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Where to Buy Gold in Houston
Where to buy gold in Houston? Should I even consider buying gold coins locally or should I buy them with an online company? These are all questions that gold and silver investors should ask.
Advantage to Buying Gold in Houston
There are many advantages to buying gold coins in Houston from a local company. First, an investor can save money by avoiding the shipping and insurance charges. These charges are usually $20-$55 per order depending on the company. Second, when you as an investor buy gold from a local company, you can examine the merchandise, pay for it, and the transaction is done. You don’t have to monitor the online payment, wait for the shipment, and worry about the shipment coming while you are not home. Third, you as a buyer of gold in Houston get to form a relationship with an individual and company who can help you sell the gold when the time comes and also give you advice on exiting the gold market.
Should I Buy Gold Coins at a Coin Shop?
Should you buy gold coins from a coin shop in Houston? Unfortunately there are far to many disadvantages to buying gold from a coin shop. First, most coins shops have very uncompetitive prices. On average my company is between 2-7% cheaper than most coin shops in Houston. Second, in many cases there is a complete disregard for investor privacy. Silver and gold dealers are required by law to obtain an investor first and last name and nothing more. However, many coin shops in Houston require that you show your drivers license and in many cases they will keep a copy on file. Finally, most coins shops don’t have firm understanding of economics and as a result their recommendations on which gold to buy is often not based on the most important and relevant information.
Should I Buy Gold Numismatic Coins?
Should you buy gold numismatic coins in Houston? There are three major reasons why gold numismatic coins will be a bad investment over the next decade. First, one of the main reasons investors consider buying gold numismatic coins is they have been told that they can’t be confiscated by the federal government. Most investors believe this because of Roosevelt’s confiscation of gold in the 1930’s. However, this simply isn’t true. In 1933, the United States was on the gold standard, which meant that every dollar in circulation was backed by physical gold. This meant that FDR could not simply print money in order to finance his massive spending and this is why FDR ended up confiscating gold. He could not inflate the dollar until he controlled the value of the gold. It is important to note here that the US government held 68.2% of the world’s supply of gold at the time. Once Roosevelt made gold ownership illegal, he immediately raised the price of gold to $35 an ounce. This immediately devalued the dollar by 40% over night. This is truly the reason why Franklin Delano Roosevelt confiscated gold. Therefore FDR would not confiscate gold today because the Fed now has the ability to inflate the money supply without controlling the gold supply. Second the Government is also to not likely confiscate gold in order to gain extra funds when they could confiscate the $7.3 Trillion rapped up in retirement accounts today, which they already regulate and control in many ways.
The second reason investor consider buying gold numismatic coins in Houston is because they believe that they have to report purchase of gold and silver bullion to the government, but not for numismatics. Once again, this simply isn’t true. Neither numismatic coins nor bullion require any reporting when they are bought and it is only when silver is sold back to a dealer in excess of 1000oz or in gold in excess of 25oz at a time that a dealer has to report anything to the government.
The final reason investors consider buying gold numismatic coins in Houston is because they believe that numismatic coins will outperform regular bullion. However, when an investor examines all the factors this is quite unlikely. First, if the price of silver or gold goes up will numismatic coins or bullion perform better? Let’s say for example, silver goes up 177% from $18 to $50, then a one-ounce numismatic collectible coin valued at $100 is likely to go up by only 32% to $132. The collectible coin will go up based on the silver it contains, but there’s no reason to think the numismatic premium will increase too. On the other hand the same $100 in bullion is now worth $277, a difference of 145%!
Numismatic coins owe the value above the silver cost exclusively to their rareness and collectability. Historically, during times of economic hardship these types of purchases do very poorly because the demand for them drop and as a result the premium over the price of gold or silver charged goes down. So in some cases it is possible to see the price of silver and gold go up and the value of numismatic gold and silver coins go down!
