Questions and Answers

Q. What is the "spot" price?

The spot price is set by paper trading on the commodities exchanges, not by physical metal in the real world. It is a number subject to manipulation by speculators who never touch the metal, trading contracts for 100 oz of gold and 5000 oz of silver that they never intend to take delivery of. If you want to take delivery of a silver contract there are many hurdles, people try all the time and the exchange makes it difficult to do, when delivery is made silver is supplied in random weight bars of between 950 and 1050 troy ounces.

When we sell 1, 5 and 10oz silver bullion and 1oz gold coins, it's important to understand it costs more to make those. Do you ask why bread costs so much when wheat is only $5 a bushel on the commodities exchange? The comparison is very similar.

Many precious metals investors believe the markets are being manipulated, and the "real world" price is higher because nobody is willing to sell bullion at the spot prices. In order for transactions (a market) to occur there have to be willing sellers, and they appear to be willing to sell only at prices well above spot. There also have to be buyers willing to pay those prices, and chronic shortages of precious metals prove that there are plenty of willing buyers right now.

Q. What is "junk silver"?

First off, "Junk silver" is not junk! Coin dealers refer to pre-1965 dimes, quarters and half dollars as junk silver only to differentiate them from numismatic collectibles. "Junk silver" is typically sold by face value ($5, $10, $100 and $1,000 being the most common increments). These coins were minted from 90% silver, and for each $1 face value there was 0.7234 troy ounces of silver when the coins were new. Allowing for wear, the industry accepted practice is to figure 0.715 troy oz. per $1 face value.

In 1965 silver was removed completely from Quarters and Dimes, and dropped to 40% in Kennedy Half Dollars until 1970. There is 0.296 troy oz of silver for each $1 in 40% Halves, and these usually sell for a very low premium.

Since 1970 only special issue coins contain any silver. Some Eisenhower dollar uncirculated and proof coins were 40% until 1976 and special proof coins since 1992 have been struck in 90% silver.

Q. Can you explain some things about coin collecting?

Collecting coins is a fascinating hobby for all ages. The study of coins is called numismatics. A coin is an excellent way to learn about history. It is also a great investment if you purchase coins that increase in value. But it is not a simple hobby because of all the factors that impact the value of each individual coin, from its history to its quality and scarcity. If you are considering starting a coin collection, here are some things to keep in mind.

First, learn some basics. Research is important for coin collectors. Thankfully, there are lots of books that can help you understand what you are buying or selling. It is important to collect what you like and discover as much as you can about a coin before acquiring it. You don’t need to have a lot of money to start. Check your pocket change for different dates and mint marks or different state and national park quarters. If you have inherited coins, or have received them as gifts, educate yourself on their background. Coins with certain dates and mint marks are rarer than others. These factors contribute to the value of a coin.

Knowing how a coin is graded, is essential if you collect coins. This system assigns a value based on the coin's condition. The grading process is pivotal. You could have the same two coins -- same year, same mint, same design -- and they could be worth drastically different prices based on the score they received when being graded by a reputable grading company such as PCGS, NGC or ANACS. Coins in near-perfect condition are very rare. So they are more valuable than worn or damaged coins.

Never clean your coins, novices are often tempted to polish their coins. Shinier coins must be more valuable, right? Cleaning or polishing a coin can destroy its value. It removes some of the original finish, rendering the coin far less valuable as a result. Real collectors prize coins that are as close to their original condition as possible.

Asking questions is the best way to learn and there are no stupid questions. Even long time collectors will have questions and need answers.

Q. The company I talked to said I should buy graded coins, because they are the best. Is that right?

For older, collectible coins, the answer is yes. See the next answer for more on that. But for modern bullion coins, even proof strikes- NO! There are some firms that will try to tell you that if you are buying a Silver Eagle or a Gold Buffalo you should buy the slabbed and graded MS70 or PR69 because you know they are genuine and they are the most collectable because they are the best examples. They will be priced at a large premium over the price of the metal, and they may try to tell you that your purchase is guaranteed.

Modern bullion coins will all grade well due to precision equipment and techniques that result in much better quality than was possible even 40 years ago. These coins are overpriced, and when you go to sell them you will lose part of your investment, unless they have a guarantee, of course. Then you will only lose 10% of your investment, and they will sell that same overpriced coin to someone else. In reality, a high grade Gold Eagle is still a Gold Eagle. They are not rare. They are not exceptional. If you are selling graded bullion coins most coin dealers will only pay the same as for an ungraded coin.

Q. What does MS-63 mean? What are the coin grades? Who decides what grade a coin is or if it is counterfeit?

Unlike the answer above, having coins graded does make sense for older, collectible coins. The better grade coins are rare, and rarity commands higher prices. It also helps everyone know if the coin has been tampered with, cleaned or in other ways less desirable. But we stand by our answer above- for modern coins there is no advantage to being graded and encapsulated.

