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    Precious Metals 101 Fundamentals

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    Maharshi Shrimali
    This document provides a summary of fundamental knowledge needed for new investors in precious metals. It defines key terms like precious metals, gold, silver, platinum and their characteristics. It also explains different forms of precious metals investments like coins, bars, rounds and ETFs. The document provides information on buying precious metals, choosing reputable dealers, and options for storing physical metals like using secure facilities that provide allocated and segregated storage. The goal is to educate new investors on basic concepts to make informed decisions when investing in precious metals.

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    Precious Metals 101 Fundamentals

    Uploaded by

    Maharshi Shrimali
    147 views12 pages
    This document provides a summary of fundamental knowledge needed for new investors in precious metals. It defines key terms like precious metals, gold, silver, platinum and their characteristics. It also explains different forms of precious metals investments like coins, bars, rounds and ETFs. The document provides information on buying precious metals, choosing reputable dealers, and options for storing physical metals like using secure facilities that provide allocated and segregated storage. The goal is to educate new investors on basic concepts to make informed decisions when investing in precious metals.

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    This document provides a summary of fundamental knowledge needed for new investors in precious metals. It defines key terms like precious metals, gold, silver, platinum and their characteristics. It also explains different forms of precious metals investments like coins, bars, rounds and ETFs. The document provides information on buying precious metals, choosing reputable dealers, and options for storing physical metals like using secure facilities that provide allocated and segregated storage. The goal is to educate new investors on basic concepts to make informed decisions when investing in precious metals.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    147 views12 pages

    Precious Metals 101 Fundamentals

    Uploaded by

    Maharshi Shrimali
    This document provides a summary of fundamental knowledge needed for new investors in precious metals. It defines key terms like precious metals, gold, silver, platinum and their characteristics. It also explains different forms of precious metals investments like coins, bars, rounds and ETFs. The document provides information on buying precious metals, choosing reputable dealers, and options for storing physical metals like using secure facilities that provide allocated and segregated storage. The goal is to educate new investors on basic concepts to make informed decisions when investing in precious metals.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 12
    At a glance
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    The document discusses fundamentals of precious metals investing including definitions of key terms and factors related to gold, silver, and platinum. It also covers considerations for choosing a storage facility.

    The main precious metals discussed are gold, silver, platinum and palladium.

    Definitions discussed include precious metal, gold, silver, platinum, bullion, troy ounce, investment grade, COMEX, London Fix, LBMA, gold to silver ratio, central bank and fiat money.

    Fundamental Knowledge of Precious Metals Investing.

    Published: February 2015


    Representative: Geoffrey Rutherford
    Toll Free: 1.888.861.0775
    www.sprottmoney.com/geoffrey

    Sprott Money is not only the most trusted source of investment grade precious
    metals in the industry, but we also pride ourselves on being educators within our
    discipline and work diligently to empower people to seek more knowledge about
    investing in precious metals. We believe it is imperative that investors have a solid
    foundation in understanding key terminology used in the buying and storing of
    precious metals, so that they are able to make sound decisions and be confident
    about investing. In addition, we firmly believe in the importance of understanding
    the economic context of the precious metals market, therefore we generate a
    significant amount of content through blogs, newscasts, and interviews to further
    empower our clients knowledge of precious metal investing.

    The purpose of this educational package is to provide the fundamental knowledge


    needed for new investors to begin their journey of physical precious metal
    investment. It seeks to provide a basic understanding of the world of gold, silver
    and platinum, so investors can become increasingly savvy about their purchases,
    and reap the rewards of their investment.

    Essentials for Novice Buyers


    Basic Definitions
    PRECIOUS METAL
    A rare metal of high economic value. Less reactive than most chemical elements,
    precious metals are popularly used in jewelry and regarded as a store of value for
    investment purposes. The most well-known precious metals are gold, silver,
    platinum and palladium.
    GOLD
    A soft and malleable precious metal with a bright yellow colour. Gold is most
    commonly found in jewelry, investments, and for industrial use. It is a chemical
    element with the symbol Au and Atomic Number 79. Gold is well-known for its
    monetary and symbolic value.
    SILVER
    A white, soft precious metal known for its malleable characteristics and value.
    Silver is most commonly found in jewelry, high-valued utensils, and as coins and
    bars for investment purposes. Silver also has numerous industrial and commercial
    uses. It is a chemical element with the symbol Ag and Atomic Number 47.
    PLATINUM
    A gray-white precious metal that is highly malleable and ductile. Platinum is a
    chemical element with the chemical symbol Pt and Atomic Number 78. It has a
    variety of uses from industrial equipment to jewelry and investment. Platinum is a
    scarce material and thus, is highly valuable.

