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6 Questions to Ask Before Investing in Precious Metals

Gold Bullion
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6 Questions to Ask Before Investing in Precious Metals

So you have decided that you might be interested in this whole precious metals investing. Maybe, you are not sure what that entails or even really what it means. Are there things that you should look for? How is this all done, and what is the safe manner of investing in precious metals? Is it easy to do? Let’s take a look at the top 6 since there are so many questions. 

Gold Bullion
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Allocated Metals or Unallocated?

There are two types of metals, and it is important that you understand both types. Investing in precious metals can be fun and a safe way to save for retirement. There are ways to invest where your investment remains safe. Allocated metals are metals that the owner has proof of ownership and is the holder of the ownership title. They are unencumbered, segregated, and proof that they own the metal. However, unallocated metals do not come with this proof and can be fake. It can also lead to things such as investor groups selling more than what their metal is worth. If there is a bankruptcy or demise of this third party, the investors in unallocated metals become unsecured creditors.  

Physical or Paper?

When you invest in precious metals, you are investing in the physical metal. This means that you will have complete ownership of the metal. This can be in gold bars, coins or silver bars, and coins. However, with paper investing, it is important that you invest with companies that offer a great reputation as this is a little easier to forge. Proceed with caution. Paper gold such as gold certificates and future gold investments aren’t always backed by the actual metal. This means that investors cannot trade their certificates for gold in the future.

Where are my precious metals stored?

24 Karat Gold Coin
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Make sure to take note of where your precious metals are stored, as this is very important. Make sure there are proper security and insurance. Most storage providers of precious metals have secure and insured facilities.

What is the mark-up for buying the actual metal?

There is mark-up; obviously, dealers like Lear, are not in this for free. But, usually, it’s pretty low. Generally, around 2%-8% but can be higher for specific coins. When you are purchasing coins instead of bullion, there is a difference in what people are willing to pay. Coins are sometimes more valuable than the metal they are made of.

What are the ongoing costs?

The ongoing costs are management fees and storage fees. These vary from company to company.

Can I take Physical Possession myself?

So, you have purchased some gold bullion and coins, congrats. Yes, you can take possession of yourself. However, it is far more common for people with coins. And you will need a secure area to store them. This can be in a bank safety deposit box or in your own safe. There are other trade-offs as well, you will have to travel to the dealer, and you will most likely have to pay a higher mark-up than you would find other places.