Monday, January 30, 2006

 

Five Ways To Buy Gold

This Bankrate.com piece looks at the best ways to buy gold. "The conundrum for investors is that gold can be owned in different forms. Some are riskier than others. Liquidity varies, as do the costs associated with each form of the asset."

"Dealers sell gold bullion bars in various weights from 1 ounce to 100 ounces or larger. You can also buy gold coins such as the American Eagle through dealers, brokerages and some banks. The U.S. Mint has a list of authorized dealers. You'll pay a commission or premium, and most dealers have purchase minimums. Be sure to study the differences between bullion gold coins, which are valued according to the market price for an ounce of gold, versus coins that have a collector's value."

"You can own a chunk of gold by investing in exchange-traded funds that make buying and selling gold bullion as easy as buying and selling stocks. The share price of streetTRACKS Gold Shares (GLD, news, msgs) roughly tracks the price of gold and represents an investment in gold bullion. In effect you get to own gold without the hassle of storing and insuring. 'With GLD, each share is priced at about one-tenth the price of gold bullion. If gold goes to $600 an ounce, then the price of a share should be about $60,' says Martin Weiss."

"The objective of iShares COMEX Gold Trust (IAU) is the same but, so far, is much less widely traded than GLD. There are fees associated with exchange-traded funds, but they're usually low. In addition, expect to pay a commission to your broker for each trade."

"When it comes to gold stocks you're investing in a mining company. Gold mining stocks can be more volatile than the exchange-traded funds. 'You're buying a company in the gold business, and indirectly you get a stake in their gold reserves and their gold business. It's an indirect method of betting on gold.' Weiss says. 'Mining stocks reflect the profits of the company. If it costs the company $250 an ounce to dig up gold, pay employees, gas and the like, and gold is selling at $375, their profit is $125,' he adds. 'If the price of gold rises to $500 their profits have doubled, so the stock is more volatile. But it works the other way, too. A drop in the price of gold could flip flop a company from one that's profitable to one that's bleeding.'"

"Advisers often tell do-it-yourself investors that the safest way to play the stock market is to buy mutual funds. That advice probably holds up well when looking for a foothold in gold, too. They're not always pure plays on gold, but that helps lessen volatility, says Mark Skousen 'I like the mutual funds that include a lot of different commodities including gas and oil such as U.S. Global Resources Fund (PSPFX). There are several out there that give you a little more investing in other areas, rather than just precious metals,' (Skousen said). Two other funds that were recommended in the course of researching this article are Prudent Global Income (PSAFX) and Vanguard Precious Metals and Mining (VGPMX). There are scores of other mutual funds that seek to give investors a stake in gold."

"Buy gold jewelry because you like it, not as an investment. You pay a premium for jewelry, in part, because of the design and craftsmanship. If you buy 14 karat gold, it's less pure than investment grade. When you sell you'll need to consider the purity of the gold and, more than likely, it will have to be refined to bring it up to investment grade."

Comments:
My thanks to John Law for posting this link.
 
I didn't see it the first time but in the middle of the page

"Related news and commentary on MSN Money"

they have some good articles. one by fleck.
 
Skousen 'I like the mutual funds that include a lot of different commodities including gas and oil such as U.S. Global Resources Fund (PSPFX). There are several out there that give you a little more investing in other areas, rather than just precious metals,' (Skousen said). Two other funds that were recommended in the course of researching this article are Prudent Global Income (PSAFX) and Vanguard Precious Metals and Mining (VGPMX).

Question? Is anyone on this blog invested in any of the funds mentioned? We have bullion and coin along with a few mining stocks, but have no money in any of these funds.I have always found Martin Weiss to be straight forward and honest with his opinions, IMO.
 
I hold GLD and PSAFX(also BEARX). Tice's funds are not just PM and Oil they take many other factors into consideration.

For 05 the funds have done basically nothing(very mild gains). If you have a lot of cash PSAFX is something to look into, if the Dollar gets devalued, like many think it will, its a good hedge.

BEARX on the other hand is playing the negatives on the economy(shorting etc etc).

GLD has been my second biggest winner on the year. I was hopeing for 1 more pull back to aquire more, doesn't seem to be happening.

I also hold Gold and Silver Coin, and anxiouslly await the Silver ETF.

If you believe that the Silver ETW will happen, Silver Coin should be considered immediately. The ETF will cause such a demand problem that $12 minimum($15 potential)seems more than likely.

Other than that, currently I find the PM market a little played out.

Of course if the Herd mentallity takes over, the numbers could get wild (800 Gold, 18 Silver).

Just my 2cents.
 
The bulk of my holdings are in ETFs. I have mining stocks to juice my returns. For those I like the cream of the crop instead of fly-by-night long shots.

No physical gold. No need for that.

I also own some CCJ, which has part ownership of Centerra Gold.
 
Yes, physical silver coins would provide a great short term investment if SLV is approved.
 
