UPDATE: We’ve been receiving a number of common questions from first time gold and silver buyers recently. So we thought it worthwhile to dig out this old post of ours from 2012 and update it. We’ve added a few new questions that we didn’t have in there before and generally tweaked it here and there too…
Buying precious metals can be a confusing project to embark on. In fact that was one of the reasons we set up Gold Survival Guide in the first place. Before we even started to offer any bullion for sale most questions we received were along the lines of what, where, how and from whom to buy?
(In case you don’t know our history we started out just writing about gold and silver from a New Zealand perspective. It wasn’t until we received mainly questions about buying physical bullion in NZ that we focussed on this area and then actively sought out deals with suppliers for our readers.)
Anyway we still get plenty of questions from first time buyers and so we thought it might be useful for you to see some of the most common questions and our answers. So here we go…
In simple terms the spot price is the cash price of a commodity like gold or silver, at a given time and place. It relates to large bars of metal stored in certified warehouses where usually just the receipt of ownership changes hands not the physical metal.
However, realize that when buying smaller bars and ingots, the spot price doesn’t include other costs that may be involved such as: manufacturing and minting costs for bars, ingots or coins; seller mark ups; storage costs; or delivery and insurance costs.
So this is why prices are quote as “spot + 3.5%” for example.
(If you wanted the pedantic answer it would be that spot doesn’t actually exist. There is only “The Bid” – what someone is prepared to pay. And “The Ask” – what someone is prepared to sell for, and one has to meet the other. The spot price is just a theoretical price midway between the 2).
Also bear in mind that the spot price generally reported in the media is usually in US dollars. So when buying precious metals here in New Zealand the “spot price” is first converted to NZ dollars using the prevailing USD/NZD exchange rate and then the premium of say 3.5% for example is added to that. Here’s an article we wrote discussing this topic:
And you can track the NZ dollar gold and silver price on our prices page.
Plus there’s also historical charts of both on there too.
Will this manipulation continue on? Can they make the gold price crash, how much control do they have over the gold price in the long term? And if this manipulation is on-going how can I trust gold/silver to hold or increase in value? These a few of the questions that have been cropping up recently. With the LIBOR scandal breaking the concept of market manipulation seems to be the word du jour at the moment
No one really knows the answers to these questions, just as no one knows to what extent gold prices are manipulated or “managed”. Here’s two quite contradictory opinions on manipulation that we posted a little while ago:
It makes sense to us that “the powers that be” do not want an explosion in gold because that would alert many more people to the failings of the current monetary system.
So who knows how much control the powers that be have over the prices. We know they fell significantly back in 2008 but the precious metals were the first to rise afterwards as well and didn’t take too long to regain their previous levels.
In terms of if this manipulation is ongoing how can we trust them to retain or increase in value compared to fiat currency? We only have history as a guide for this. Assuming manipulation has been going on for the past decade, gold and silver have steadily increased in value nonetheless during this time (or rather paper currencies have continued to fall). So it could argue that all things being equal they will continue to gain in purchasing power in the future.
Some have called this a “managed rise”. So if there is manipulation, it seems there is a limit to how much the prices can be controlled. We have seen a fair amount of evidence which does suggest there is about a 100 to 1 ratio of “paper” gold versus actual physical gold. So this derivitisation of the gold market could help the powers that be “manage” the price to some degree. Of course we don’t profess to know all the answers, no one does!
We get this question a bit. But as we’re not financial advisors it’s not our role to tell you how much paper wealth to convert to bullion. We simply say consider your net worth and decide how much you want to “remove from the system” and allocate to physical bullion with no counterparty risk.
Then you could also consider splitting this amount into say, for example, possibly thirds. Grab a position if you don’t have any bullion, but keep some powder dry in case of a dip in prices. You can then also consider dollar cost averaging. Which is to buy on a set day of the month regardless of the price. Or every 2 months or 3 months or whatever your preference is and your budget allows. Overall this not only removes the emotion of buying but should give a decent overall entry price.
Here are a few of past articles that may be of some help if you want to look at timing your entry: http://goldsurvivalguide.co.nz/is-now-a-good-time-to-buy-gold-in-nz-dollars-part-2/
Understanding exchange rates when buying: http://goldsurvivalguide.co.nz/avoid-worrying-about-the-nzdusd-exchange-rate-when-buying-gold/
Some simple methods to determine lower risk times to buy: http://goldsurvivalguide.co.nz/nzd-gold-and-silver-a-beginners-guide-to-technical-analysis/
Or if you prefer to watch and listen than read, here is the video version of this article: http://goldsurvivalguide.co.nz/gold-and-silver-new-zealand-a-beginners-guide-to-technical-analysis/
This really comes down to individual preference. We see people who either buy all gold, all silver, or a mixture of both in varying amounts. We’ve actually written two separate articles outlining some of the reasons for buying each metal that still apply today:
In the Why Buy Silver article we outline some of the reasons as to why silver potentially may have more upside than gold. Although history (including recent history in the past few years) also show that when both metals fall silver usually falls further than gold.
