How to invest in precious metals

I always recommend you invest in this order:

1. Physical ownership

Invest in the real thing whether coins, rounds, wafers, bars, scrap. Physical ownership removes all counter-party risk of fraud, theft and some forms of confiscation. By handling the real thing, you have a greater understanding of the properties of the material, are are more able to detect a fake or fraud. Only by knowing the real thing can you spot an imposter. The obvious risk is theft, so make sure you own a safe and bolt it securely to a wall away from prying eyes. You can store physical metals in a safety deposit box, but there is some risk of confiscation associated with this. Once you own more than you are comfortable keeping with you, then you will need to look at some of the next forms of ownership.

2. Vaulted precious metals/bullion banks/ETF's

Firstly I don't recommend you use ETF's (exchange traded funds). You have no guarantee that the gold or silver you are buying is even there as you cannot demand delivery, and auditing is limited to absent. For more, see the video at http://www.runtogold.com/2008/12/a-problem-with-gld-and-slv-etfs. A more secure alternative is a bullion bank such as Goldmoney.com or Bullionvault.com. I use Goldmoney personally and with my business. It allows me to buy and hold physical gold and silver in secure audited vaults in London and Zurich. For a review see http://www.runtogold.com/goldmoney. The difference with this and an ETF is that the metals are in the form of physical bullion, the gold you own is the gold that is stored, and you can get physical delivery of the metals.

GoldMoney. The best way to buy gold & silver

3. Mining stocks

Mining stocks are leveraged to the price of gold and silver meaning that if a precious metal price were to rise, the underlying stock will usually rise disproportionately higher. The converse is also true regarding falling prices. Mining stocks therefore hold higher risks, but offer potentially a much greater reward. These stocks can be categorised as major producers, minor producers, and exploration and development. The majors hold less risk but respond less to a rise in underlying prices whereas the explorers hold substantially higher risks but potentially much higher rewards ... if you pick the right one.

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