How to Buy and Sell Physical Gold and Silver, Part 2

This is part 2 of my interview with Doug Eberhardt, author of Buy Gold and Silver Safely: The Only Book You Need to Learn How to Buy or Sell Gold and Silver. As with yesterday's post, I'll include my questions in bold/red and Doug's answers below each one. And at the end of the post, I'll add in some commentary to add perspective to why I asked the question and/or what I think of the response.

We ended yesterday with Doug telling us the types of items he recommends people buy when they purchase physical gold and silver. Today, we get into detail on these, especially where to buy and a bit about how pricing works (more on this in the next post).

Assuming I decide I want to buy one (or more) of the above, how do I locate a reputable place to buy them? And can you give me some examples of the "best" places to buy them in your opinion? 
 
My company, “Buy Gold and Silver Safely” sells the gold and silver I recommend in my book at a 1% flat fee. Other companies I recommend are APMEX, and Tuvling. There might be more, but the one issue that I hear people complain to me the most is the push by some of these low cost companies into the rare coins, or other coins where the dealer makes more profit. That’s why my book is clear in “asking the right questions” of dealers to begin with.

What does "1% flat fee" mean? Does that mean that if gold is at $1000 per ounce then a coin with one ounce of silver in it would cost $1,010 if purchased from you? (Editor's note: we'll cover the topic of pricing in greater detail tomorrow.)

The 1% flat fee is the fee that is added to the ask price. So technically you have the spot price, plus the fee that goes to the U.S. Mint, and any dealer fees are added to what the base price is. A gold dealer legally cannot sell bullion gold for less than what they get from the U.S. Mint for. 
 
Is 1% good? What do others charge? Can't I buy American Eagle coins cheaper directly from the government?

1% is the lowest in the industry. Others will charge anywhere from 1% to 13% or even more if they can get away with it. On IRAs for example, I know of a broker at one gold dealer who told me they have leeway to charge up to 30% for bullion.

One cannot buy American Eagle gold one ounce gold coins from the U.S. Mint at a lower price. You can see from their pricing sheet, they are overpriced.

Where do people buy on your site?

I don’t sell gold online, nor do I have plans to do so at present, although, I may incorporate that in the future. I do have a minimum of $20,000, that’s why I give other places to buy in my book. If people want to buy from me they can contact me at:
 
5945 Pacific Center Blvd.
STE 510
San Diego, CA 92121
888-604-6534

What makes you reputable? (Who recommends you, who certifies you, etc.) Not to question your integrity, but people will want to know.

Almost all the gold dealers associate themselves with the rare coin places like ICTA. Since I don’t sell rare coins, I am not associated with anyone (a rare breed).  So I am stuck with getting a BBB rating, which really doesn’t mean much since Goldline, who is under investigation by the city attorney in Santa Monica as well as the FTC has the highest rating by the BBB. I’m presently working on getting that set up. Not much else I can do except write good articles and rely on word of mouth at this point.

My book of course will lead to more possibilities. I have people who have volunteered to be called if necessary. I have to let my reputation develop over time, but the fact I offer gold and silver bullion at the lowest prices and the fact my book and blog articles are all about keeping people from getting ripped off by other gold dealers should add to my credibility as a broker/dealer. They just don’t let anyone become a broker/dealer and sell gold. The places I acquire my gold and silver for my customers also do their due diligence.

Lastly, if people don’t want to do business with my company, they are more than welcome to buy from someone else. There’s plenty of business to go around. I bring value by what I write continually on my blog and I’ve even told people to buy gold in Euro’s (sold for a 30% gain) and am presently recommending buying gold in Yen for trades (dollar cost averaging in). This of course is not investment advice, but just suggestions.

What's the buying process entail (details on ordering, paying, shipping, delivery, etc.)?

What typically has to happen is the money has to be “in-house” before a trade can be conducted. This is typically done by a wire transfer. Once the money is in-house, the trade can occur when the individual decides to pull the trigger and purchase the coins/bars.

The trade is confirmed at the current spot price and the metal is set aside for delivery or storage. Delivery is typically done via either Fed Ex or USPS, both of which insure the metal and have been reliable.

