If you are new to metals you have come to the right place. I will attempt to answer the What, Where, When, Why and How questions as they relate to metals. “What metals and Why Would I buy them?” The metals focused on in this discussion are gold, silver, and copper. There are other precious metals like platinum, palladium and so on, but while they are certainly considered precious they are also very expensive and a bit obscure to us common folk, which is why I have stayed away from them. Gold, silver and copper are all chemically related elements with an excellent track record that can be easily and openly obtained and studied for anyone interested in them. An excellent resource on the current state of specific metals is kitco.com. They have one site for precious and another site for base metals, like copper. And yes, they also sell metals. Why buy and hold metals? Buying metals is not for everyone. But bear in mind that U.S. dollars are a fiat currency created by the government. Since the U.S. departed from the gold standard in 1933, dollars are worth what the government says they are worth and are valued at what the world market values them at. The value of the dollar itself fluctuates, that factor combined with recent rate of inflation hovering at about 13% (annual, 2008) means the dollar buys at least 13% less goods and services today than it did a year ago. So a dollar today buys only .87 cents (or less) worth of stuff compared to what it would buy last year. If you had your dollars sitting in the bank earning 1% interest you technically lost money—or more precisely you lost 12% of your buying power with those dollars. And if you had it in stocks those stocks would have had to have earned 13% plus whatever taxes you would pay on the profit just to break even for the year. I do not know of a stock that has earned more than 13% over the past year. Sad I missed it if there was one. But the same is not true of metals. Unlike many currencies of the past and many more stocks and stock funds, across the history of the human civilization, these three metals have never been worth zero. Many commodities commentators today consider metals a store of value rather than an investment. This is probably the most accurate description. An “investment” is a typically a financial vehicle you put your dollars into believing it will “take off” and return a net profit higher than the rate of inflation and taxes. Your passbook savings account at your bank is not an investment for you. A “store of value” is more of a safe haven where your value will remain over time but may not return an actual real skyrocketing “profit”. Over time, metals adjust up in price and in the short run fluctuate as the market dictates. Of course if you are in the right metal at the right time (bought it while it was undervalued and low) you could sell when the market makes an adjustment and spikes and you may see a short term real profit. Folks who bought gold at $200 per ounce would have made a profit of $800 per ounce if they sold it in early 2008 or Fall 2009 when the market spiked over $1000 per ounce! GOLD- has been a primary store of value and basis of trade across nations for thousands of years. The constant value of gold is worth noting. Some 2400 years ago the King of Babylon pegged the value of gold at (the equivalent of) one troy ounce equaled 350 loaves of bread. Remarkably today (2009) the same is true. At $1000 per ounce divided by 350 puts the price of a loaf of bread at $2.86--about what you'd pay for a loaf of good grain bread. The same cannot be said of the U.S. Dollar. In about 1913 you could buy about 5 loaves of bread for $1.00, but not in 2009. So what happened? For many decades the United States was on a gold standard, meaning that for every paper dollar we had printed in circulation there was one dollar of gold in Fort Knox to back the value of that dollar. Few US citizens today even know that for 3 days in 1933 the US government ordered that all banks closed while all physical gold was removed from every bank, replaced with paper money. It was thereafter illegal for US citizens to own gold bullion from 1933 until 1976 when Gerald Ford finally repealed that portion of the law. And even though the US separated its dollar currency from the gold standard in 1933 gold is still as it was—a universal currency of civilization. Gold also has many industrial uses but is expensive. There is no shortage of gold but the supply and price of gold does fluctuate seasonally with demand and other factors. India is the largest seasonal retail consumer of gold for their wedding season in the fall months. China is likely to be the largest bullion consumer. Historically, the general trend for gold pricing seems to follow crude oil pricing. And when the value of the US dollar against other world currencies is low, gold generally tends to rise. What to buy? Stick with bullion coins; American Eagles, Canadian Maples, South African Krugerrands. Avoid jewelry, plated items, foreign and U.S. collector coins. Many of the US gold issues from the 1800's have been counterfeited by overseas mints over the decades. SILVER- has always seemed to be the “poor stepchild” of gold throughout the centuries. Many believe that may soon change. The supply of silver is quite small compared to other metals and many investors think that a primary factor keeping the price of silver down is simply the lack of demand for the metal. If every household in the US bought 10 ounces of silver in the same week the metal would be instantly scarce and the price would soar. That is until supply met demand and the equilibrium was reset. But instead, the silver we have continues to languish about in the cases of pawn shops, coin shops, and flea markets. Ebay seems to turns a lot of silver and that is a good sign that there is some public interest in the metal. There are even more industrial applications for silver than gold. This is likely because it is much more cost effective—less expensive. The supply of silver is tighter than gold and its value also fluctuates somewhat with seasonal demand. The price of silver has been pegged to gold through the years, with the exception of the Hunt brothers’ run in the 1980’s. Historically silver’s pricing ratio was pegged in the U.S. at 16:1 against gold or 16 ounces of silver equal to the value of 1 ounce of gold. Recently though, this ratio has risen to an abnormal level. In September 2008 the ratio is 66:1 which may mean one of the following scenarios is true: 1. Gold is overpriced and should correct itself down. 2 Silver is very underpriced and will correct itself up. 3 Both gold and silver will adjust some to approach the 20:1 ratio. 