A salesman might have a chart showing the performance of “rare/collectible/numismatic coins” against “regular/bullion coins.” Of course, the chart shows the numismatics performing much better. But these graphs inevitably track particular rare coins, which are cherry-picked with the benefit of hindsight. For every one rare coin that outperforms, there could be ten to twenty that severely underperform. Only afterward would you know which coin you should have bought. Additionally performance charts often omit the dealer’s high markups and markdowns that would more than wipe out the alleged profits for retail investors. In the end, investing in numismatic coins is far inferior to bullion.
Central Banks Buy Gold
As we enter 2012, we need to look back and realize that we are exiting a historic year for gold specifically. Central banks bought record amounts of gold to hold as a reserve this year. GFMS estimated net central bank gold purchases ballooned to around 430 metric tons, or 13.8 million troy ounces, in 2011; a more than five-fold increase on the previous year and the highest level recorded since 1964.
China Central Bank Buys Gold
One of the biggest players this year was China who had been purchasing less than 20 tons a month before this year. However, all of the sudden, beginning about 5 months ago we saw a 20 ton purchase, 30 ton purchase, 40 ton purchase, 80 ton purchase and in November 102 tons. 102 tons is a staggering number!
Mexican Central Bank Buys Gold
Mexico has also been a big player. Mexico’s purchase of 100 tons of gold in February and March alone underscores the opinion at central banks that precious metals like gold must be used as a monetary reserve as a substitute for accumulating more dollars. Central banks last year became major buyers of gold, reversing their strategy of selling some of their gold reserves each year in the past.
Russia Central Bank Buys Gold
The Central Bank of Russia purchased over 90 metric tons of gold in 2011. In fact, Russia has been buying gold every month since April 2007, WGC(World Gold Council) data shows. These have mainly been domestic market purchases. Russia’s official net gold purchases Since April 2007 total 439.4 tonnes.
At the end of the day, total net gold purchases from the official sector in 2010 was just 77 tonnes, and jumped to over 430 tonnes of gold by the end of the year. There is no question that central banks have been increasing their involvement in the gold market with this massive 558% increase in buying from 2010 to 2011. These purchases show how central banks have very little confidence in the multiple fiat currencies and more specifically the dollar. It is interesting to look at the chart above note how with the increase in central bank reserves with gold we saw a corresponding rise in price for both gold and silver. This makes perfect sense. However, despite the massive increase in reserves last year there was not nearly as large of a rise. Therefore, it is extremely likely that we will see an especially dynamic year in 2012 as the gold and silver price try to reflect both the increase central bank buying from 2011 and 2012. If central banks continue this massive amount of purchases in 2012 gold will be in for an incredible year and it would not surprise me if we saw gold above $2,000.
Gold and Silver Exchange in Houston
Many precious metals investors in Houston are not sure whether they should own a higher percentage of gold or silver or whether they should do a gold and silver exchange in Houston. Is gold or silver a better investment?
Gold and Silver Exchange Great Idea
What most investors don’t know is that silver is by far a better investment than gold. Over the past ten years silver has outperformed gold handily. Additionally, silver is used in a vast quantity of industrial functions and its industrial demand has increased every year for over a decade. As if this is not enough, the historical gold to silver ratio has departed from its historic world history average of 12 to 1 and the US average of 16 to 1 and currently stands at 55 to 1. Finally, there is a massive above ground shortage of silver that will take years to remedy. The situation is so bad right now that there are 3 ounces of aboveground gold for every 1 ounce of aboveground silver. So clearly silver is the better investment, but should investors make a gold and silver exchange?
Gold and Silver Exchange Timing
Should investors trade their gold for silver? If so, is there a better time to do it then others? The answer is yes. It is definitely a good idea for investor to trade their gold for silver. Silver will most definitely outperform gold over the next 5 to 10 years and so transferring current investments in physical gold into physical silver is a very smart investment move. However, there are better times than others to transfer gold into silver. A great time for doing this was right after silver nearly reached $50 an ounce early in 2011. Silver fell over 30% to less than $33 an ounce. At the same time, gold fell from $1550 to $1475 or only 5%. In this case if an investor had traded gold into silver before the correction, they would have received approximately 32 ounces of silver for every 1oz of silver. However, if an investor waited until after the correction, they would have received approximately 45 ounces of silver for every 1oz of gold! This makes a huge difference in your return over the long-term.