Plus check out this video for more on this topic:
Last month we also read an interesting article by Bron Suchecki where he analysed the performance of gold, silver and various combinations of the two. We can cut to the chase here and say that this shows that a 50:50 mix actually looks like a pretty safe bet over various time periods.
Yes as gold and silver prices vary every minute of the day, in order to lock in a price you need to make payment the same day.
However in times (like now) where there is high demand and delays in delivery of silver, we have a supplier with an option to lock in a silver order with a 20% deposit and then pay the balance a few days before delivery is due. If this is of interest then just mention it when you request a silver quote.
The vast majority (say 99%) pay via online banking – credit card is not a good option as you will have to pay more due to the card processing charges.
You can pay cash over the counter but this is dependent on what is in stock. So you need to contact us first to get a quote – not just show up at the suppliers premises.
Bullion is shipped via courier fully insured right up until you or someone at your delivery address signs for it.
The courier doesn’t know the contents of the package (it is plain) and also the package goes from the supplier to the depot first and then is delivered to you by a different courier to help ensure they don’t know the contents. But it is at the supplier’s risk until it is signed for it anyway.
Yes it can be shipped to a work address. In fact that is often preferred given it is a signature required package it’s more likely they’ll find you at work during business hours than at home.
On clearance of funds generally about 4-6 days later. Orders are not sent on a Friday to ensure the goods aren’t sitting around a courier depot over the weekend. However depending on demand this can vary considerably (as it is currently where there are significant delays) so check when you place your order.
We’ve actually answered this in an article or 2 before…
PAMP Suisse Gold / Silver vs Local NZ Gold / Silver: Which Should I Buy?
All the suppliers we use will buy their products (and in fact even some of each others) back. There is also a ready market on the likes of Trademe for gold and silver bars and coins. Also our guess is also that if the precious metals bull market continues the likelihood is that there will be more buyers of gold and silver in the future coming to the party a bit late in the piece. So you could make an argument that as the precious metals bull market proceeds it will also be easier to sell your gold and silver than it is now.
Yes – you’ll pay more than the spot price when you buy and less than it when you sell it back (unless you sold on say Trademe or privately you could get more than spot price then. Have a look at our FAQ page – the last question answers this one. And there might be some other useful information on there for you too.
There are a number of options available. We detail a couple of the most common ones here on our Gold and Silver Storage page.
Yes, it applies to them regardless of the form – as long as purity is:
• gold not less than 99.5%
• silver not less than 99.9
From the IRD website covering GST exemptions:
Supply of fine metals
Fine metal is any form of:
- gold with a fineness of not less than 99.5%
- silver with a fineness of not less than 99.9%
- platinum with a fineness of not less than 99%.
The supply of fine metal is an exempt supply, such as any sale of fine metal by a dealer, or anyone importing fine metal.
Exception: When newly-refined fine metal is supplied by a refiner to a dealer as an investment item, it is a zero-rated supply.
Local gold and silver bars/ingots are stamped with the suppliers “hallmark” and with either 9999 for gold (four 9’s or 99.99% pure) or 999 for silver (three 9’s or 99.9% pure). Also, in terms of ensuring purity of supplied product the local New Zealand suppliers we use regularly exchange metal with other companies locally and in Australia and so when this happens the metal is assayed again. So if there was ever a problem with purity they would be found out before too long and as reputation is everything, this would put them out of business. They are family owned and run businesses, conservative by nature and have been around for over 30 years, supplying precious metals to private investors but also to Jewelers in NZ.
Some overseas products such as bars from Swiss Refiner PAMP come with assay certificates and individual serial numbers. These cost more than local gold and silver. For example for gold, another $45 per 1 oz bar more and for silver, a further $50 per 1kg bar. These are more readily exchangeable overseas, so depending on where you intend to sell them, may be a better option for you.
Well, there’s a few of the questions we’ve had lately. There are a few other common questions answered on our FAQ page too, so check that out if yours isn’t answered above.
Still have questions you’d like answered?
Leave a comment below or fill in our contact form and we’ll see what we can come up with. Bear in mind we are not financial advisors so we won’t give specific advice to you but if we get common questions of a more general nature we are happy to share our opinions. Or pick up the phone and call 0800 888 465 and ask away!
If you’re ready or almost ready to buy then head over to our product page. You can request a quote from there. People often do this just to get a feel for how things work.