I'm thinking about turning some cash into metal. Specifically I'd like 1/10oz gold and 1oz silver eagles (or maple leaves).

Something I can't figure out is the premiums dealers are charging, specifically for silver. Right this moment, silver spot price is $16.94. I'm finding 1oz coins for $19.33, about a 14% markup.
I know eagles usually sell for more than spot, so I found a quote from a buyer for $17.37 right now. That means the real markup is more like 11%, but that's still pretty high no? How am I supposed to make any money if I have to take a hit on both ends of the transaction? How can I buy PMs without wasting my gains on dealer premiums? I'd have to hold for several years just to break even.

PMs is not about flipping for a profit.

Or buy only in private sales, where the seller wants to avoid paying a dealer premium as well, and you might get spot.

Of course. But I'm not trying to lose any of my hard-earned money either. With a appreciation rate of about 2%, I may need to hang on to the coins for decades to avoid losing money. That's not smart, right?

You don't buy PMs to make money, you buy them to preserve and transport wealth.  Some would argue that they don't preserve wealth terribly well either, but they would do better than other easily transported vehicles.

You can avoid the premium by buying privately as mentioned above.  Otherwise it is just another cost of hedging with PMs (in addition to the lost capital appreciation or income the funds could be earning elsewhere).

You have to pay taxes on any gains, so there is always something working against you.  

The 1/10 gold has huge premiums.  

It's pretty stupid to try to make money flipping PM's    Especially, when you don't have much money to begin with.   That isn't what it's about.    

Otoh, you will be able to get spot or better,  if Slv or gold goes up.     The physical metal begins to dry up, and premium spread increases.    It was interesting to watch, during the last bubble.

To be clear, I'm not trying to flip PMs. Just trying to have some cash in a form that's protected against inflation, and is accessible. (kinda) The point is to preserve value though, not put a dealer's kid through college. I don't know when I might need this money (maybe both cars explode tomorrow, tree falls on my house, etc.), so I don't want to have to hold on to it for years just to break even.

Called a local coin shop today, and their markup was 4.6% on gold ounce coins, $4 on silver which seems a bit high, but reasonable. However, when I asked about 1/10 eagles, he told me that some law requires him to charge 16% markup on fractional gold!?! Has anyone ever heard of that?

Yeah, it's his law of "gots to make dem premiums".

Of course not, but there's no need for you to be ignorant about these things.  You can buy at close to his wholesale price online.    Obviously, he isn't going to deal with people like you, unless there's a profit in it for him.   This isn't some secret "gold bug" knowledge, is just good old common sense.

Fractional gold has markup.  Stop being poor, and buy 1 ounce coins.   It's not that much money these days.    433 loaves of bread. (which is probably just the same as it always was)

Yes, I'm aware that things can be bought online. Which sites do you suggest? Prices online I've seen aren't THAT great after factoring in that wire transfers and shipping aren't free. (Unless you're buying $10k+)

You're definitely right about the 1oz coins. That seems to be the best way to collect gold. Anyone want to buy a bunch of air-tites for 1/10 ounce coins?

I've used apmex several times.  Occasionally apmex has better prices posted on ebay auctions.

jm bullion and provident metals are cheaper than apmex
shop around
ebay apmex can be cheaper than apmex website

I recently placed an order off SD Bullion. They have $7.77 shipping and 3% credit card processing fee, or wire transfer to avoid that. (Which costs me $20, so orders over $670 it starts saving money.)

The reputable ones have already been cited.    Shipping is always free.    You gotta shop around for the deals.    Sometimes, their EBay store is best.     Stick with the well known companies, ask here if you are unsure.

$0.15 over spot. They are also one of the largest PM dealers in the US. BayPreciousMetals (BPM) is a subsidary of Coins N' Things, who has provided billions to the U.S. government.

http://www.coinworld.com/news/precious-metals/2016/01/ebay-branded-precious-metals-enter-market.all.html

https://rover.ebay.com/rover/1/711-53200-19255-0/1?type=3&campId=5337559805&toolId=10001&customId=j0n749ruk200zk8a00004&mpre=http%3A%2F%2Fwww.ebay.com%2Fitm%2F332162436449

PMs should not be considered a primary investment like a 401k. Over the long duration stocks have massively outperformed PM, which historically have barely kept up with inflation and are notorious for massive price fluctuations fueled by greed and fear. If your PM investment accounts for more than single a digit of your net worth (i.e. It should be less than 10%) you are doing it wrong. It's a hedge against hyper-inflation and currency devaluation. It's also a compact and portable form of wealth and is a way to hold wealth outside of the governments control. Ppl have been hiding and burying gold since the creation of civilization thousands of years ago.

To answer your question yes premiums will eat up your returns, this is why people who think they are going to flip it for a profit are morons. It will take years just to get your preium back. IMO PMs should be bought with the intention of holding it for the long haul, preferably never selling and passing on to family members why you get elderly, with the instructions for them to do the same.

Based off of what research?

