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What to buy?

Posted: 10 Nov 2011, 12:19
by Rasta
A frequent asked question is: what do I buy?

It totally depends on your budget, your expertise in this (investment) area, your geographical location, etc.

Starting blank, without knowledge
The goal is to accumulate precious metals, for storing purchasing power. You are not going to get into collectables, investments or otherwise. Then you should aim for:
  • - bars - general accepted bars (check the LBMA good list for the general accepted refiners, along with its trademarks stamped on the bars), so you can always exchange them anywhere in the world, under any condition, no questions asked. The bars have to be 99.5 at least, but most bars produced in the last decade are 99.99. Here a list of bars with their pictures.
    - coins - Go for the most known coin in the world - the Krugerrand
Not new to the game
The goal is to accumulate precious metals, for storing purchasing power. You may get into collectables, investments and otherwise, but the bedrock of your investments is bars and coins as listed above, and you should still refrain from going into any form of paper. Besides that, you may go for:
  • - silver - Silver is just more volatile then gold, and you pay VAT on silver, making it less attractive compared to gold.
    - coins - You may pick the locally known coins. E.g. if you are in France, you may go for the coins popular there. Remember the coins might not be recognized outside of France - so if you are forced to sell you may loose money due to that.
You are following the game for a while now
If you are up to it, you may consider going beyond "storing purchasing power". There are risks involved, so only "gamble" with money you can afford to loose. Any paper form is an IOU, with counter party risk associated with it, besides the normal risks like operational risk, (geo-)political risk, etc. The logical order of investments is to continue from risk-less to risk-full. Especially true for day-trading: Know that the vast majority of the participants will (statistically) loose money, as it is a zero-sum game, and the brokers are shaving off their part too.

Re: What to buy?

Posted: 13 Nov 2011, 22:36
by Rasta
Some thoughts on paper investments. Those thoughts are true not only for precious metals, but for all investments.

The popular trading vehicle of the day are ETF's, Exchange-traded funds. Let's use the ETF's as example here. Say there is a popular ETF for commodity X, issued by bank Y. It may appear a nice trading vehicle as long as everything goes fine. But what happens, if somethings goes slightly wrong? E.g. the issuer of the ETF, bank Y, is having arguments with the authorities? Or, there are rumors that the ETF is not backed by any commodity X? Imagine what happens: the buyers are gone - just overnight! Without buyers, there is no market. The theory is, that the ETF shares are really worth the amount of the underlaying commodity X. So if you are a holder of a share of that ETF, then you have not lost any wealth by a disintegrated market. You simply are not able to exchange your paper for wealth, for as long as that market doesn't start again. If bank Y issues bankruptcy, then the market for their ETFs is terminated. You may have to wait for years until a bankruptcy judge comes to a final decision, and you have to hope the ETF really did hold the underlaying commodity.

Another example: you are participating in a real estate development project. You are buying a share for an apartment in an complex, which is supposably to become a nice beach resort in an developing country. The expected property boom fades out due to geo-political situation in the developing country. The development project is half on its way, or perhaps even finished. But there is no market, no people are willing to buy an apartment. That means on paper you may still hold a valuable investment, but you are simply unable to cash-in in the property. It may take yeers or even decades before the situation improves.

Moral of the story: In investments there usually is more that meets the eye. Some investment assumptions are made in well working conditions, in well functioning markets. But what if you are misguided in those assumptions, or well functioning conditions?

Investment vehicles that heavily rely on dependencies, are just more vulnerable to changes in those connections. If security of your wealth is important, then reducing complexity of the investment vehicles makes sense. As stated in the previous posting: if you worry about counter party risk, then holding the actual asset/commodity (opposite to a paper IOU) is a logical thing to do.

Re: What to buy?

Posted: 14 Nov 2011, 12:10
by mcduff
Personally I would not buy big gold bars. For one, I don't have the money;-) But foremost, there are rumors fake big (1000 oz) good delivery bars are circulating. The most dangerous type would be the tungsten fakes. Tungsten weighs about the same as gold but has a different look and feel. Now take a tungsten bar and add a fat layer of gold on top. That way you have a bar with correct size and mass and feels and looks the same as the real stuff.

These fake bars are difficult to make. Certainly when the stuff you're faking gets smaller and smaller. So I would prefer smaller bars and coins.

Example of fake tungsten bar:

How to detect such fakes:

So in general I prefer coins because you can test them using inexpensive tools: a caliper for thickness and size of the coin and a scale for the mass.

Re: What to buy?