Collectible coins are graded on a scale of 1 to 70. A coin graded 70 would be perfect, but 1 is poor, where almost nothing on the coin is legible and even the design is lost. Also there are different designations for Business or Mint Strike (MS) and Proof Strikes (PF). A business or mint strike is a coin struck on regular dies and intended for circulation, whereas proof coins are struck using specially polished dies at least twice.

When we talk about a coin being "slabbed" it refers to the coin having been examined by a skilled coin grader (independent third party) for evaluation, then sealed in a tamper-resistant holder with the assigned grade on a label, usually with a serial number and some kind of hologram or other recognizable feature that certifies its authenticity. There are many organizations that grade coins, not all of them are honest or accurate. The best are PCGS, NGC and ANACS.

Q. What about numismatic gold coins? What's the deal with gold confiscation?

A lot of nationally advertised dealers will push pre-1933 U.S. Gold coins, and like to point out that the government confiscated gold in 1933 but exempted collectible coins. They hint that it might happen again, but if you buy their numismatic gold offerings you will be safe. In 1933 Gold WAS money. The Federal Government confiscated the people's gold (with the exception of 5 oz per person) to keep the government solvent- it was an emergency measure. It also had the benefit (from the Federal Reserve's point of view) of severing the link between gold and paper, allowing unfettered inflation of the currency. Gold is no longer legal tender money so there would be no actual purpose or reason to try confiscation again (unless the government decides to confiscate other kinds of savings like IRA and 401(k) accounts). That said, collectible coins are pieces of history and have appreciated much faster than bullion, so there is nothing wrong with owning them.

Q. What is Anti-money Laundering?

Missoula Gold and Silver Exchange uses all of its commercially reasonable efforts to comply with the Uniting and Strengthening of America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (the "USA Patriot Act"). As a dealer in precious metals, Missoula Gold and Silver Exchange uses commercially reasonable efforts to only source its customers' precious metals from dealers that comply with the USA Patriot Act, and only selling to dealers and clients that comply with the USA Patriot Act. Additionally, Missoula Gold and Silver Exchange has an express policy against aiding and abetting in the act of money laundering or facilitating any illegal acts governed by the USA Patriot Act or otherwise. By agreeing to Missoula Gold and Silver Exchange's terms and conditions and consummating a transaction with Missoula Gold and Silver Exchange each customer hereby represents and warrants to Missoula Gold and Silver Exchange that (i) the customer is in compliance with the USA Patriot Act, (ii) none of the funds being used to consummate the transaction were derived from or related or connected to money-laundering, terrorism or any other illegal or illicit activity and (iii) the transaction is not a scheme, or part of a scheme, involving or in support of terrorism, money-laundering or any other illegal or illicit activity. Missoula Gold and Silver Exchange, at all times, reserves the right to require the customer to provide supporting information and documentation in support of the preceding representations and warranties or to ensure compliance with the USA Patriot Act.

Q. What are the 1099B IRS Reporting Requirements?

We are often asked whether or not Missoula Gold and Silver Exchange's bullion transactions are "private". The privacy of our customers is one of our utmost concerns. When you buy from MGSE, there are no reporting requirements of any kind - no matter the quantity, the metal type, or the product. However, when it comes time to sell your products, the government does require bullion dealers to file reports where applicable. This IRS report is the 1099B form, and it applies to the following transactions:

You might wonder why sales of these specific objects are reportable. These reporting requirements are related to the regulations that require brokers to report all proceeds from stock and commodity transactions. These specific objects are currently traded (or used to be traded) on commodity exchanges. Form 1099-B reporting requirements do not apply to any other coins. They do not apply at all to American Gold Eagles, American Buffalo, Austrian, Australian (Perth Mint Coins), Chinese or any fractional bullion gold coins. And they apply only if you sell at least the minimum quantity that is equal to the quantity of a commodity contract for the object.

Q. Do you offer "pooled accounts" or metals storage?

NO!!! When you buy precious metals you should always take delivery. No exceptions! Some big-name dealers offer so-called pooled accounts at lower metal prices. Well, if you are buying the exact same bullion items that could be delivered to you how can it be cheaper to not have it delivered? The only price difference should be shipping costs- which you would pay separately anyway.

If you are buying for financial security, what is the point of having it stored somewhere else? It could be the most secure of blue-chip securities companies, but in a crisis how sure are you that you can take possession of your property? When buying precious metals, always take delivery when possible.

Q. What is Dollar Cost Averaging?

Everyone has heard about it, most people have a pretty good idea about how it works, but only a few people have really looked at how exactly it achieves better results than almost any other market timing method.

The most important characteristic of dollar cost averaging is what it achieves in a volatile environment. When prices are low, you can buy more of the item you are investing in, and when prices are high you buy less. That means you will end up with more of the commodity than if you just invested in the item at the beginning of the period, especially if there are a lot of price swings along the way. In fact, when one considers the precious metals moves over the last several years, it has been an outstanding way to approach the markets.