Profiting From Trading Gold And Silver Bullion

profiting trading gold and silver bullion

Trying to find a market that is not saturated can be a difficult task in the modern age because forums and other tip websites attract crowds very quickly when potential for profit is concerned. A healthy sector that has not been ruined by the hordes of speculators is gold and silver bullion and coin trading. A good point to make is that entering this sector requires capital to invest, risk tolerance and some knowledge which provides some barriers to entry to your competition. 

This business model achieves profit by buying bars and coins and then selling when the price has risen. Capital requirements to get started are quite low too, especially for traders starting out that buy and sell silver Britannia coins as these are low value coins but attract moderate profits when moved in size. 

Gold Sovereign Trading 

Higher up the value chain is the most popular gold coins in the UK, these being gold Sovereigns manufactured for centuries by the Royal Mint

The Gold Sovereigns are a very liquid investment in the UK with many precious metal investors that only collect gold sovereigns, making the market for this type of coin huge! 

The gold Sovereign is 91.67% pure gold (22 carat) and features a portrait of the reigning king or queen at the time that the coin was minted. Gold sovereigns come in various sizes, there are quarter, half, full, double and five sovereign coins. The larger the size of the coin the less you will pay per gram of gold, but the full sovereign is the most popular and best to get started on. They are always in demand and trade at low premiums, meaning most of the money you spend to buy one is justified by the coin’s intrinsic gold value. 

Gold Bullion Coins 

Gold bullion coins, which are pure 999.9 gold, are the other option but require a larger budget. These coins are great for beginners as they trade very close to the gold spot price which means that you do not have to worry about paying high premiums for the more scarce and rarer numismatic coins. However, when you buy a gold bullion coin, your profits and losses are at the mercy of the gold spot price. You can only sell the coin for around 1-2% above the gold price. Therefore, it is important to time your purchases well and to buy into a market decline rather than chasing the market after a large rally. 

Trading Silver 

Perfect for entrepreneurs that have lower budgets or those than are risk adverse and do not want to risk too much too soon. Silver coins are usually traded in bulk, with 25 single ounce coins per tube. A moderate movement in the silver spot price can mean that your silver bullion coins become profitable to sell. Bullion companies offer live instant prices, but you may need to shop around to see who is paying the highest rates. More confident entrepreneurs may wish to buy large 1kg silver bars as a smaller increase in silver prices is required to make adequate profits. A word of caution, however, as large bullion bars can be significantly higher to send in the mail which erodes into profit margins. 

Gold Sovereigns 

Gold sovereign coins are low premium and weigh 8g, making them easy to store, stack and send to a buyer in the post. The sovereigns are considered bullion, making their value very close to the gold content in the coin. This means that very little knowledge of the coin is required to get started. After buying some gold sovereigns, you need to wait until the gold spot price has risen to then make a profit by selling. Again, the best place to sell gold sovereigns is often bullion companies as some such as Auronum will pay year specific premiums for your coins. 

Numismatic Coins 

Higher risk but higher return plays are also a big part of this market with numismatic coins high premium coins. These are gold coins of a specific design which are often historic. Examples would be 18th century 8 escudos coins or British Guineas. This type of trading requires specialist knowledge because the entrepreneur needs to know how much of a premium to pay and when the premium is too higher. Even though this strategy is the riskiest, it can be the most profitable by a large margin. For example, buying a £30,000 8 Escudo coin from Costa Rica is a lot of risk, but a 5% profit would return £1,500. When we compare this to the gold sovereigns, it is standard to expect around £10-15 profit when buying and selling a gold sovereign. It would take, therefore, a gold sovereign trader to profit on the sale of at least 100 transactions to make the same profit that the seller of the £30,000 8-escudo coin. If a large collection of high premium numismatic coins is purchased, the potential profit is very large. 

Moreover, gold numismatic coins are high premium which makes them very insulated from the gold spot price. In fact, numismatic coin prices hardly change with the movements of the gold spot price. This means that you can still make profit from your coins even when the gold price has fallen. Given the high prices involved when numismatic coins change hands, the market for these coins is much smaller than the other types of gold and silver investment.

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