Where can people see/find the "current spot price" (so they can check on the cost/value of their purchase)? Is there an "official" source for the information? Is it as of the exact moment the item is bought or from the value at the end of the preceding day (or something else)?

People can go to various sites and find the price of gold. I eventually will have this on my home page, but don’t want to put another company's widget on there, so am developing my own. www.kitco.com, http://www.bullionvalues.com/, as well as CNBC are good for checking prices.

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The whole physical gold and silver buying process seems fraught with fees and costs that make the cost of investing quite high IMO. And they seem highly illiquid as well (more on that tomorrow.) Then again, if you're buying only to hold and use in case of a total meltdown, there's no need to consider selling.

Click here for the final post in this series.

Comments

[MasterPo]

What is your opinion of 90% coins vs. full silver coins?

[mbhunter]

Nice questions FMF. I'm enjoying the insights into this process.

[Doug Eberhardt]

Master, what are you referring to when you say "full silver coins?" My guess is you mean the American Eagle coins. These coins can have a premium of a few dollars plus each over spot, but the buyback is higher right now. The 90% silver would be just 11 cents or so over spot.

I prefer the lowest cost to spot for my clients, but some people still prefer the American Eagles.

[MasterPo]

What on the coin indicates a 90% coin is in fact a 90% silver coin?

IOW, a pure silver coin like an Eagle or Maple Leaf says it's pure silver. When someone shows you such a coin there's no question what it is (presuming no trickery). But with a 90% coin how does one know it is truly a 90% coin? Just by the know the dates of such coins?

[ParatrooperJJ]

Can you reference the USC that forbids a dealer from selling at a lower price then the mint?

[Rod Ferguson]

I agree with APMEX and Tulving, although for most small-timers, APMEX is the preferred choice.

"The whole physical gold and silver buying process seems fraught with fees and costs that make the cost of investing quite high IMO."

FMF - yes, there are fees and costs with buying PMs just like there is with buying stocks, bonds, munis, etc. TANSTAAFL. And, just like a broker who charges 9 different small fees while adverstising 'low, low fees', you can get taken to the cleaners if you don't do your research. So - do your research :)

"And they seem highly illiquid as well (more on that tomorrow.)"

I'll wait for that article to comment in full, but I do want to say three words - local coin shop. I have yet to have any trouble whatsoever selling physical PMs.

"Then again, if you're buying only to hold and use in case of a total meltdown, there's no need to consider selling.

Not necessarily. For the small time purchaser (or the dollar cost averager), the most likey purchases will be in 1 and 5 ounce sizes (both silver and gold). Once they accumulate a few hundred ounces in the smaller amounts, converting a portion to 10 and 100 ounce bars saves on storage space; the same holds true for conversion to 1000 ounce bars once a few thousand ounces are accumulated. Conversion means selling the smaller sizes and purchasing the larger.

[Doug Eberhardt]

MasterPo,

MasterPo, yes, by the dates. The 90% coins are the quarters and dimes that were in circulation here in the U.S. before 1964.

[Doug Eberhardt]

ParatrooperJJ,

Perhaps I should not have said "legally" in that statement, but what I meant was the U.S. Mint will not allow the gold dealers to sell below what they sell the coins for. They told me they would come after them. See #8 in the following document.

http://www.usmint.gov/downloads/consumer/AgreementForm.pdf

If a gold dealer receives a discount for buying in bulk, they cannot sell the coins lower than the U.S. Mint. So if a coin is priced at $1,000 on the U.S. Mint site, but is bought for $960 by the dealer through a bulk purchase program, the dealer cannot sell that coin for less than $1,000.

However, I wasn't happy that this form was vague and didn't include this information in my book. When I was interviewed by FMF, I probably shouldn't have even brought it up. Upon further conversation with the U.S. Mint, I have learned this applies to Proof coins, and not the American Eagle one ounce coins.

Obviously, if the price of gold falls, the seller of the gold coin can sell it to the public for a lower price than what they bought it from the U.S. Mint for at the higher price.

I hope that clears things up for you, and good question. Also note, I don't recommend proof coins because of the extra premium to acquire and the fact that this premium would be irrelevant to the the gold content should we get to that state in the economy (same with rare or European coins).

I just prefer people to buy as low to spot as possible, and at the lowest cost (commission) to the gold dealer.