Diversifying with Precious Metals: Where to Buy Gold and Silver

by Jerry Robinson | FTMDaily Editor-in-Chief

HOUSTON, Apr 19

Today, gold prices made headlines as they smashed through $1500 per ounce. Of course, the price of gold has been in a bullish upward trend for the last 11 years. See the chart below.

Silver, by contrast, has just recently begun its major price uptrend. After a false start in 2003 and 2005, silver prices began their march firmly upwards in 2008.

And now that economic uncertainty is shaking countries to their very cores, investors all over the world are just beginning to wake up to precious metals as an asset class. Anyone who is interested in owning precious metals would be wise to make up their minds by August 2011. This is because 60% of the annual returns in precious metals often come in the final quarter of the year. And I believe that in the fourth quarter of 2011, both gold and silver prices are going to begin waking up the masses and that in 2012, we will begin to move into the mania stage.

The DSL™ Savings Strategy 101: Diversifying with Precious Metals

As you know by now, my preferred savings diversification model — not for your investments but for your 6 month liquid saving reserve — is one-third in foreign currencies, one-third in precious metals, and one-third in U.S. Dollars. (I will explain an ideal investment portfolio allocation strategy in an upcoming article series.)

When it comes to precious metals, the two most common questions that I receive on a regular basis are: 1) What kind or forms should I buy? and 2) Where can I buy gold and silver?

In yesterday’s article, I answered the first question. (You can read that article here.)

And in today’s article, I will answer the second question.

Where to Buy Gold and Silver

Many investors are used to buying stocks, mutual funds, and bonds. But where does an investor to buy gold and silver?

In our last article, I explained at least six different ways to gain exposure to price appreciation in precious metals. Here’s that list, along with how and where each of them can be purchased.

1) Buying physical gold and silver bullion. As you know, this is my preferred method for owning precious metals. You can buy bullion coins and bars from a reputable local precious metals dealer. Look for someone who has been in business for a good amount of time. (Beware: Many unscrupulous individuals have recently entered the market seeking to sell gold and silver. Many times, these same dealers will be no longer be around to service your needs when prices are no longer favorable. Avoid fly-by-night companies.)

Shameless plug: I personally like to use someone like FTMDaily friend, Tom Cloud, a veteran precious metals advisor who has been in the business for 33 years. He is based in Atlanta and has tens of thousands of satisfied clients. He charges low commissions and offers free shipping and insurance to all of our readers. But best of all, Tom does not charge anything on the back end which means that if you purchase a bar of gold from him and then decide to sell it later, he will buy it back without charging you a “sell-back” fee. That means a lot in these days of high commissions. You can learn more about Tom here.

2) Buying numismatic gold and silver coins. When it comes to buying numismatic coins, I don’t. However, that is because my goal is strictly inflation protection. I am not interested in starting a coin collection. However, if you truly are interested in numismatic coins for their rare coin value, shop around for the best rates. I have found that most of the big precious metals companies charge the highest mark-up on these types of coins.

Again, if you are strictly wanting to protect yourself from the ravaging effects of inflation, you are probably not looking for numismatic coins. However, if do want these types of coins, do your research and pay as little commission as possible. Look for a local dealer in your area.

3) Buying Gold and Silver in the Futures Market. To buy gold or silver in the futures market, you should have a solid understanding of how the futures market and futures contracts function. This can be a confusing venture for newcomers and there are much easier ways to gain exposure to precious metals. After doing your research, if you should determine that trading precious metals futures is right for you, get started by opening an account with an online discount broker. (I personally like Etrade.com and ThinkorSwim.com for low cost trading.)

4) Buying Option Contracts on Gold and Silver. Many individuals who want to gain massive exposure to gold and silver with relatively little money turn to trading options. While I am fond of this strategy, this is not something that you just jump into without doing your due diligence. There are many low-cost and low-risk types of option strategies to investigate.

After doing your research, if you should determine that trading precious metals options is right for you, get started by opening an account with an online discount broker.

5) Buying Gold and Silver futures through ETF’s. ETF’s can be purchased through an online discount broker, just like a stock. Usually you will pay less than $10 to buy and less than $10 to sell. But do your research as the two most popular ETF’s, GLD (the gold ETF) and SLV (the silver ETF,) have been riddled with complaints about improper hedging. However, if your goal is only to trade in the short-term, ETF’s can be fine. However, if your goal is longer-term protection from inflation, you will probably want to focus on holding physical metals.

6) Buying Precious Metals Mining Stocks. Gold and silver mining stocks can be one of the riskiest plays in the markets. Be very careful if you venture into these companies. While they can be highly profitable, they are prone to heartburn-inducing price swings. With that said, if you are intent on buying a gold or silver mining stock, simply open an account at an online discount broker and begin trading away. (Broken record: Always consult a financial professional before making any financial decisions.)

Conclusion

Personally, I believe that everyone should have at least a few weeks of living expenses saved up in silver bullion coins, followed by bullion bars. I also like to see gold holdings in highly recognizable low-cost bullion coins and bars.

In an upcoming teaching series, I will get into some of the specific gold and silver coins and bars to look for.

(For those of you who are interested in learning more about precious metals investing, I highly recommend that you sign up for our free monthly financial education webinar scheduled for this Thursday entitled: The Fundamentals of Precious Metals Investing. You can learn more and sign up for free by clicking here.)

Tomorrow: I will explain how you can diversify your six month liquid saving reserve through buying stable foreign currencies. I will share with you what my favorite foreign currencies are, and where and how to buy them.

Here at FTMDaily.com, we are working hard to create solutions for you during these difficult times of economic crisis. We invite your feedback and comments on how we may serve you better. Feel free to contact me directly at jerry@ftmdaily.com.

In The News Today…

1. GOLD RUSH: Growing concerns about the U.S. Dollar sent gold futures spiking above $1,500 an ounce for the first time ever.

2. DEBT TRAP: The U.S. national debt has now reached $14.3 trillion… and it is growing by the billions daily.

3. BLOOD AND OIL: Newly released government reports expose a link between oil firms and 2003 invasion of Iraq.

4. BIG BROTHER ALERT : Here’s one more way that the Feds are invading your privacy.

5. DUBAI A BUY?: Globe-trotting money manager, Mark Mobius, says that Dubai banking, property and services stocks are offering a buying opportunity.

Finally…

A new secret memo made available through the Freedom of Information Act shows that President John F. Kennedy demanded UFO files 10 days before his death. And now, new speculation from the Telegraph-UK on whether JFK’s assassination was tied to his “over-interest” in the UFO phenomenon… You can see the files and read more here.

Why So Serious?…

It’s time to laugh a little. Here’s a sampling from some of the late-night jokers.

“President Obama is celebrating Passover with a Passover Seder. After hearing this, Sarah Palin said, “Ah, so he IS a Muslim.” –Conan O’Brien

“Tax day is the day that ordinary Americans send their money to Washington, D.C., and wealthy Americans send their money to the Cayman Islands.” –Jimmy Kimmel

“Obama called on Americans to have more grandchildren. Probably so there’s more of them to pay off our debt.” –Jay Leno

“President Obama laid out his plan to reduce the $14 trillion national debt. Unfortunately for Sasha and Malia, it involves selling a lot of Girl Scout cookies.” –Jimmy Kimmel

Cartoon of the Day…

Until tomorrow,

Jerry Robinson – FTMDaily.com

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Jerry Robinson is an economist, published author, columnist, international conference speaker, and the editor of the financial website, FTMDaily.com. In addition, Robinson hosts a weekly radio program entitled Follow the Money Weekly, an hour long radio show dedicated to deciphering the week’s economic news.

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