What do you think are the two most important questions an investor should ask before buying silver or gold bullion? For some, hunting for bargains is about more than getting a product at the cheapest possible cost. It’s about the chase and the hunt, not the catch. One of my family members who fall into this category even remarked once that her ancestors would be proud of her “hunter bargain” skills.
Within the context of the silver bullion market in South Africa, the same is true. Many investors see themselves as exclusively bargain hunters. They would never stoop so low on the bargain-hunting food chain to be caught paying the market-related price for an ounce of silver. They patiently wait for dealers to send them a newsletter with the latest bullion bargain. If the price is low enough, they pounce.
Buying the most amount of silver for the least amount of rands is indeed a solid strategy for bullion investors. I have spent years telling my clients to be careful not to overspend. The focus should be on well-priced silver, not pretty silver. Buy pretty silver as an auxiliary hobby as you learn to appreciate various minting techniques. Buy pretty silver as someone who appreciates coins as art in their own right.
Anyway, is the price per ounce of silver the most important aspect of investing in silver? The answer is a resounding NO. Below are two considerations that are more important than price.
The buy-back policy of the seller
The first consideration that is more important than the price of the silver bullion product is the buy-back policy of the seller. In fact, this should be the most important concern for investors for several reasons.
Firstly, while silver and gold are strictly speaking money, one cannot spend a silver Krugerrand at Pick ‘n Pay or Makro. For now, at least, sellers of silver and gold may release the economic energy inside each ounce by selling it for currency (i.e., rands). This is where a trusted seller committed to not only selling to you but buying back from you re-enters your story. Imagine the stress of requiring urgent liquidity, having that amount of convertible asset in the form of precious metals, but the dealer/person from whom the purchase was made is only a seller! Imagine the hassle of having to sell on Junk Mail, Gum Tree, or Bid or Buy, and then trying to organise couriers to get your coins to the seller. Imagine having to navigate all of this in a time when you just need some cash flow. If price is your number one priority and concern, you may have accepted all the above risks and difficulties for a saving of R5 or R10 per coin.
Secondly, a dealer or seller worth his/her salt (so to speak) is dedicated to long-term growth and relationships with the precious metal community and is passionate about your story and the victory of your financial future. What dedication is there when a seller of a financial instrument is not willing to buy back their own product? Even second-hand car dealers will take back the car they sold to you. You may be shocked at how little they will pay, but I digress. The point I am trying to make is to emphasise that a solid buy-back policy and commitment to customers will provide you with peace of mind about the future time when you decide to “cash in” your investment.
The buy-back price of the seller
The second important consideration that is more important than the selling price is the buy-back price the seller is offering for your precious metals. A buy-back policy is only part of your victory of finding your ideal precious metals seller. Part two is to carefully consider the price they offer for your ounces of silver or gold when you wish to offload.
Recently, I had a WhatsApp dialogue with an investor who purchased a particular niche silver product from a local manufacturer. Sadly, the manufacturer offered him 25% of what that item was selling for on the seller’s website.
I realise that this example is a low-hanging fruit to pick. But it is the reality and there are sellers who are more than willing to take advantage of investors who are desperate to sell. It is common sense to ask a seller to tell you what they would buy back that item should you bring it back the next day or anytime in the future for that matter. Their response should be the basis on which you enter into a business transaction with them. Not the selling price of their silver!
A More Substantial Victory
Buying cheap silver is not victory. At least it is not a complete victory. If it was, buying sterling silver spoons and cutlery at auctions would be a winning strategy for acquiring silver. For the more mature investor, save some time, build a relationship with a dealer who will not only sell you bullion at great prices but is there for you when the time comes to liquidate your investment. Knowing that you can depend on your dealer when circumstances require.
P.S. Silver-Sphere Trading, in addition to having an excellent buy-back policy, is also selling the cheapest silver and gold bullion on the South African market overall. Not to mention our wide selection of products. Which makes this blog article a little ironic.