as an alternative investment.

I suggest you begin to prepare your strategy now for investing in precious metals.  You should consider what metal – primarily gold or silver, or both – you want to invest in and why.  Platinum and palladium are too exotic for most people – gold and/or silver should suffice.  You’ll need to figure out how you’ll be storing them.  Most people use bank safe deposit boxes, but there are sensible reasons why you might want to consider a private depository, or your own private alternative.

And, of course, you’ll need to plan out the form in which you prefer to invest in precious metals.  For some people silver bars or gold ingots may be the way to go because you may get the most physical metals for your money.  Others may want to own bullion coins because they prefer the ease in which they can be traded, and they’re legal tender.  Another consideration is that price premiums over bullion value, or “melt value,” on common date pre-1934 vintage U.S. gold coins are at historically low levels, making these coins attractive buys at this time.

Precious metals can also be purchased using Individual Retirement Account (IRA) funds or 401K funds.  Rare coins are not allowed in these plans at this time.  Some experienced coin dealers, like me, are aligned with qualified administrators of these types of retirement accounts who can take care of the necessary paper work, with the coin dealer serving as the broker.

So find a good coin dealer/broker who can help answer your questions and who can help you plan your strategy.  Another important point – give your loyalty to this person.  By all means do your comparison shopping, but please don’t take a dealer’s advice, wasting his or her time, with the intent of shopping around for the best price just to try to save a few dollars.  It’ll often bite you in the end.  If you stick with a dealer you trust and believe in, he or she will be there for you when you have questions about selling or when you have other unforeseen questions during your ownership of your precious metals investments.

 

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