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Gold and Silver Investing

Realtime Silver spot price
In terms of precious metals, this site is mainly focused on their use in and as coined money. However, a few words should be said regarding investing and trading. I look at gold and silver primarily as a long term investment. They are something to have around in case you need it. From that standpoint, I do not obsess with what the precious metals market is doing; by themselves, gold and silver have had value for thousands of years as money and as a store of wealth. In times of crisis they can be relied on as a medium of exchange since they are not dependant on a political situation for backing as is the case with money like the Dollar, Pound, etc.

Realtime Gold spot price
For those of you who chose to invest in that manner, be sure to take physical possession of the metal. If something happens, all the bars of gold won't do you any good if they are locked in some firms vaults and all you have is a receipt! Physical Posession can be in the form of bars or gold coin (see image at left below: 1oz Krugerrand Gold Coin). For smaller amounts, gold in the form of coins is very convenient. For large amounts, consider bars which are available in various weights either by metric (kilograms) or troy (pounds)

Another way to play it (in addition to keeping some aside for long term) is to do weekly trading. By weekly, I don't mean to imply any set schedule but refer to short term playing of the market. There are a few prices to be aware of. One of the most important is the spot price which changes throughout the day based upon the markets which react to world political and economic events. However, you rarely can buy gold or silver at the sport price. Afterall, the bullion traders would not be able to make any profit on the transaction if you could, and face it, that is what they are in the game for.

So, there are two more prices that you have to consider. One is the bid price, the other is the ask price. These are based upon the spot price and vary from dealer to dealer since each has his own rates set up. These prices are what the dealer will pay for the metal and the amount that he will sell it for.

Here's where the trading comes to play.

Lately, gold and silver have fluctuated quite a bit in short periods of time. Using this knowledge, you can "beat the spread" Let's look at an example. Let's assume the spot price for gold is $610 Often the difference between buy and sell prices is only a few dollars. At $610 an ounce, you may be able to buy an ounce of gold for $611.50 At the same spot price, you may be able to sell it at $607.50 If you buy at $610 (paying $611.50) the price of gold only has to go up $4 before you can sell for profit providing that you are not converting to physical metal on each trade. Many dealers have pool acounts set up where you can do exactly this. You never see the physical metal but still can trade it back and forth. The two charts above show the spot prices of gold and silver over the last 24 hours.

Before getting into the trading game, though, be sure to become familiar with the movement of the metals. Study the charts, look at trends, keep an eye on the news. Also study the firm that you will be dealing with. Familiarize yourself with all the terms and how they operate. Have questions? Call them or email them, most likely they will be quick to respond. There's an old adage that, although it is painfully obvious, bears repeating. Buy low, sell high.

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