Investing in Gold and Silver: Interview with an Industry Insider

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It's been a volatile year for those investing in gold and silver.

Gold is down some 20% year to date, and silver has lost more than 30%. The yellow metal tumbled more than 30% in the three quarters to June as fears mounted of an early end to the U.S. Federal Reserve's bond-buying program.

But the stars are aligning for better times ahead.

Following a record 23% drop in Q2, in which gold suffered a two-day carnage (April 15-16) that took prices down some $225 an ounce, gold gained nearly 9% in Q3. The gains ended gold's longest quarterly losing streak since 2001.

Silver prices fared even better in the latest quarter, bouncing 10.5%.

It's also worth noting as a Capitol Hill debt ceiling showdown looms that during the last debt ceiling debacle in 2011, gold soared some 25% over the July-September period, to reach record highs of more than $1,900 an ounce.

Moreover, with all the uncertainty in Washington, ongoing Middle East geopolitical tensions, and continuing Eurozone woes, it just makes sense to own precious metals as a store of value, cash alternative, safe-haven asset, and means of diversification.

With that in mind, Money Morning caught up with Joseph Merrick, owner of Provident Metals. The Texas-based company is one of the largest precious metals dealers in the world, is among the top 10 precious metal dealers in the country, and has an A- rating from The Better Business Bureau.

Even though this year's price slump has deterred some profit hunters from investing in gold and silver, Merrick said it has been a "banner year" for business.

Check out what Merrick had to say on why business has been booming, on investing in gold and silver going forward, and on the next hot commodity investments...

Investing in Gold and Silver: Insight from Provident Metals

Money Morning: Thanks for joining us today, Joe. First, tell us a bit about Provident Metals.

Joseph Merrick: Provident was founded in 2009 and we've grown at an incredible pace that has allowed the precious metal investor an opportunity to make choices based on education and value instead of being forced to go to the "only gig in town."

MM: Who are your customers?

JM: Our customers are prudent people looking to protect their buying power by investing in precious metals. By and large, that cuts a wide swath of Americans due to the changing environment in which our economy currently stands. We're excited to be at the forefront of this building wave of awareness and knowledge.

MM: How has business been year to date?

JM: It's been a banner year. We have grown tremendously in the past year due to our innovations in the physical investment arena [more on those later], as well as our ability to speak to the everyday person. We are inclusive in our associations with folks and bring them what they want to see.

MM: The U.S. Mint is on track to report record sales for the popular American Silver Eagles. Amid frenzied buying earlier this year, the Mint was forced to ration sales. Did you run out of stock?

JM: Like every other dealer in America, we did run out of stock for a bit in April, but we also allowed people to lock their prices in according to the current spot price so they could add to their portfolio at their price goals. It's a valued service that our customers have begged for and an option we'll continue in the future, provided we know that stock will be coming.

MM: What should investors look for when buying Eagles (gold and silver)?

JM: The most important thing investors should do in this type of situation is buy from reputable dealers to ensure they're going to get their metal. While Provident is one of world's largest precious metal dealers, there are other honest dealers out there as well.

MM: Please explain the advantages/disadvantages of buying scrap (junk) metal versus graded coins.

JM: Advantages include it's generally at a better price point compared to spot silver, it's more fungible (exchangeable), and there's a chance you may find a better date coin, which you could sell for a lot more money. The disadvantage is space it takes up. When buying a graded coin, you can store a lot of value in a small place. For instance, there are many graded silver dollars worth $50,000 or more. The same amount of junk would weigh almost 150 pounds.

MM: What do you think: coins or bars, as an investment?

JM: This isn't an easy question. The answer lies somewhere in the answer to the following question: What's your goal? If your goal is to make money in the long term while having fun in the short term, it might be a good idea to purchase something interesting like high-grade slabbed coins or 90% junk silver because you can show them off or look for key dates. If your goal is to hide it away and give it to someone in your will, perhaps .999 silver or gold bars are the way to go.

MM: Silver is indeed much more affordable than gold. Have silver sales outpaced gold?

JM: More people can afford silver than gold, and more people enjoy the opportunity silver brings them in the sense that they can get a wider variety due to its more affordable price point. Investing in precious metals doesn't have to be stuffy and boring any more. You can be selective, get a great price, and enjoy some absolutely tremendous artwork by some world-famous sculptors.

New Trends in Investing in Gold and Silver

MM: What new trends have you seen this year?

JM: We've recently seen a lot of new and young investors come into the market. I feel it has to do with the fact that we're bringing pop culture into the precious metals industry. I'll be the first to admit that we're not the only dealer to do so. But, I would argue that we're the best at doing it. It's been an exciting year seeing young people post to YouTube videos of them opening new precious metal purchases. People certainly love their silver; especially when their order includes a Walker from our Zombucks (apocalyptic currency) series.

MM: What are your bestsellers?

JM: Our bestsellers will likely always be the American Silver Eagle due to its historical significance within the silver marketplace. However, our first round in the Zombucks series, the Walker, has been a remarkable success, and we anticipate the release of our second round to enjoy an even greater success due to its subject matter. It's just fun to do something different from what everyone else is doing while continuing to provide value through service and selection.

MM: Let's go back to those innovations in physical investment - what kind of innovations in physical investment do you mean?

JM: We're excited to bring to market the most exciting new physical investment vehicles the industry has ever seen. Yes, we have silver, gold, and platinum, but we're on the leading edge of a new type of savvy investor by also offering copper and diamonds.

MM: When and why did you start offering diamonds as an investment?

JM: We started offering diamonds as an investment in July of this year. We will always offer the leading precious metals investment vehicles like Americans Silver and Gold Eagles, but we feel a need to let people know that investing in physical and tangible assets like diamonds is no longer only available for the rich. Anyone can afford a carat of diamonds. We give the public opportunities to invest in diamonds at several different price points while including a competitive buy back price. We're removing the mystique of investing in diamonds and making it easy for anyone to enter the diamond industry.

MM: How has diamond interest been?

JM: Diamonds have performed very well and are becoming a more popular option as investors learn more about them and as they see that Provident has now made diamonds a bullion product. We don't expect to sell more diamonds than American Silver Eagles, but we see a lot of upside potential for them and are very excited by the results so far.

MM: Finally, any predictions for 2014?

JM: Provident will come out with new and exciting products and services. The county will probably enter Q4 (quantitative easing round four). Silver will shoot to $38 an ounce. And, we'll only have three years left to prepare for the Zombie Apocalypse of 2017, so you better get yourself some Zombucks!

Don't miss Money Morning's guide to buying physical silver.