2011 has been a unique year for gold, with the value reaching record highs and now experiencing a price pullback.  Some economists are even going so far as to say that “gold is dead.”  Dennis Gartman has made public his decision to sell all gold, and even predicts the market ending with “wholesale or even forced liquidation.”  The biggest shock was his labeling of gold now as a “bear market” and his proclamation of “death to the bull.”  As a bullion dealer, I’m afraid I must disagree with this sentiment and offer some insight to educate the American investor.

 Whether or not gold is truly “dead” comes down to how you view gold and what you do with your purchase.  Investors can be divided into two further sub-groups: traders who will be selling gold for immediate profit as if they were selling stocks, and long-term investors who buy gold as insurance, particularly in times of uncertainty.  If you are a trader, perhaps you could listen to Gartman; the damage that has been done to the price of gold this year may be detrimental.  However, I advise all long-term investors to hold onto their assets right now.  And 2012 is expected to hold a strong performance for gold.

 Due to the bank solvency crisis, the Euro could disappear, but currency will continue to be printed.  For Germany not to relent on this issue would be the same as inviting a deflationary depression.  Once money is allowed to be printed once more, gold and silver are expected to advance!  Gold could be expected to close 2012 at over $2,500!  Meanwhile, the US continues to have an unstable economy, but I find it highly unlikely that the government will allow too much depression to occur during an election year.  We can look forward to more money being printed and for markets to be very active. 

 Beyond 2012, the continuing rise of debt and talk of a future global meltdown all put gold in a very reliable place.  There is also always the possibility of a future war, particularly now with relevant events unfolding in the Middle East and US’s loss of its spy drone to Iran.  This doesn’t mean we should run to push the panic button yet, but let’s just say that military conflicts are never good for the economy.  And economic instability leads to a bull market for gold.

 Of course, like any doomsday prediction, fear of losing wealth is something to be wary of, but it certainly does instigate a sense of caution and suggests holding onto gold as a future insurance.  This current price pullback should not be seen as a sign to flee from gold, but rather as an invitation to buy up as much insurance as one can, as, all things considered, it actually seems irresponsible to not have some gold!  If this dreaded meltdown were to happen tomorrow, those of us with gold would be in a much better position than someone who has stocks.

 The price pullback may send some panicking, but as bizarre as it may seem, both history and my own experiences in this business have shown that the best investments are always made at the scariest times.  The beginning of the Gulf War, or the early months the market crash of 2008-09, may have been a distressing period, but those who invested in gold during those periods eventually discovered a rewarding outcome!

 Gold is the only “stock” in history that has been valuable since Biblical times.  It has a track record of reliability spanning millennia!  And much like the Biblical story of those who built and worshipped a golden calf, today it seems our traders only worship market of instant profits, unaware of the golden bull; that is to say, a bull market that exists and continues to deliver based on consumer confidence.  If gold seems like a bear market today, it is only because the investor is looking with the intent of trading gold in the immediate future.  An American investor who is thinking long term are well aware of the powerful and fertile bull out in the field, ready to charge in and drive the bears away.

          Those looking to get into silver bars will quickly learn of two company names: Englehard and Johnson Matthey.  Many investors will ask only for one of these two types of bars.  Fortunately, Bullion Trading LLC carries both.  These bars are one hundred ounces .999 fine silver (99.9% pure).  Unlike coins, which have an everyday usage as well as a specific appeal to collectors, bars exist entirely for the sake of storage.  Investors may store a great amount of physical wealth in a relatively small space. 100 ounces silver bars are easy to stack and store.  Their dimensions are approximately 6.5 inches long x 2.5 inches wide x 1.25 inches in depth.  They weigh only 6.86 pounds on bathroom scales, making them relative portable and easy to handle. Furthermore, 100 ounce silver bars are accepted trading units, making them as easy to sell as they are to buy.  In other words, they’re very liquid!

