It's tax refund time, and my suggestion to you all (especially US citizens) would be to spend 50% of your tax refund on precious metals. Here's a little known fact: The average rate of inflation in the US over the past 40 years has been 7% per year. This means in 10 years you lose half your money.
The case for precious metals as an inflation hedge really doesn't need to be re-stated. But before you get into precious metals, here are some important things to know:
1. The COMEX price means nothing. Be prepared to set your own price.The COMEX is just one of many markets for precious metals. Other markets are eBay and Craigslist. The COMEX is in fact a very small market. Use the COMEX price (like all other prices) to your advantage. When the COMEX price is the lowest, buy from the COMEX (or from dealers who base their price on the COMEX price). The primary objective here is to always buy low and sell high.
2. For buying, coin shops and bullion dealers are the most reliable & usually the cheapest.eBay is very expensive these days, mainly because of cash-back. If you're in the US, take advantage of the cash-back offer. Otherwise, forget about eBay. Craigslist rarely has bullion up for sale and if it is, it's usually local pickup and quite expensive (because the seller knows how valuable bullion really is).
3. Always tally up all your costs (shipping, exchange rates, and other fees) before determining price.It's often easy to forget about shipping costs, customs fees, eBay fees (for selling), or exchange rate arbitrage. Typically, exchange rate arbitrage is 3% of the price (if you're paying in a currency other than your bank's).
4. Always prefer domestic dealers over foreign. But not necessarily local.There's certainly more risk involved in sending precious metals across international borders. You could be hit with customs fees or run into some kind of draconian restriction on imports. Now, in Canada, if you choose a dealer within your own province, you'll have to pay provincial sales taxes. So it's usually better to buy from dealers outside of your province (or other regional jurisdiction) to avoid taxes.
5. Do not sell anything unless you must.Given the uncertainty of a fiat monetary system, you never know if something is a bubble or if it's hyperinflation. There's really no way to judge if precious metals have become overvalued. The best exit strategy is to never sell. However, there are those cases where you desperately need some money. In such a case, you are forced to sell. There are also situations where you may find a better investment (e.g. a stock or a piece of property) but don't have enough money to invest in it. In that case, again, you are effectively forced to sell to raise cash.
6. There is such a thing as having too much.Keep enough cash lying around so that you won't be forced to sell in the event of some minor setback (e.g. losing your job). The problem with selling precious metals is that in many cases you are hit with taxes & fees, on top of the premiums you paid originally to purchase the metals. Therefore, too much buying & selling will cause you to lose all your money.
7. Keep yourself busy.Sometimes it's tempting to obsess about the daily spot prices or constantly second-guess your investment decisions. To avoid such foolishness, you should keep your mind occupied. Basically, forget about the fact that you have precious metals and go on with your life.
There is another question precious metals investors struggle with, and that is, "Which metals should I buy?" My belief in this regard is that the oldest metals, those that have been money for thousands of years, need to be given priority. You should have a much larger proportion of gold & silver relative to platinum & palladium.
Deciding between platinum & palladium is quite easy. Palladium can be substituted for just about every use of platinum and it's much cheaper. Plus, Russia controls much of the palladium supply, meaning it could create artificial scarcity quite easily, raising prices dramatically. Palladium can be used to produce the cold fusion effect observed in 1989 by Fleischmann & Pons. There's also a growing palladium jewellery market in Asia. I would recommend palladium over platinum any day of the week.
Now, deciding between gold & silver is more tricky. On the one hand, gold is owned by central banks and is therefore more capitalized. It's more liquid & less volatile. The problem with silver is it's a wild ride. If you don't like wild rides, you should keep more gold than silver. However, silver has the potential to go much much much much higher than gold. Silver can be substituted for all other precious metals, and there's less silver bullion out there than gold bullion! So if you want maximum upside, you should go with silver. And because silver is correlated with gold, you won't miss out on gold's upside by owning silver. However, I would recommend holding some gold because of its low volatility. In cases where you need to sell something, you would sell the gold & keep the silver.
Historically, the best performing portfolio is 50% gold, 20% silver, 5% platinum, and 25% palladium. However, it's also very volatile & illiquid because of palladium and not very well exposed to silver. So instead, I would recommend a portfolio of 40% gold, 40% silver, 5% platinum, and 15% palladium.
In the end it's up to you. Remember: DYODD (Do Your Own Due Diligence).
My word is not gospel. Amen.