Gold and Silver Exchange Process
How easy is it to make a gold to silver exchange? The process is overall very simple. At Lone Star Bullion, we determine the value of your gold bullion and simply credit it toward your silver exchange. Some investors are concerned that they will lose money on the transaction based on commissions charged. However, this simply isn’t true. The commissions charged by Lone Star Bullion are very competitive and would be no different than if a person was considering a normal silver bullion purchase. In the end, making a gold and silver exchange in Houston is arguably the smartest investment move they can make in the current markets.
Should Investors Buy Numismatic Coins or Deal with Numismatic Exchanges?
When investors consider investing in numismatic coins versus bullion, it is difficult to choose between the two. When I was first considering whether to invest in numismatics or bullion I went to the Houston Numismatic Exchange and the Houston Gold Exchange, coin shops in my local town and talked to sale associates that claimed that numismatic coins couldn’t be confiscated, didn’t have to be reported, and would outperform bullion. On the other hand bullion companies argued that it is more important to own more physical metal and not simply a rare coin.
Gold Confiscation
So do the numismatic exchanges and companies have a point? The answer is no. The first argument that numismatic exchanges make is almost always that numismatic coins can’t be confiscated. Most numismatic exchanges argue that numismatic coins cannot be confiscated based on Franklin D. Roosevelt’s Executive Order in 1933. So the first thing we have to do is examine the reasons behind this confiscation. Executive Order No. 6102 issued by Franklin Delano Roosevelt outlawed the ownership of gold. After the executive order, the government bought back gold at $20.67 an ounce from the public in accordance with eminent domain law. There are two main reasons. The first reason a government would confiscate gold is in order to gain additional funds in order to deal with fiscally hardship. And the second reason would be in order to inflate the money supply.
Most gold and silver investors believe confiscation is likely because they only are considering the first option. Most investors in gold and silver believe that is why Roosevelt confiscated gold. However, this simply isn’t true. In 1933, the United States was on the gold standard, which meant that every dollar in circulation was backed by physical gold. This meant that FDR could not simply print money in order to finance his massive spending and this is why FDR ended up confiscating gold. He could not inflate the dollar until he controlled the value of the gold. It is important to note here that the US government held 68.2% of the world’s supply of gold at the time. Once Roosevelt made gold ownership illegal, he immediately raised the price of gold to $35 an ounce. This immediately devalued the dollar by 40% over night. This is truly the reason why Franklin Delano Roosevelt confiscated gold. Therefore FDR would not confiscate gold today because the Fed now has the ability to inflate the money supply without controlling the gold supply. Second the Government is also to not likely confiscate gold in order to gain extra funds when they could confiscate the $7.3 Trillion rapped up in retirement accounts today, which they already regulate and control in many ways. All gold and silver holdings are a mere fraction of this and confiscation would require most likely a house-to-house search, which would be moth time and manpower intensive. When we look at confiscation in this light, the numismatic exchanges con simply disappears.
Reporting Gold and Silver
A second misconception is that investors do not have to report numismatic coins, but they do have to report bullion. Neither numismatic coins nor bullion require any reporting when they are bought and it is only when silver is sold back to a dealer in excess of 1000oz or in gold in excess of 25oz at a time that a dealer has to report anything to the government.
Numismatic Coin Performance
Finally, many numismatic exchanges argue that numismatic coins will outperform bullion in the long run. However, when an investor examines all the factors this is quite unlikely. First, if the price of silver or gold goes up will numismatic coins or bullion perform better? Let’s say for example, silver goes up 177% from $18 to $50, then a one-ounce numismatic collectible coin valued at $100 is likely to go up by only 32% to $132. The collectible coin will go up based on the silver it contains, but there’s no reason to think the numismatic premium will increase too. On the other hand the same $100 in bullion is now worth $277, a difference of 145%!