            Silver bars of this or larger sizes do offer an important investment advantage: they carry a low premium over spot silver compared to Silver Eagles, Silver Maple Leafs or 1-oz silver rounds.  A bar is simply precious metal, designed to be traded.  It is not fancy nor carries nationalistic implications.  During the inflationary crisis and oil crunch of the 1970s, interest in silver bullion as a form of wealth protection grew in popularity. As a result of the demand, the Engelhard company began minting silver bars with weights of 1, 10 and 100 troy ounces. However, by the mid 1980s investor interest in precious metals had waned to the point that Engelhard decided to cease extruding silver bars.  JM bars are also discontinued.

            Despite this very brief history, both Engelhard and JM silver bars remain the industry standard in silver bars (or, to put it another way, the gold standard for silver!).  They are sought after for their guaranteed purity, quality and brand name recognition.  The Engelhard and JM names remain trusted and recognized icons in the precious metals industry and their silver bars remain in high demand.  Finding either of them can be a bit difficult due to the lack of production since the 1980’s, but fortunately that’s where bullion dealers come in handy.

            Someone new to investing in precious metals is likely to be attracted to the colorful designs of coins over the “dull” look of bars.  Yet what better place to start than with bars from a trusted brand and a proven record of value!

            Next up, let’s discuss the United States’ own gold coin: the Eagle.

            In 1986, the American Eagle was first minted as a direct response to the immense popularity of the South African Krugerrand, which had just experienced a ban by congress in international sales.  The Eagle sported Lady Liberty as its trademark design.  This was the same Augustus Saint-Gaudens design that had first appeared on the United States double-eagle gold piece in 1907, where it remained until 1933.  Now, with the launch of this new coin, the Eagle flew to become the leading gold bullion coin investment product in the US, and never looked back, not even when the ban on Krugerrands was lifted in 1994.

            As the most widely traded bullion coins in America, Eagles are a strong investment, affording buyers narrow spreads between buy and sell prices.  They cannot be purchased directly from the mint but only from authorized dealers who will sell it at a markup above the spot price.  As mentioned in our “Premiums” article, the Eagle has the single highest premium of all gold coins, but this also means it has the highest buy-back price.  This leads to a larger investment, but also a higher return when you sell it.

            Just like the Krugerrand, the Eagle is twenty-two karat pure gold, with the remaining two karats being a silver-copper alloy.  The Eagle is also actual American currency.  It has a face value of $50.00, but due to the value of the gold content, this numeric value is really only symbolic.  As my customers and I operate within the U.S., our relationship to the Eagle is slightly different than what it is with international coins.  First off, it means that it is illegal to deface within US territory and I cannot melt it down as I frequently do for Krugerrands.  It is also the only bullion coins whose weight, content, and purity are directly guaranteed by my government.  This gives my customers more confidence around the Eagle than with foreign coins, and long-time investors know that they can include Eagles in their Individual Retirement Account.  However, from a financial standpoint, it doesn’t make much sense to buy gold through your IRA account unless you plan on trading, rather than holding, the asset.  The amount of cash you can invest each year into your IRA is spelled out in the Congressionally-mandated contribution limits.  Gold doesn’t have utility in the sense that is going to product taxable cash, whereas if you own corporate bonds, dividend paying stocks, or real estate investment trusts, you are going to receive distributions each year in the form of interest or dividends.  As an investor, you may be better off buying American Eagle gold coins and place them in a safety deposit box at their local bank.

            The U.S. Mint also produces proof versions of American Eagles for collectors.  Those coins undergo a specialized minting process, where burnished coin blanks are fed into presses fitted with special dies. After scrutiny by inspectors, each American Eagle Gold Proof Coin is sealed in a protective plastic capsule and mounted in a satin-lined velvet presentation case with its own official Certificate of Authenticity.   In 2006, the United States Mint unveiled a new item.  Now collectors may purchase American Eagle Uncirculated Coins in silver and gold directly from the U.S. Mint.  In a process identical to that used to create the magnificent American Eagle Proof Coins, American Eagle Uncirculated Coins are hand-loaded into the coining press, struck on specially burnished blanks and carry the “W” mint mark of the United States Mint at West Point.