4. Neither gold nor silver will adjust because we are seeing the establishment of a new ratio. You will have to do more research on your own to determine which scenario you believe to be the most likely one. What to buy: Best bets are .999+ fine bullion coins and bars. American Eagles, Canadian Maples, Mexican Libertads, Englehard bars and rounds, bars from A-Mark, Silvertowne, and even the Franklin Mint if you can get them cheap. Avoid: plain art bars and rounds, gimmick silver items (“$10,000 bill bar”), silver plated or silver clad items, imported silver items—especially from Asia, and collector coins that sell at a premium. Don’t pay extra for graded common bullion coins. Avoid home poured bars. You never know what you’ll get in terms of fineness and weight. Many of the bars being offered from overseas are fake--plated copper bars. COPPER- Is a non-ferrous base metal. It does not share the same prestige or price as its precious metal siblings gold and silver. But because it is in the same elemental family on the periodic chart (and there are only three metals in that column on the chart) it shares many of the same properties as both gold and silver. Copper has been used by mankind even longer than gold and silver. The value of copper traditionally came from the ability to utilize it. Early civilizations discovered that when you mixed the right amount of molten tin or other metals with molten copper –creating an alloy—that the resulting alloy could be forged into tools and weapons. Copper was the backbone for these implements until something happened to the supply of tin from the west and soon iron was discovered to work just as well while being less expensive. Thousands of years later copper is being used today for the broadest range of industrial applications, too many to list here. Copper it seems is used in almost everything. And there is no shortage of copper. We have plenty around. The key is who will have it in the future. We hear an awful lot about the “slowdown” in development and construction lately but indications are that China and Asia will continue to modernize at a break neck pace. This development will require tens of thousands of tons of copper over the next 10 to 20 years. Producing copper is a labor intensive and energy consuming process. As the cost of the energy to produce and deliver it rises so must finished copper to cover the cost. I have to wonder whether the current spot price actually covers that cost. So while the supply may be fine, the demand for copper, many say, will be strong driving the price up. China has been stockpiling copper in very large quantities for some time now. What to buy: Until recently it was not practical to own copper as a store of value. You won’t find copper at the pawn shop or at the coin dealer. If you wanted copper you would pretty much have to buy a spool of wire. But this has changed. Several reputable suppliers are now making quality .999 fine bars available to the public. Jetco, Metal Mint, E.Cohen all produce fine products at fair prices and sell on Ebay as I do. Stick with small increments. 4oz bars to 1 pound or 1 kilo bars. Easy to buy, easy to sell. Avoid: 1oz copper bars. They look pretty but the recent closing bid pricing plus shipping equates to copper at $211.00 per pound so the premium there is way too high. Also avoid any home poured copper bars. You never know what you’ll get in terms of fineness and weight. Avoid copper US cents. Yes they are copper but they may be recalled by the government anytime now. If that happens you will get 1 cent from each, not the 3 cents you paid for them. “How do I buy metals and when is the best time?” Gold & Silver: When to buy? Precious metals have a general seasonal trend on pricing. The 34 year tracking shows that March and late June through August are the periods where prices are historically weakest for gold. If you want to get the most for your dollars that’s the best time to buy—when it’s low, right? How can you buy precious metals? You can buy them locally if you have a pawn shop or coin dealer in your town. Sometimes there will be a coin dealer at a local flea market. Coin shows are also a very good place to look. Dealers in bullion coins and bars work off of a margin. They can’t afford to buy and hold metals for 30 years hoping to someday strike it rich. They have to eat and pay rent in between like most of us. So what they do is make their own margins off the spot price. I have known several dealers over the 15 or so years I have been involved with metals and here is how this works: when a dealer buys silver or gold bullion from you they pay spot less 10%. When they sell it they usually price it as spot plus 10%. This builds in a 20% margin for them if they can sell it before a market drop. Of course if the spot rises then they just make more. It is also important to note that many local dealers will cover the sales tax on your purchase if you pay in cash. That can save you 6% to 9% right there. And of course you can buy here on Ebay. The only advice I have there is choose your seller carefully, limit your purchase to no more than you care to lose if they do not ship. Always get the shipping insurance, and use your Visa through Paypal so if they do not ship you can easily recoup your money. Visa is good about that. This advice applies to all Ebay purchases IMO. Copper: There is a spot market for copper but it is far detached from any retail values. The current spot price for copper is about $2.79 per pound. You won’t find anyone anywhere selling copper for that price. I think of the spot price of copper as the wholesale price—a basis of cost for an industry using copper to make finished goods. In the retail world where we operate, copper is worth what people are willing to pay for it and this fluctuates. It is a good and simple practice to start a spreadsheet of your own at home. I like to track the immediate past 10 successful auctions for 1 lb copper bars, including shipping. Every few days I’ll track the last 10 auctions and average them to see what copper is selling for by pound. Then I know pretty much what I should expect to pay if I am buying or receive if I am selling. Turns out to be a good tool. Disclaimer: I am not a financial advisor and none of the above should be mistaken for sound financial advice. Please consult a professional of your choosing for investment advice. The preceding information is merely an opinion on why and how one might choose to buy certain metals on the open market.