When youâre looking to start buying precious metals like silver and gold, understanding how to buy them can be a bit confusing.
There are a few different methods you can take, and it really depends on how you want to purchase them and your ultimate goals. In this blog post, weâll take a look at the top 4 ways to buy gold, silver and cryptocurrencies.
Contents
- Physically
- Storage
- Gold & Silver ETFs
- Digital Gold & Silver
- Earning Interest With Digital Gold
- 8.6% Interest On USD
- Conclusion
On a side note, this is not financial advice and you are recommended to do your own due diligence before making any decisions.
1) Physically
The first method to buy and hold Gold and Silver is to purchase them physically.
This is a traditional and tried and true method done by many of our parents and the most direct way on this list. You can easily find Gold retailers in shopping malls and everywhere which makes this the easiest method too.
Some of the advantages of purchasing your commodities this way are
- You physically own it
- It feels and looks good
- Can be a way to exchange for goods and services if the world were to crash in turmoil (Unlikely and hopefully not)
People who buy gold physically often like the feeling of owning it themselves and they wear it in the form of necklace of bracelets. While some prefer to store it at home securely which brings me to the disadvantages.
Disadvantages
- Best to not let anyone know you have it
- Storage costs
- The premiums for buying Gold and Silver bars can be high
- Not liquid (Unable to exchange for cash as soon as youâd like)
The costs of buying a good safe can be quite expensive and the cost might just be able to get you a few more gold bars. But this is something one should factor when you buy physical Gold or Silver.
The premiums for buying commodities depends on their demand and supply. The higher the demand, the higher the premiums and this can fluctuate with uncertainty.
So, expect to be at a loss when you first buy them but it does not really matter if you are planning to hold them for the long term.
Another major disadvantage can be the time it takes to liquidate your gold. Since itâs physical gold, you cannot exchange for cash immediately in case you need it urgently.
2) Storage
Similar to the first method, this method can be an improved way to buy and hold your precious metals.
Buying and storing your metals with a gold storage service or in a bank (domestically or overseas) is a safer and cost-effective way if you are interested to purchase Gold and Silver physically.
This minimises the cost of buying a safe and decreasing the risk for yourself by keeping gold at home.
These are some of the advantages for storing your precious metals
- Safer
- Easier to liquidate compared to holding it yourself
- Save on costs such as a safe
However, these are some of the disadvantages you should consider too.
- Costs of storage in the long run
- Jurisdictional risks
- The hassle and costs to retrieve it when you need it
The cost of putting your gold and silver in a bank or a storage company may not outweigh the cost of buying a good safe in the short run but it can increase gradually in the long run.
If you store your metals overseas, do take note of the relations of your country with the country you are storing your assets in. The power and authority of the country matters and when things go bad you might not be able to store your Gold or Silver.
This brings it to the last point, it can be a hassle for you to retrieve your assets and the costs might be really high too.
3) Gold & Silver ETFs
Moving on to the digital world, youâre able to buy Gold & Silver with a click of a button.
Buying Gold & Silver ETFs (Exchange Traded Funds) will help you save on premiums when buying them physically and you do not have to worry about any storage costs or the potential risks by holding it.
Here are some of the largest Gold & Silver ETFs you can look at
- iShares Gold Trust
- iShares Silver Trust
- Aberdeen Standard Physical Gold Shares ETF
- Aberdeen Standard Physical Silver Shares ETF
Advantages
- Save on premiums and storage costs
- Able to go âshortâ or bet on a sell if you think Gold & Silver will drop in the short term
- Easy to liquidate
However, as good as it seems to buy Gold & Silver on paper, there are a few notable disadvantages you should take note.
Disadvantages
- You donât hold and own it per se
- Unsure if these ETFs really own the physical metals themselves
- On top of paying for the Gold & Silver prices, you are also paying spreads and fees to these ETFs
- Policy changes
With the liquidity and convenience, comes with another set of downside. The most notable ones are, you are not really owning the asset but only a contract.
This is similar to Contracts For Differences which Iâve written about in this article comparing it to Equities.
This brings it to the point of, you are really not sure if these ETFs really own the physical metals themselves and if they donât, it can be a really huge problem. But for the most part, these ETFs have large assets under their management and they are regulated and backed by physical gold.
4) Digital Gold & Silver
The last but not the least, in fact the newest player in the market, digital Gold and Silver provides an interesting way to buy and hold your assets.
This is where the Cryptocurrency comes in too as I mentioned in the title in case you have not seen it anywhere in the article yet.
Personally, I am buying Gold using this method as you are able to gain interest just by holding the asset!
Letâs jump into the advantages
- Easy to liquidate
- Low fees
- Earn interest
Some companies that are offering these digital products are
- Digix
- Paxos
- Vaultchain (Gold & Silver)
Essentially, what you are buying is âGold Cryptocurrenciesâ. You exchange your money with their products such as Pax Gold from Paxos which is a digital token/currency.
Unlike ETFs, you are not owning the contracts or investing in the ETF but instead, you own these digital currencies. But similar to ETFs, you do not know for sure if these companies really own the precious metals which brings me to the disadvantages.
Disadvantages
- Still new and people can be skeptical
- Not many information on these products
- You donât own the assets per se
- Includes the risks with Cryptocurrencies
Earning Interest With Digital Gold
The juiciest part of the article is here and thank you for reading up till now!
I am buying my Gold using Pax Gold which is a product by Paxos as they are now partnered with BlockFi, a Cryptocurrency bank that offers you an unbelievable amount of interest just by storing your cryptocurrencies with them.
When you store your cryptocurrencies with BlockFi, you can earn up to 8.6% interest per annum.
As you can see in the image above, APY stands for âAnnual Percentage Yieldâ and looking at PAXG which is Pax Gold, you can earn up to 5% interest just by holding your Gold.
How amazing is that?
8.6% Interest On USD
If you take a look at the APY of USDC which is âUSD Coinâ, a stablecoin backed by the US Dollar which follows a 1:1 ratio with USD. It shows an APY of 8.6% which is unbelievable.
Yes, this means you are able to earn an interest of 8.6% annually on your USD just by storing it with BlockFi.
Something to take note of, you can only exchange your fiat money in USD to USDC to enjoy the 8.6% interest. And even though it represents a 1:1 ratio with USD, a google search tells me that it may not be safe as it is not FDIC (Federal Deposit Insurance Corporation) insured.
But the worst can only happen if BlockFi goes out of business which can be likely, however, they have more than $1.5B in assets under management and are looking to introduce the first Bitcoin Rewards Credit Card.
This makes them reliable, however, know that risks are still present.
Going back to the topic, you donât have to exchange your hard-earned money with USDC but rather, just invest in PAXG.
If this makes you skeptical about whether PAXG is reliable, you can take a look at what Paxos has to offer by clicking on that link.
They are a regulated financial institution and each PAXG token is backed by one fine troy ounce of a 400 oz London Good Delivery gold bar stored in the vaults of London.
Conclusion
In conclusion, this is not financial advice which I have mentioned at the start of the article and please do your own research before you make any decisions.
Always aim to protect your money and go with the options that you feel comfortable with while understanding all the risks you are getting yourself into.
I hope this article has helped you by laying out a few options if you are considering to buy Gold, Silver or Cryptocurrencies.
And if youâve enjoyed this article, check out other similar articles such as âthings to do before buying a stockâ or my first episode of âhow to trade forexâ series.
As always, thank you for reading and see you in the next one!
Earn 10$ worth of Bitcoin when you sign up with my referral code here.
Resources
I personally prefer to hold onto physical gold, do whatever makes you happy!