            American Eagles are beloved coins for the patriotic consumer; one may feel that he is not only getting gold, but national gold valued by his own government.  And to the investor interested in gold, the Eagle is another coin with a rich history with the ability to yield lucrative profits!

We’ve already discussed all that goes into selling gold and silver, but now you have to decide whether or not to use the benefit of the Internet. While the Internet’s reputation for providing honest business has proven to be less than favorable, one cannot deny how convenient it is.

Ideally, the best place to sell your gold to would be the same dealer that you purchased it from. He will be a reliable buyer since he should have the records of the exact purchases you made, and as a returning customer, he should give you a good deal.  But it is still an inconvenience to bring your gold over to him or to any other local dealer for that matter, only to be offered a price that may not be the one you want. The Internet on the other hand is a wonderful way around this; it allows you to search for multiple buyers from the convenience of your home. And trust me, finding people won’t be a problem. The moment you say “I have gold to offer,” you will definitely start getting attention. The issue isn’t if you’ll find people but how to make the right choice. This world comes with its own rules.

Within this article, we’ll just assume for the sake of argument that there are no scammers and that all prospects you meet will all be in good faith. This assumption is far from the truth, but it doesn’t matter. There are many more things to consider when selling gold or silver online.

An online gold dealer will need to see the item before offering you a quote and every single item requires inspection. Unfortunately, sometimes my clients may give me misleading information about their item, not out of malice, but simply because there are things they don’t realize. For example, if he is selling me a Pamp bar I will immediately ask if it’s enclosed with a certificate or if that certificate has been opened. He may answer yes not fully knowing what I am talking about, and it won’t be until I inspect the item that I realize he was wrong. Many customers don’t realize that once its certificate is opened, it is no longer valid and the bar will immediately lose some of its value. So for reasons like this, any respectable gold dealer will ask to see your items to properly assess their value.

This means you will need to ship it to them, and these shipping fees will be an investment on your part. Once the prospective buyer receives the item, you are entirely at his mercy. If he decides to buy from you, it will be at his discretion and on his own time, possibly leaving you in the dark. And if he should decide to decline the offer and ship the item back, it will be at your expense. Of course, you can try to avoid this by only looking for buyers in your local area, some of whom could even visit you in person, but that might backfire as well. Not every buyer may be comfortable with that arrangement, and you will be severely limiting your search, particularly when the Internet offers you a potentially worldwide market. And besides, do you really want to tell a random stranger “I’m keeping four kilos of gold in my house and, by the way, here’s the address?”

The other option is to sell your gold using some sort of auction. Now in our EBay article we discussed the drama involved with buying and/or selling gold that way. To sum it up: you will be stuck having to accept whatever the winning bid amount is, which may not necessarily represent that value of the item at that given time. You do not want to be in a position where your auction will be ending in one minute and your options are either to go through with selling your item for an extremely low amount or to just bail out of the auction, which will hurt your credibility in the Ebay community. And even if you do make a decent sum, keep in mind that between listing fees, transfer fees, and shipping, you may not make as much profit as you hoped for.  Then again, the opposite is always true as well. You may end up making a killing on your sale, despite the value of the item drastically plummeting at that minute. Some people will prefer to sell this way simply because they enjoy the suspense of this gamble.

So what to do? Personally, I always prefer to sell in person and know that doing anything online will only lead to complications. I would recommend selling only to someone you already know, trust, and have a relationship with, but if you must sell online, both online dealers and online auctions have their pros and cons. You could potentially make a great sale through either option. The drawback is that neither of the two really provides much security. So before you go into it, tell yourself that the issue isn’t finding a buyer but about choosing the right one, because the profit you make from this sale will be the sum total of the choices you make.