About Discount Gold and Silver Trading

Significance

There are different ways to invest in gold and silver, but the most popular way for a person to invest in discount precious metals is to purchase gold and silver coins. These coins can be gold coins from across the globe, and investors are able to purchase coins from the United States, the United Kingdom, China, Canada and South Africa, among other countries. For many investors, discount coins are seen as a way to hedge their bets against inflation, making it a profitable market for dealers. This can lead to some less than reputable people flooding the market with gold coins.

Investing in gold and silver in uncertain economic times is one of the most typical financial strategies. In theory, while the value of the dollar falls, people will begin buying up gold and silver in order to protect themselves from deflation. This has a two-fold effect on the value of gold and silver: as demand for gold and silver increases (due to the falling dollar), the supply of gold and silver decreases (as it is removed from the market). Those that buy into gold and silver early will see a return on their investment, as the gold and silver that they initially purchased will be worth far more as demand peaks.

As of November 2008, 20 percent of the annual amount of gold mined is slated to be converted into bullion (gold coins) intended to be purchased by investors. Once purchased, the value of gold silver, and other precious metals can be watched as with other stocks, by following the commodities market.

While it is possible to find reputable dealers of gold bullion, there are many unscrupulous businesses attempting to exploit the commodities market as well. These often come in the form of discount gold and silver trading companies. Precious metals are almost always sold at or near market value and are rarely sold for deep discounts, so an investor should be wary of any company offering very discounted coins.

There are some obvious gold scams populating the Internet, which play on the individual's familiarity with the gold and silver trading industry and desire to make an easy profit. For example, some email scams promise shares in Nigerian gold mines or other outrageous claims. These are usually easily identifiable as scams because of their grandiose promises and often poorly worded English.

Other less obvious scams include "services" that will quickly convert your gold and silver into cash. These companies often ask you to mail in your jewelry for a free "appraisal." This appraisal is often far lower than the item's actual price, but because the company already has the piece of gold or silver in hand, it is difficult to dispute the price. In some cases, the company simply keeps the jewelery without sending a response. By the time the authorities are alerted, the "company" has disappeared.

The best ways to sell your gold and silver jewelry is to first get it appraised by a reputable dealer. Rather than visiting a pawn shop or an online dealer, inquire at a local reputable jeweler in order to find an accredited appraiser. These appraisers may charge a fee, but the price they put on your gold or silver will be far more accurate and garner more trust from prospective buyers. It is best to have your gold or silver appraised by a third-party, rather than someone who is buying the piece, for obvious reasons. When having a buyer determine the value of the piece, you are not having the item appraised, rather, you are haggling.

Trading gold and silver on the stock market is similar to trading stocks. Investors buying and selling gold through a broker may never see the actual physical gold and silver they own. However, any type of individual trading should not be approached lightly. Make sure you conduct deep, independent research into the process of buying and selling commodities before attempting to make a profit trading on the market. The world of stocks, commodities and securities is highly complex, and most amateurs quickly lose money without proper advice.

Part of the notion that gold and silver are safe investments lies within the belief that these precious metals are inherently valuable. This stems back to the "gold standard" which the U.S. government adopted in the 1900s. Simply put, each dollar was a promissory note representing a certain amount of gold that an individual owned. In theory, an individual could visit a bank and demand to redeem their dollar for gold. In this way, gold was the actual currency that was exchanged for goods and services. Gold, whether minted into a coin or not, was accepted as payment in stores, based on weight. For example, you could enter a store with three ounces of gold dust and make a purchase.

Today, that is not the case. Though the U.S. still maintains a reserve of gold, gold's value is determined just as any other commodity--by its supply and demand. Gold is no longer as liquid (legal tender immediately usable in the paying of debts or exchanging of goods and services) as it once was and is instead an asset. You must sell gold at its current market value in order to receive money. It is not money in itself, and is not, as many believe, a 100 percent safe investment. It is still subject to the volatility of the market.