Investing in gold and silver

the easiest way to invest in gold and silver -- by buying bullion, coins, and scrap. This can be done at a rate appropriate to one's income and interest.

Humans have always had an eye for things that glitter, whether those objects be stones, metals, or organics. Ironically, the most hallowed of treasures have proven to have qualities that made them more useful for industry than for ornamentation. Nothing’s harder than diamonds, so they make great drill bits, blades, and grinding powders. Silver and gold have wonderful conductive properties; nothing conducts electricity better than silver, and both metals are both strong and ductile. Gold never tarnishes, even in salt water; silver does, but that is its strength. Its ability to chemically react with many other elements makes it ideal as the basis of most compounds used in modern photography. Silver and gold (not to mention their cousins platinum, palladium, and rhodium) have always been held dear, but once the industrial revolution hit and Wall Street roared to life, they became hot industrial commodities.

Back in 1980, gold hit an all-time of $850 an ounce. Silver tagged along, rising somewhat. It really took off, however, when the Hunt brother of Dallas (Buckey, James, and Lamar), managed to corner the silver market and drive the price to over $50. At one point, the Hunts became $195 million richer every time the price went up by a dollar an ounce. By the same token, they lost $195 million for every dollar the price of silver dropped. Not surprisingly, they overdid it and eventually the price of silver tumbled to less than $11 an ounce, virtually overnight. The Hunts fell hard, losing a great deal of money, above and beyond the slap on the wrist the got from the government. After all, cornering the market was illegal. By the turn of the millenium, silver had stabilized at about $4.50 per ounce

Warren Buffet and others have suggested that silver alone may rise to $20 per ounce by 2005, and where silver goes, gold usually follows -- and vice-versa. The Hunts aside, you needn’t be a millionaire to invest in either silver or gold. These days, coin dealers and the federal government have made it easy for you. And if you’ve a sharp eye, you can find a bit of good silver in everyday circumstances. What’s the secret? Read on.

Dribs and Drabs

Who says you have to buy silver and gold in bulk? Nobody, that’s who. You can buy pounds are a time, if you have the cash, but you can also invest at a rate appropriate to your income and interest. One easy way is by buying bullion and coins. The term “bullion” refers to any small, portable form of metal, which may take the form of bars, ingots, grains, or coins. Indeed, most gold and silver coins may be treated as bullion “in the round.” Gold was rarely used for coinage after the late 1800s, and silver was removed from US coins in 1964. Anything minted earlier, however, has a significant value simply as precious metal. Coin gold is very pure, but coin silver, as it’s called, tends to be 90% pure (as compared to sterling at 92.5%); the balance is copper. Typically, coin silver is worth about 75% of the current price per troy ounce (there are 12 troy ounces to the pound). Coin silver is easily obtained through auction services or at your local coin shop. Remember that some bullion and most coins have a collectible value as well as a pure precious metal value. If you’re collecting coins only for silver or gold, please be sure to pick only the most worn coins available. Anything in better condition should never be melted down. Remember, as a coin, its value is likely to increase as the years pass.

Since 1986, the United States government has been providing its citizens with an attractive and simple way to obtain silver and gold. They do this by minting bullion coins of extreme purity. The gold eagles (so named because of the eagle depicted on the reverse) come in several denominations: $5, $10, $25 and $50. In reality, they’re worth quite a bit more, and their value fluctuates with the market. Even the tiny tenth-ounce $5 pieces are usually worth more than $25, and they’re exceedingly easy to store in large quantities. The lovely $1 silver eagle, which weighs a troy ounce and consists of 99.93% pure silver, typically goes for $6-10 from a retailer. Their silver value averages about $5; the premium comes from their pure beauty as coins. Platinum eagles depicting the Statue of Liberty on the obverse have been available since 1997, but are for serious and wealthy investors only. These coins come in $10, $25, $50, and $100 denominations. An ordinary tenth-ounce platinum eagle is worth about $75; $100 eagles are worth 6-10 times their face value. Like gold eagles, they can easily be stored in large quantities in a small space -- or example, a safe deposit box or safe. Whatever form of government minted-bullion you choose, you can buy it from dealers by mail order or in person, or you can get it directly from the U.S. Mint.

Scrap and Garage Sales

Gold is scarce in everyday life, but this isn’t necessarily the case for silver. Bullion and coins are just two ways to collect it; you can also collect it by buying sterling silver utensils or objets d’art. Where can you find them? Try garage sales, flea markets, estate auctions, and online auction sites. Old sterling pieces have high collectible values, but modern sterling usually does not. Sterling silver can usually be identified by the word “sterling” stamped somewhere on the object, or by the number code “925” (meaning it’s 925/1000ths pure silver). If the object lacks these marks, it’s probably silverplate. While buying silverplated objects and restoring them can be quite enjoyable, these objects aren’t worth nearly as much as sterling. The silver in silverplate is extremely pure, but it’s merely a veneer over a base metal such as steel.

Occasionally, you might be able to acquire scraps or fragments of silver too small for normal use. Take them and add them to your silver horde; you can sell them enmass once you’ve accumulated enough metal to make selling worth the effort. And don’t ignore those broken or damaged items: flawed jewelry and cutlery are especially common. Many people recognize the value of a sterling object if it’s unmarred, but may lose sight of its value if it isn’t in perfect shape. Recently, I purchased a broken sterling fork at a garage sale. For days, I tried in vain to fix it; then it occurred to me that I was trying to mend 1.3 troy ounces of very pure silver worth more than $5 on the market. I got it for 25 cents, about one-twentieth of its actual value. The seller had failed to realize its value and, at first, so had I. Once I remembered that I had only one utensil of that type anyhow, and had proven to my satisfaction that I’d never be able to fix it properly, into my silver hoard it went.

I’ll be looking for more sterling this weekend, and probably will until garage sale season is over. Then I’ll move inside to the flea markets; they can be excellent sources of both silver and coins. Who knows: I may find that low-priced silver ladle, or a dinged teapot worth much more than I’ll pay for it. Whatever the case, I’ll enjoy the chase. See you there!