How and When to Sell your metals
Investors in gold and silver typically do a little selling in addition to their buying regimen. But before you sell, make sure you do so at the best times and in the most profitable ways. The most important thing is to make sure you trust the dealer you’re selling to. Make sure they have a high BBB ranking – no less than an “A.” Also make sure you can get them on the phone whenever you need to.
When you want to sell your gold or silver, give your favorite dealer a call, and tell him what you want to sell. If you have a relationship with a dealer, like the one you bought the items from, you can usually get a quote over the phone on the stuff you want to sell. If you’re agreeable, the dealer will lock in the price. Once you have a price lock, write the confirmation number down and package your stuff up to send to the dealer. Don’t forget to include your address and the confirmation code. Some dealers like My Gold Advisor will wire payment directly to you, free of charge, as soon as they receive your package.
When do I sell?
Sell when you need cash to buy something you need or when gold and silver are overpriced. You’ll have a good idea when gold and silver are overpriced when certain key ratios are met.
Just because gold and silver moves up 5% this week doesn’t necessarily mean it’s a great time to sell. The best time to sell your gold or silver is when you have another, better use for your money.
What ratios should I watch?
Watching key ratios can provide important indicators for when to hold and when to buy. These ratios help us understand when gold and/or silver are going from undervalued to overvalued. These ratios help us decide when we might want to switch some of our portfolio into another asset class.
1. Gold to Silver Ratio
One key ratio we watch is the ratio between gold and silver. The ratio of gold to silver in 2012 is about 50:1, which means it takes 50 ounces of silver to buy one ounce of gold. When this drops to 12:1 or 15:1, we’d consider selling some of our silver and converting it into gold. When it takes less silver to buy an ounce of gold (like 12 ounces of silver to one ounce of gold), then gold is heading “lower” and silver is heading “higher.”
During periods of history when gold and silver served as the foundation of the world’s economy, this ratio was typically between 14 and 16. Whenever we suffer a global monetary crisis, whenever people begin to fear that the world’s paper currency system will break down, the price of silver tends to rise far more than gold.
We expect this ratio to eventually reach the mid-teens again because the ongoing massive global inflation will inevitably lead to a collapse of the dollar standard and to the return of gold-backed currencies.
2. Median House to Silver Ratio
When you look at the median house price in the United States compared to silver in 2012, it takes about 5,000 ounces of silver to buy a median-priced house. When the ratio gets closer to 500:1, meaning 500 ounces of silver will buy a median-priced house, this would be an indicator that it may be time to switch from silver into residential real estate.
When silver can buy that much house, it would indicate prices of residential real estate have come down to a point where silver may be getting overpriced and/or housing is undervalued. We want to buy things that are undervalued (“low”) and sell things that are overvalued (“high”).
3. Dow to Gold Ratio
Another ratio we watch is the Dow/Gold Ratio. This is the ratio of the number of ounces of gold it takes to equal the Dow Jones Industrial Average. The Dow has been around 13,000 in late 2012. Gold is around
$1,800 per ounce, so the ratio is about 7:1. It takes seven ounces of gold to match the Dow. When the ratio is closer to 1:1 or even 2:1, we might consider selling some gold and buying equities.
How to Get the Most from Your Sale
Use a dealer you know, trust, and respect – and preferably one you’ve done business with in the past. Never go to a Cash4Gold or other We Buy Gold-type of business in your local strip mall.
One of the funniest parts of the gold and silver bull market we’re in is all the “cash for gold” stores popping up. It’s funny, because they tend to be an empty room in a strip mall with a window sign saying, “We Buy Gold!” Inside you’ll find a counter, likely behind a bulletproof window.
There’s a reason those things are popping up everywhere. These businesses generate huge margins and huge profits for the dealers. They do this by ripping off the consumer.
Let’s say you bring a pile of your old jewelry into one of these stores and that jewelry contains four ounces of gold. At a spot price of $2,000 an ounce, the melted value of your gold is $8,000. In most cases, these businesses will only give you about 20% to 40% of the melt value. You’d be lucky if you received $4,000.
These businesses are making 100% to 200% off of you instead of a fair margin of perhaps 5% to 15%. If you were to sell your scrap metals to My Gold Advisor, you’d receive between 85% and 95% of the melt value. We simply don’t believe in gouging people who don’t know how to value their old jewelry.