Numismatic coins owe the value above the silver cost exclusively to their rareness and collectability. Historically, during times of economic hardship these types of purchases do very poorly because the demand for them drop and as a result the premium over the price of gold or silver charged goes down. So in some cases it is possible to see the price of silver and gold go up and the value of numismatic gold and silver coins go down!
A salesman might have a chart showing the performance of “rare/collectible/numismatic coins” against “regular/bullion coins.” Of course, the chart shows the numismatics performing much better. But these graphs inevitably track particular rare coins, which are cherry-picked with the benefit of hindsight. For every one rare coin that outperforms, there could be ten to twenty that severely underperform. Only afterward would you know which coin you should have bought. Additionally performance charts often omit the dealer’s high markups and markdowns that would more than wipe out the alleged profits for retail investors. In the end, investing in numismatic coins is far inferior to bullion.
Investing in Silver: One of the Best Investments Over the Next Decade
Will silver be the best investment over the next decade? This is a question many silver investors have asked and while it is difficult to say whether it will beat every single investment, there is no question that it will be one of the top ones. In this video Josh Renfro deals with the four major reasons why silver will be one of the best investments over the next decade.
- Invest in Silver: The Historical Return
- Invest in Silver: The Historical Gold to Silver Ratio
- Invest in Silver: The Industrial Demand
- Invest in Silver: The Massive Above Ground Shortage
This video also brings up questions like, “Are gold and silver prices manipulated?”; “How is the gold and silver prices determined?”; and many more. Silver and gold have already proven themselves over the last decade to be one of the best investments and thousands of investor now hold it today. Watch this video and understand why this particular investment may be one of the best ones you can choose for the next decade.
“Why Invest in Silver?” The Massive Above Ground Silver Shortage
At the dawn of the technology revolution in the 1970’s and 1980’s, there was a massive increase in the industrial demand for silver. Today, total demand for silver is between 800 million and 1 Billion ounces per year and nearly 700 million of that is funneled exclusively to meet industrial needs.
Government Silver Manipulation
Unfortunately, between 1980 and 2006 there was a massive government sell of silver. The United States alone nearly sold 3.5 Billion ounces and multiple other governments sold off nearly all their stockpiles. In addition to this, investors net sold 1.7 Billion ounces during that same period. Effectively meaning that between 1980 and 2006, somewhere between 5.5 and 10 Billion ounces of silver were dumped on the market. This effectively kept the silver price flat for decades until the sell off ceased.
The Problem with Silver Mining
Because of the low silver prices, new mining ventures in silver were nearly non-existent. Consequentially, while the demand for silver rose, the price of silver did not and neither did the mining capacity. As a result, for at least the last 15-20 years, we have been running a 50-200 million ounce deficit every year on silver production, which has decreased the supply steadily year after year after year. Even now as the price of silver has increased, creating additional silver mines will not be an easy project. It takes approximately 7-10 years to take a mine from the point of discovery to production. Another problem is that a majority of silver mined does not actually come from silver mines. Back in 2007, approximately 75% of all silver mined came from copper, zinc, or gold mines. One of these mine would find a large silver deposit and would process it separately from their main metal, but they were not actively seeking to find silver. Only 25% of the supply mined actually came from silver mines.
Above Ground Silver Rarer Than Gold
In the end, the major deficit that has been run for many years has resulted in above ground silver being more rare than gold! There are three ounces of gold for every one ounce of above ground silver. In fact, the supply of above ground silver is so scarce that if silver mining were to stop today, the above ground supply would only last for four months before being completely exhausted.
“Why Invest in Silver?” Reason #3: The Industrial Uses of Silver
Many silver investors think that silver is merely a hedge against inflation or money. While this has been largely true, since the start of the technology age in the 1970’s, this historical pattern has changed.
Technology and the Industrial Uses of Silver
With the dawn of the technology revolution, a massive demand for metal that could be used as an electronic converter became a chief concern within industry. With its unique properties including its strength, malleability and ductility, its electrical and thermal conductivity, its sensitivity to and high reflectance of light and the ability to endure extreme temperature ranges, silver is an element without substitution in the electrical world.