    BULLION
    Bullion is used to describe precious metals bars, rounds, and ingots, produced by
    mints. The value of bullion is determined by the purity and weight of the precious
    metals content.

    TROY OUNCE
    A unit of imperial measure specifically used for measuring the mass of precious
    metals. A troy ounce is not to be confused with the common 1 ounce, as they
    have different units of measurement.
    1 troy ounce = 1.097 common ounce = 31.1 grams = 0.06857 pounds
    INVESTMENT GRADE
    Investment grade indicates a degree of purity of the precious metal product that
    is considered high enough to be tax-free. The investment grade for gold is 99.9%
    and for silver is 99.99%.
    PURITY / FINENESS
    The purity/fineness of a precious metal is measured in percentages and indicates
    how much of an object is made up of the particular metal. Currently, the highest
    purity for investment grade gold is 99.999%.
    What is the purity of:
    24karat gold
    99.9%
    22karat gold
    91.7%
    Sterling silver
    92.5%
    FACE VALUE
    The monetary value depicted on a coin set by the minting authority, often times
    the government. Face value differs from the actual value of the coin. For instance,
    a 1oz Gold Maple Leaf coin has a face value of $50 but the actual value of the coin
    is based on the spot price of gold.
    LEGAL TENDER
    A medium of payment that is recognized by law and the government. Coins
    created by government mints are recognized as legal tender as they have a face
    value that can be redeemed as payment.

    Types of precious metals


    What forms of precious metals can I buy?
    Precious metals can be bought as physical coins, rounds, bars, paper ETFs, futures
    and trusts.
    Coins: Precious metals that have a face value, as set by the government.
    The value is based on the amount of precious metals in a coin.
    Rounds: Coin-shaped bullion that do not hold any face value. They are not
    backed by the government and thus, are not considered legal tender.
    Bars: Bullion that is shaped into bars, sheets, wafers or plates. Like rounds,
    they do not hold any face value.
    What is the difference between rounds and coins?
    Coins are minted exclusively by a government-backed sovereign mint and
    bear a face value. Rounds are coins that do not have a face value and can
    be minted by a private or sovereign mint.
    What is the difference between physical precious metals and ETFs?
    Physical precious metals are tangible assets that investors can possess and own.
    An exchange-traded fund (ETF), on the other hand, is a commodity exchange
    traded fund consisting of gold or silver-backed contracts and derivatives. They are
    also a form of paper investments. When a gold ETF is redeemed, you do not
    receive the precious metal but the cash equivalent.

    Different Mints
    MINT
    A facility, either private or government-backed, that produces precious
    metals/bullion bars and coins.
    Examples of Minting Companies:
    Royal Canadian Mint
    Canada*
    US Mint United States*
    The Royal Mint United
    Kingdom*
    PAMP Suisse Private
    Switzerland Mint

    Australian Perth Mint


    Australia*
    Sunshine Mint Private US
    Mint
    NTR Metals Private US Mint

    *Government Mints

    Prices
    SPOT PRICE
    The current market price at which gold, silver, and platinum can be purchased on
    the spot market. The spot prices are constantly changing as the markets move
    accordingly.
    SPOT MARKET
    A market in which gold, silver, and platinum is bought and sold for delivery in the
    very near future.
    ASK & BID
    The Ask price is the spot price at which precious metals are sold to a consumer.
    The Bid price is the spot price at which precious metals are bought back from a
    consumer.

    PREMIUM
    A dollar or percentage amount that is added on to the spot price to arrive at the
    live product price. The precious metals dealer, the Mint or banks will add a
    premium.
    SPREAD
    The difference between the asking and bidding price of a product. The spread
    helps determine what the precious metals price needs to be in order to create an
    investment gain.
    VOLATILITY
    The relative rate at which the price of precious metals moves up and down. If a
    price moves up and down rapidly over short periods of time, the price has high
    volatility. If the price almost never changes, the price has low volatility.
    How are live product prices determined?
    When purchasing from a dealer, distributor or a bank, live product prices are
    calculated by adding a premium onto the spot price of the metal.
    What is the difference between coins and bars and why the difference in price?
    Coins and bars differ based on value and production cost. Since coins are legal
    tender and hold a face value, they have a higher premium than bars, which do not
    have a legal tender value.
    What factors influence the difference in premiums?
    Other factors may also influence premiums such as size, purity, the country the
    metals are from, the minting company that produced the metals, and supply and
    demand.

