What is the Best Gold and Silver to Buy?

It’s tempting to answer this question by simply saying: any.

Any gold, any silver, in any quantity, at any time. Gaining more exposure to all the benefits precious-metals ownership conveys is almost never a bad idea.

But of course it isn’t quite that simple, because what does best mean, anyway? Different things to different people. Everyone will likely have their own definition, based on the relative weight given to any number of factors — personal preferences, aesthetics, convenience, cost, timing, market activity, and investment goals, among others. You need to take all of them into consideration.

Gold and silver bullion are typically sold in three forms: Bars, coins, and rounds. Each offer varying advantages

The form of precious metal that you buy is far less important that the fact that you buy precious metals, period: They all offer the same core benefits

Your personal preferences and priorities (e.g. How much you prize the design beauty of a coin vs. a plain bar) will determine what the “best” gold or silver to buy it for you

If you want the most bang for your investment buck, buy the cheapest per-ounce metal you can, bearing in mind the spread, the difference in price between the current highest “bid” (offer to buy) and current highest “ask” (offer to sell).

One interesting way to leverage your precious metals purchases is to buy coins with a seigniorage -- the cost the issuing mint adds to a coin’s underlying metal value to cover their production costs and add a profit -- that has a history only going up. When seigniorage fees get raised (the American Gold and Silver Eagle’s have only ever gone up, never down), it raises the prices of already-issued coins as well

Are Precious Metals for You?

Where do you wish to place your hard-earned investment dollars?

Some would answer in stocks and bonds. Others are drawn to real estate. Or perhaps you prefer collectibles like rare stamps, antique furniture, or 1960s muscle cars. There are surely still people who keep cash as cash, in the form of savings accounts, CDs or even stuffed under the mattress. And of course there are plenty of us who believe in the unparalleled enduring value of precious metals.

investors will opt for a diversified mix across many asset classes. Indeed, those who can afford it might say all of the above.

But the most savvy investors recognize that precious metals provide unbeaten “portfolio insurance.” When nearly every other asset class is falling, gold and silver tend to rise.

Gold and silver tend to serve as a powerful flotation device for your overall financial wellbeing when stocks, bonds, and real estate, which all tend to move in the same direction at the same time, all serve as anchors. You should own some if you can.

But the “best” gold and silver for you to buy is up to you.

Personal Preferences and Aesthetics

First, which do you prefer?

Gold has been the king of metals for millennia. It’s been highly prized as a store of value and has never gone out of fashion. It’s aesthetically pleasing, won’t rust or tarnish, has been stamped into coins and crafted into fine jewelry, and has served as a medium of exchange for most of civilization (and, in a pinch, can still be used that way).

Although silver does tarnish, it meets most of the same criteria. It has an aesthetic attraction that some find equal to that of gold.

And with both, there is a simple pleasure to be had in holding a heavy, shiny coin in your hand that you just can’t get from paper money.

Second, what’s the best form for your gold and silver, according to your own guidelines for making that judgment? Aside from jewelry — which is beyond the scope of this discussion, but offers significant and unique benefits you can read about here — the choices generally come down to coins, rounds and bars.

Coins, (also referred to as sovereigns when issued by national governments as legal tender), are widely recognized around the world. Many feature beautiful designs. They are readily convertible to cash. They ring when dropped on the floor and can be carried around in your pocket. They come in both gold and silver and are subdivided into bullion coins and numismatics.

Bullion coins are those issued in the modern era, from about the late 1960s to the present day. They are valued solely according to their metal content and don’t command any premium as collectibles. They are highly liquid.

Numismatic coins are those minted before the modern era, which have added value because of their age, rarity, condition, historical significance, or some combination thereof. They are a specialized and volatile market inhabited by two primary kinds of market participants: savvy, longtime collectors who tend to know what they are doing, and novice buyers who purchase (and almost invariably get ripped off) because of television or internet advertising.

You can easily avoid the many pitfalls of numismatics by simply sticking to bullion coins.

Rounds are coin-like. They are the same troy weight and purity as a comparable bullion coin but are not legal tender. A subset of rounds are commemoratives (or medallions) that are minted in limited editions to mark some specific event. They also contain pure gold or silver. Rounds tend to be less expensive than bullion coins per unit metal but are reasonably liquid. Commemoratives are often merely a marketing ploy, given an artificial scarcity that allows the manufacturer to charge an additional premium that is likely undeserved.