Posted: 14 Nov 2011, 14:32
by Rasta
mcduff wrote:....

So in general I prefer coins because you can test them using inexpensive tools: a caliper for thickness and size of the coin and a scale for the mass.
Besides the chances of buying tungsten, especially through a renown dealer, for coins you forget to mention the easiest test of all: the ring test.

Ever tossed Euro coins in your pocket? Then you know due to the copper contents, the sound of these coins is really flat, short-lived and has a low pitch. Try to do the same test with silver coins (e.g. .999 Wiener Philharmonic), or gold coins (e.g. .9999 Maple Leave) and you hear a very different sound. A full, long lasting ring with a high pitch.

If the coins are a cast with a blend of other metals, you should notice by a different color (more yellow for more copper, note the Krugerrand has 10% copper, and is more yellow then the Maple Leave). If the coins are plated with an outer (gold/silver) finish, then the core is different metal. In both cases, the ring should be substantially different. The speed of sound is different in an alloy.

Although I never tried, you should be able to distinguish tungsten from gold, as tungsten is paramagnetic and gold is diamagnetic.

Re: What to buy?

Posted: 29 Nov 2011, 21:43
by skyscraper
dit artikel kan ik ieder aanraden die z'n eerste stapjes zet naar de aankoop van fysiek: ... ter+Schiff

het onderscheid tussen verzamelmunten en beleggingsmunten vind je makkelijk hier terug: ... n-en-baren

denk wel dat het nog altijd aan te raden is om, uitgezonderd in tijden van schaarste, te gaan voor de betere kwaliteit van beleggingsmunten om te vermijden dat je bij verkoop de premie verliest.

Re: What to buy?

Posted: 31 Mar 2015, 22:23
by Gwyde
Decennia geleden werden ook de meer courante historische gouden munten (bvb 20 Frank Leop II) verhandeld met relatief hoge premie. Een significante premie betaal je nu alleen nog voor de niet-courante gouden munten en voor de echte rariteiten is de goudwaarde zelfs van ondergeschikt belang. Een Leop II 20 frank (uit een courant jaar) kan je in sommige banken kopen aan de goudkoers. De marge is iets hoger dan voor een Krugerrand, maar bvb lager dan voor de kleine fracties (1/10 of 1/4 Krugerrand). Why not?

Sommige beleggingsmunten zijn conform met een historische munt maar dragen een jaartal dat bij de originelen niet voorkomt. Bvb: Op de website van de Oostenrijkse munt kan je 4 en 8 florin goudmunten kopen gedateerd 1892 met keizer Franz Iossph op de obverse zijde. Nota: In 1892 was de corona ingevoerd en werden geen florins meer geslagen.
Je kan ook 10 Corona uit 1912 en 20 of 100 Corona munten kopen uit 1915 (!). Tijdens WO-I werd geen goudgeld meer aangemunt. Deze goudmunten hebben geen verzamelwaarde en de premie die je erop betaalt, is eigenlijk weggegooid geld. Mooi afgewerkt zijn ze wel: Proof uitvoering en mooier dan de historische originelen.
Gold Crowns with a denomination of 10 and 20 crowns were issued in 1892 for the first time, when the gold currency system was introduced in Austria (Austria adopted the Gold standard). In 1908 the year of the 60th anniversary of the reign of Franz Joseph I the 100 Crowns piece followed. The 1912 10 Crown/Coronae, 1915 20 Crown/Coronae, and the 1915 100 Crown/Coronae are still minted today.
Zelfs de 1780-restrike zilveren Maria Theresia Taler is nog steeds te koop (wel meer dan €30 in proof versie).

Re: What to buy?

Posted: 01 Apr 2015, 14:24
by Spruitje
Gwyde wrote:... Een Leop II 20 frank (uit een courant jaar) kan je in sommige banken kopen aan de goudkoers. De marge is iets hoger dan voor een Krugerrand, maar bvb lager dan voor de kleine fracties (1/10 of 1/4 Krugerrand). Why not?
Zijn er dan nog banken (Belgische?) die zich daarmee bezig houden? Toen ik destijds via Belfius baren aankocht deden ze dat volgens hen via hun hoofdzetel in Brussel, later hoorde ik dat ze dit gewoon bij 'n handelaar kochten via hun eigen interne rekening. De verhalen dat Fortis destijds Krugers verkocht aan premies die lager zaten dan de goudboeren werd ook verteld. Zijn er dan nog Belgische banken die aan 'gouden munthandel' doen?