    Buying
    Where can you buy physical precious metals?
    Physical precious metals can be bought from banks, jewelers, or bullion dealers.
    Many investors prefer to go to bullion dealers because they provide the most
    competitive premiums on products and they offer a sense of security outside of
    the banking system and government. Banks have very high premiums. Buying
    from private bullion dealers is also faster, easier and more convenient as less
    paperwork is required. Many dealers operate with a storefront, over the phone
    and/or online.
    How do you buy physical precious metals?
    Physical precious metals can be ordered online, over the phone or in person at a
    store or bank.
    How to choose your dealer:
    Check to see if your dealer is listed on the Better Business Bureau or similar
    rating agency and if so, what their rating is.
    If it seems too good to be true, it probably is.
    Verify that your dealer does not back order products to avoid not fulfilling
    your order after payment has been submitted.
    Google search

    Storing Your Metals


    Where should I keep my precious metals?
    There are many options for investors to store their precious metals. Some choose
    to store it within their own homes while others choose to store it in safety deposit
    boxes in banks. Sprott Money offers storage options in Canada, U.S., Singapore,
    Switzerland and the Cayman Islands. All our facilities are private and non-bank.
    What does allocated and segregated storage mean?
    Allocated storage means that your precious metals are recorded under your
    name and you hold direct ownership of the metals. Segregated storage means
    that your precious metals are stored separately from others in individual boxes
    assigned to each client.
    How to choose your storage facility:
    1. Location To prevent the government and the banks from bailing-in
    (confiscate) your precious metals in times of financial difficulty, find a
    storage facility that is private and outside the banking system. Having a
    storage facility that is located in a politically and economically stable
    country is also important because it offers you the added sense of security
    and peace of mind.
    2. Allocated & Segregated Make sure the storage facility you choose offers
    allocated storage so that you have direct ownership of your precious
    metals. If you do not wish your precious metals to be mixed up or
    comingled with other clients metals, make sure your storage facility offers
    segregated storage as well.
    3. Insurance Your precious metals should be fully insured by your storage
    facility or program so that in the event of loss, theft or physical damage to
    your metals, you will be fully compensated.
    4. Fees Find the most affordable storage program while being cautious of
    scammers and con artists. Remember, if it seems too good to be true, it
    probably is. Generally, fees are calculated on basis points which are
    annual percentage rates, based on how much you are storing (volume) or
    based on the total value of your storage inventory.

    5. Audit Ensure the storage facility you choose undergoes external audits
    from a reputable accounting firm at least once a year. Storage facilities that
    allow you to go in to see and count your metals for yourself are a plus.

    Precious Metals Market Explained


    Important Definitions
    COMEX
    The Commodity Exchange, Inc. (COMEX) is a division of the New York Mercantile
    Exchange (NYMEX) in which Gold and Silver are traded.
    LONDON FIX
    The procedure by which the price fix of gold and silver is determined twice each
    business day on the London market by the members of the LBMA based on the
    buy and sell orders at that time. The price fixing provides a recognized rate that is
    used as a benchmark for pricing precious metals products.
    LBMA
    The London Bullion Market Association (LBMA) is a wholesale over-the-counter
    market for the trading of gold and silver.
    GOLD / SILVER RATIO
    The ratio demonstrating how many ounces of silver it takes to purchase one
    ounce of gold. Investors use the ratio to evaluate the relative value of silver,
    which determines if its an optimal time to purchase gold or silver.
    CENTRAL BANK
    An institution that manages a states currency, money supply, and interest rates.
    They also oversee the commercial banking system of their respective countries.
    Examples include the Federal Reserve (Fed) of the United States and the
    European Central Bank (ECB).
    FEDERAL RESERVE (FED)
    The Federal Reserve is the central banking system of the United States. It consists
    of 12 regional Federal Reserve Banks, the Federal Open Market Committee
    (FOMC), a Board of Governors, and numerous privately owned US member banks
    and various advisory councils. Its key objectives are to maximize employment,
    maintain stable prices, and maintain moderate long-term interest rates. Having

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    both private and public components, the Fed was designed to serve the interests
    of both private bankers and the general public.
    FIAT MONEY
    Inconvertible paper money made legal tender by a government decree. Examples:
    US dollar, British Sterling, Euro
    BULL / BEAR MARKET
    A bull market is when a market is performing well and prices have an uprising
    trend. A Bear market, on the other hand, is when a market is stagnant or falling,
    causing prices to drop.

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