Bars conjure up images of those 400-oz. chunks of metal that are piled high in Fort Knox and other depositories. But in fact bars come in a wide range of sizes from 1 gram on up. Bars are generally the cheapest way to buy gold and silver in bulk, but are the least liquid. Since they don’t usually have the fine artwork of coins, it’s important to make sure that they are stamped with the mark of a reputable mint.

Convenience

If it’s important to you to be able to acquire and liquidate your gold or silver holdings as quickly as possible, then sovereign coins are the way to go. They’re instantly recognizable worldwide and very portable. They can be bought online with a minimum of hassle. If you have a same-day need for cash, with no regard for price, they can probably be sold over the counter at a local coin shop. You can carry coins with you when you travel — provided you’re willing to take the risk — as an instant source of cash in foreign countries.

Another aspect of convenience is your storage capability. Gold is obviously far more valuable than silver per ounce. You can keep a lot of gold in a safe deposit box that would be overflowing if you tried to fill it with a dollar-equivalent amount of silver.

Cost

You can only buy what you can afford. As noted, gold sells for a lot more than silver. If you can buy a 1-ounce gold coin, that’s probably what you should do. If your budget only allows for 10 one-ounce silver coins, that’s a good investment, too. But be aware that gold coins (like the Canadian Maple Leaf) are also available down to 1/20 of an ounce.

Cost will also partly go toward determining what form of precious metal you purchase. Bullion coins are the most liquid but the most costly. If you just want to acquire gold or silver by weight, then rounds or bars might be the best bet.

When assessing cost, you’ll also want to consider whom to buy from. A 1-ounce American Gold Eagle’s price will vary from vendor to vendor, according to what each is charging for a premium. You can shop around for the biggest bargain, though this should not be your only criterion. Other things matter—such as dealer reputation, shipping and taxation, buyback policy, and so on. As a general rule, you’ll do better on cost by buying online from a dealer who does a lot of bulk business than from a local shop that moves only a few coins a day.

Timing and Market Activity

It is impossible to perfectly time a market, and the precious metals market is no exception. All manner of investment hucksters, from the big banks all the way down, spend marketing fortunes to convince you they have the one and only effective short-term-markets crystal ball.  It’s a fool’s errand to think you could identify the exact best moment to buy or sell your gold and silver over the coming days or weeks or months.

But this is not to say that you should pay no attention to market activity. The time to buy is probably not when everyone is rushing to buy. That’s more likely to be a good time to sell, if you have a mind to. Conversely, the best buying opportunities come when the market has been dead in the water for some time; one incontrovertible lesson that the past teaches us is that gold and silver never go out of fashion forever.

If you’re data-oriented, and have an analytical mind, you can pore over the historical trends of gold and silver prices. The records go back hundreds of years, although you will find long periods when nothing happened because the price was government-controlled. But trends, defined by peaks and valleys, will be evident, and they may help you determine whether precious metals are over- or undervalued.

One unique and highly predictive tool is the gold/silver ratio, or GSR. This will tell you how gold buyers are valuing the metal in relation to silver buyers. Over time, it tends to revert to a mean. When the GSR is over 80, this has been a reliable signal that silver is undervalued and could be the better buy.

Goals

Finally, what are your personal investment goals?

Perhaps you have some free cash, and wish to invest in precious metals as a speculation. Clearly, there are people who do this, even on a relatively small scale. You’re welcome to try, but we wouldn’t recommend it.

For one thing, we could be at the beginning or end, or in the middle of a long-term trend. There’s no way to know. You take your chances, and all you can do is hope you’re on the right side of things.

For another, speculation is gambling, pure and simple. It’s like buying into a game of Texas Hold ‘Em in Vegas. You might hit on that magic combination of skill and luck, and you might win. But you may well not, because your opponents may be more skilled, luckier (or both) than you are.

Once you enter the precious metals casino, you will be playing against the big banks and the giant funds. To continue our poker analogy, they’re able to place bets large enough to move the market, and thus they determine its outcome, from day-to-day or even year-to-year. You have no way to know whether they want the price of gold to go up or down, and for how long. You will be carried along on the current, in whatever direction they decide.

Ideally, you understand that your goal in buying gold or silver should be to create a store of value for your wealth, however much it may be, and to own your own personal, in-house inflation hedge. That is the way precious metals have functioned for millennia. As the old saying goes, an ounce of gold bought a fine suit of clothes in Roman times, and it still does today. It is a time-honored insurance policy against the ongoing debasement of paper currencies. Gold endures through inflation and deflation, through the ups and downs of business cycles, and even through real financial calamities.

The “best” gold and silver to buy is that which you intend to hold for the long run, as that private insurance policy.