10,000 Industrial Uses of Silver
Silver as a commodity has over 10,000 industrial uses, the largest of any commodity with the exception of oil. Silver is used in laptops, TV’s, iPod, medical equipment, batteries, automotive parts, bearings, cell phones, computers, water purification, solar energy, and many more. Over the last 30 years silver’s industrial uses have skyrocketed. Fabricated demand for silver in 2011 is over 900 Billion ounces.
With numerous new advances in technology, it is expected that the industrial demand for silver will continue to increase for decades. The continued demand will continue to increase the price of the metals as both industrial and investment demand seek for equal share of the metal.
“Why Invest in Silver?” Reason #2: The Gold to Silver Ratio
Many new silver investors have hear of the gold and silver ratio, but do not understand its significance. Consequentially, Many investors ask, “How could the gold to silver ratio affect the future return on gold and silver?”
The History of the Gold to Silver Ratio
To truly understand the economics behind the gold to silver ratio, we have to understand the history. There have been periods such as with ancient Egypt where the gold to silver ratio was 1 to 1. At other time like during the Ming dynasty, the gold to silver ratio was 4 to 1. However, when the gold to silver ratio is examined over multiple centuries the average is 12 to 1. These ratios are not simply a mystical number, but rather are a reflection of the law of supply and demand. When we examine the silver both in above ground and under ground supplies, we find that there is approximately 10 ounces of silver to every 1 ounce of gold.
The Impact of the Gold to Silver Ratio
The first time that the gold to silver ratio seriously deviated from the norm in US History was in 1933 when Roosevelt confiscated gold and artificially raised the price of gold by 40%. After a decade or so the ratio returned back to normal, but in 1973 when the United States went of the gold standard the gold to silver ratio went crazy. Before 1973, it took roughly 16 ounces of silver to purchase 1 ounce of gold, or a 16 to 1 ratio. Due to extreme manipulation of silver prices, the gold to silver ratio skyrocketed until it peaked at 100 to 1 in 1990. While the ratio has begun to consolidate back to its historical norm, the ratio today ranges between 55 and 65 to 1. With gold at $1620 an ounce, silver would be at $135 an ounce if silver were to correct back to its historical ratio!
“Why Invest in Silver?” Reason #1: The Historical Return
Over the past ten years, so many investors have asked, “Why Invest in Silver?” Investors have seen numerous commercials on TV and advertisements on the Internet talking about the benefits of investing in gold, but not nearly as many commercials and advertisements have been made for silver. The first major reason for investing in silver is the historical return we have seen over the last ten years.
S&P 500 Historical Returns
Many economists and financial experts have referred to the last ten years as the “lost decade” for the stock market. When investors examine the charts for the S&P and every other major index from 2000 to 2010, the stock market was flat and if they further adjust the return for inflation, they will find that their return was negative. Effectively ten years of an investor’s investment life is gone with nothing to show for it. The fact is we have been a bear market for the last ten years and it is far from over. The average bear market in the US over the last 100 years lasted 12-16 years and unfortunately because of the massive debt load associated with the current crisis, it is likely that the current bear market will last even longer than normal period.
Silver and Gold Historical Return
On the other hand, from 1999 to 2010 silver rose over 760%. During the same period gold rose 514%. While other commodities did well during that period, none came close to performing as well as gold and specifically silver. To paint a clear picture, imagine you invested $10,000. Today if you had invested that in the stock market you would have less than $10,000. If you had put that in gold you would have $51,400 and if you had invested it in silver you would have $76,000!
Hilarious Swiss America Commercial!
I thought this video advertisement was hilarious. It is a must see. In regards to Swiss America, I completely disagree with their philosophy. Numismatic coins are a huge part of their business and are an investment I believe will significantly underperform in comparison to regular bullion. The commissions are a lot higher and ever since bullion started its ten year hike bullion has significantly outperformed numismatics. In many ways they are similar to a coin shop.
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