As shown by the graphic below, gold has had a better run than stocks. 1971 is when gold and the U.S. dollar were de-linked by Nixon making the time frame chosen relevant and not cherry picking. Anytime before 1971 and "technically" the gold and dollar were the same. While this chart is from 2015, a chart incorporating the latest 2 years might change it a little, the market could also crash in the next year as well. It at least encompasses 45 years.

This actually shows a portfolio that has 20-30% decreases yearly volatility (x-axis) but you still get the same annual return (y-axis).




https://www.youtube.com/watch?v=K70aQh9ptpU&t=855s

I have no clue what that chart is trying to represent and Im a freaking engineer that deal with graphs and tables every day.

Be careful where you get your info on investing in PMs from. There are people who have a vested interest in making PMs seem like a mystical investment that will make you uber rich. These people tell you to buy when the price goes up because its "going to the moon!" and when the price of PMs goes down they say "no is the perfect time to buy at reduced prices" funny how no matter the price they say you should buy...thats because they make money off selling PMs, not actually investing in it.

I get why you pick 1971 as a starting point to track gold as this is when nixon ended the gold standard, its also conviently the lowest price point. Congrats to those who bought in 1971, but what about those who bought in the 1980s, they saw 0% growth for THIRTY YEARS!

Just for fun I found the historic returns of the stck market from 1971 - 2016
http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html

Gold hit the market at $65 in 1971

if you bought $65 of gold in 1971 it would be worth $1,250 today
if you bought $65 of diverse stocks in 1971 it would be worth $6,000 today

Dont get me wrong, im not saying never buy PMs, i personally have some, but def keep it a small portion of your wealth. If you want to retire wealthy a 401k with company match is hands down your best bet.

Gold is a bet on fear, greed, and an unstable future. Stocks are a bet on prosperity, capitalism, and a bright future.

I say this not to mock you but to help you. I had the "gold bug" at one point, I was on kitco and other forums where it always seemed like the world was coming to an end looking back on it almost seems like a cult or a pyramid scheme. You buy into these lies, the price tanks and you realize the only way out it to convince more people to buy in to is so prices rise and you dont feel so miserable about your investment haha. Luckily I got in fairly early so i was able to dump my PMs holding and break even. I used that cash to pay off my mortgage, which over the last year or two has literally saved my thousands of dollars in interest, it was the best decision I ever made!


if you want to invest in PMs its your call, i personally only kept a handful of coins which I chose not to sell because of collectability and because some were given to me by family members so I have a strong desire to pass those coins onto my children and grandchildren.

Two fallacies.

Most investors fail to match the market.

The market fails to account for the capital gains taxes that must be paid annually in order to match the "market" as new equities are offered and old ones go bankrupt or are delisted.

Also, I have no clue where the numbers com  your link come from. With stocks, there can be some creative accounting too get any number for returns.

But I agree with your point. It should be no more than 30 percent of networth. I am sure Venezulians, Germans, Zimbabwians, etc. all regreted having wealth outside of the system...

Precious metals tend to go up when the economy goes down.  Don't look at them as a way to make money, look at them as a backup or hedge against a poor/failing economy, particularly one where your other investments may be losing value.

I know I'm bumping up an older thread, but it's what I'm needing to understand.

So from a numismatic stand point some coins can be worth more than just the PM. For instance the 99999 pure Victory in the pacific coins.

Gold with a 10 year commitment to hold on to it is better than any savings account for your kids right?

I agree with others who have said metals aren't generally a smart "investment". However the last time I bought a boatload of metal was around 2008-2009, flipped it for a 300% profit in under 3 years. "Smart" is relative...

I went a tad overboard on 1 ounce foreign and slabbed coins for a while, then bought a tube or so of eagles from APMEX when they had them on sale at $360 each. Tapered back now, offloaded the foreign stuff and focus primarily now on walking liberty halves and mercury dimes. The foreign stuff sold well and I netted a bit of profit in a short time but that stuff really seems to go in trends.

I chose the mercs and halves because they're generally faked much less, to me they're more historically significant, I pay a small premium over spot(buying local from a reputable dealer, 1-2 tubes at a time) and they'll be easy to divvy up or sell in bulk when the time comes. That's just me though. I personally don't even take gold into consideration at the small amounts I'm investing. Too many fakes and probably slightly fewer buyers, or so I would think.

I see a lot more silver being offloaded in the EE than gold for what it's worth.

You'd still lose money.  Your PM investments have to beat both inflation AND that hideous buy/sell spread to make money.  They just aren't designed to do that long term.

PMs are a fine SHTF hedge but they are an absolutely horrible investment.  Stocks and Bonds downright rape PMs over the long term.  It's not even close.

If you are worried about long term appreciation or losing money then PMs are not right for you.  If you want to speculate short term or are worried about SHTF, then by all means get some and don't sweat the premium.

Neither of those things are necessarily fallacies.  You easily buy funds to match the broader market and there are plenty of containers out their like IRAs and 401ks to defer the tax liability to the end just like any PM you hold long term.  

An IRA/401k with index funds is pretty standard stuff.

Answers above.

Thank you for a great reply.