How to Invest in Silver and Gold: a Beginner’s Guide to Coins and Bars

Last Updated on June 15, 2021

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Many investors first starting out wonder how to invest in silver and gold. Silver and gold prices are likely to continue to rise in near term and further than that for a lot of reasons: concerns about inflation, excitement about the industrial uses of these metals, and the leveling-off of mining yields are all at play.

What exactly should you do about it? What is the best way to go about investing in the precious metals? 

The traditional way is: buy some silver and gold coins or bars. Then store them in a safe place and keep track in the movement of their value. For gold this can be an expensive way to get started, though. For example, the American Buffalo 2021 one-ounce gold proof coin is selling, as these words are written, for $2,790. If you’re interested in silver, you can buy an analogous coin for about $73.

Please be aware that there are unscrupulous coin dealers, who will try to unload on the the latest “commemorative coin” with the engraved likeness of a celebrity. These heavily marketed issues sell at a huge premium to the physical metal and soon lose a lot of that value.

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Silver and gold bars don’t have the ceremonial look and packaging of the coins. If you are looking at these metals purely as an investor rather than as a coin collector, you may want to shop around. Photo credit: Shutterstock.com

Silver and gold bars don’t have the ceremonial look and packaging of the coins. If you are looking at these metals purely as an investor rather than as a coin collector, you may want to shop around. But as of this writing you can buy a 10 oz silver bar for $322. Gold? Plan on buying one of the same weight for $20,400.

Of course, when you acquire an investment of such value you’ll want to keep it secure. For a modest coin collection this can involve a safe deposit box at your local bank, for example, or an at-home safe. It isn’t prohibitively expensive in either case. But the costs of any security arrangements you make will be another risk/benefit calculation for you to make. There is also the problem of liquidity: how easy will it be for you to find a buyer for your coins and bars when you do need to convert some or all of them into cash?

For security and convenience. if the physical possession of the metal isn’t critical for you: consider other ways of gaining exposure to the price move.

Exchange Traded Funds (ETFs)

Exchange-traded funds exist for both gold and silver. They are both liquid and convenient. No bulky bars will be delivered to you. An ETF is designed to track the price of its underlying asset, though there is generally the possibility of tracking error.

In particular, if you’re going to go this route, the The Goldman Sachs Physical Gold ETF (AAAU) is worth your attention.  It is structured as a grantor trust, which provides some tax protection, and  the physical gold is stored in vaults in London.

Tip: a variant on the ETF is the exchange-traded note. The ETN is in essence a prepaid contract, so any risk of tracking error is removed.

Equity in Miners

The common stock most closely tied to silver and gold are those of the companies that mine these metals, such as Canada based Wheaton Precious Metals Corp. (NYSE:WP). WPM ended the first quarter at $38.21, and is as I write near $48, after first quarter results that showed record-breaking revenue above $320 million and solid operating cash flow.

Taking an interest in any specific mining company comes with idiosyncratic risks that require extensive research into the company’s history and management team. If you aren’t up to that, here is one more suggestion about how to invest in silver or gold. the mining company sector has its own ETFs, which helps limit the risk that, just for example, any one firm will become the next headline victim of a ransomware attack or an embezzler.

Among the most highly regarded ETFs in this space are two from Van Eck:  Van Eck Vectors Gold Miners ETF and the Van Eck Vectors Junior Gold Miners ETF. (Respectively GDX and GDXJ).  The two Van Ecks track the large-cap and small-cap gold miners respectively. The former is a more conservative, the latter a somewhat more aggressive play.