Just curious. We are thinking about purchasing physical gold/silver coins as part investment/part hobby for the family. We would like to do this until we purchase our next house (maybe in 4 or so years). At that time we would like to sell them and use as part of our down payment. How do you go about doing that and get full value? No body has ever mentioned that part before. Since you can purchase via mail, do you also sell that way?

Thanks for any suggestions,
Angela
 
Richard Russell is always worth reading, IMO.

http://www.321gold.com/editorials/russell/russell013106.html
 
We are thinking about purchasing physical gold/silver coins as part investment/part hobby for the family. We would like to do this until we purchase our next house (maybe in 4 or so years). At that time we would like to sell them and use as part of our down payment.

This seems like a really bad idea.

Gold has had a really good run the last few years and I am betting my money it will continue, but I would not bet money that would put me in a bind if I took a loss.

The nice thing about non-physical investments is that they can be liquidated in a couple of minutes and they have a very low transaction cost.

Right now the POG is being pushed upward largely by speculation. There is no reason why it cannot decline precipitously.
 
(Right now the POG is being pushed upward largely by speculation.)

that's what they say when they don't understand the fundamental reasons why something is rising. I challenge you to find any metric of gold being overvalued.
 
that's what they say when they don't understand the fundamental reasons why something is rising.

I suppose you are going to enlighten us as to those fundamentals. Give it a shot. I would prefer something that addresses supply and demand (You know, fundamentals), not some survivalist B.S. about "Gold is money."

After that I suggest you explain why an investment as volatile as gold would be a good place to put money intended for a house payment--as opposed to something like TIPS.

How do you suggest explaining to your family that you cannot buying a house because you blew the money speculating on gold?
 
(I suppose you are going to enlighten us as to those fundamentals.)

20+ bear market in gold
dow/gold ratio way overvalued
increasing demand from asia/ETFs and buying by multiple central banks
inflation
dollar is falling
 
oh, and gold is money is most certainly not survivalist BS. it's thousands of years of history. it's in the US constitution!

SEC. 9. And be it further enacted, That there shall be from time to time struck and coined at the said mint, coins of gold, silver, and copper, of the following denomination, values and descriptions, viz. Eagles—each to be of the value of ten dollars or units, and to contain two hundred and forty-seven grains and four eighths of a grain of pure, or two hundred and seventy grains of standard gold.

Chap. XV.—An Act establishing a Mint, and regulating the Coins of the United States
 
I can add that adjusted for inflation (CPI) POG is at the 1993 ($406)level and below 1975 minor top ($196). POG to reach adj. for inflation top in 1980 has to go to $2176 ( in today's $).
That example show that Gold as Money is not survivalist BS.
The only BS is your believe that Dollar is the money.
 
(The only BS is your believe that Dollar is the money.)

the average 1800s person dropped off in 2005 would probably laugh and cry that our money is backed by nothing!
 
And 1700s person, and 1600s person, and 1500s person and Egyptians , Romans, Greeks, Mongols
and ... 1902s Americans.
 
pretty much since gold and silver were first used a couple couple few thousand years ago!
 
20+ bear market in gold

So the price didn't do what you wanted the last twenty years and that means it will go up? This reasoning does not fall under any defintion of "fundamentals" that I have ever heard about.

dow/gold ratio way overvalued

You bet it is. The DOW is made up of companies that grow their profits. They don't just sit there like a lump of metal. This is why investing in the stock market over the last hundred years would have killed the returns of investing in gold.

increasing demand from asia/ETFs and buying by multiple central banks

The accumulation of gold by investors is not a fundamental. As soon as the price move falters, speculators will abandon their positions. We might as well buy houses in CA because investors are buying them.

The central banks situation is mixed, and it is also fickle. European countries are selling into strength. Russia is accumulating, but it doesn't make up for the European countries. The only information available about China is rumor, and the size of the gold market is insufficient to absorb any meaningful portion of China's investments. Regardless, the actions of central banks are unpredictable.

Asian demand is increasing, but that demand is mainly for jewelry, which is elastic. The increase in the POG has already caused a decrease in jewelry demand. So far this decrease has been more than countered accumulation by investment vehicles.

It's useless to talk about demand without talking about supply, and the gold supply is responsive to the price of gold. High cost producers are boom-bust businesses. They need to get when the getting is good, and the current price makes the getting very good. The inevitable increase in supply will put downward pressure on the POG. Once this shows up in the price action, the smart money will close out their investment positions and the price will collapse to a sustainable price based mostly on jewelry demand.

inflation dollar is falling

Inflation did not exactly prop up the price of gold during the 80's and 90's. And the dollar was on a tear last year.
 
Ama...
Simply stated, you think that:
"State of Our Union is Strong", we don't.
 
Ama...
"Inflation did not exactly prop up the price of gold during the 80's"
You must be joking. No inflation in 1970's????????!!!!!!???? Eeeee???
 
t's in the US constitution!

SEC. 9. And be it further enacted, That...


You must have a different version of the U.S. Constitution than the rest of us. More rational people consider the coinage act of 1792 just a law passed by Congress. I would hardly tell people the Patriot Act is "in the Constitution."
 
"Inflation did not exactly prop up the price of gold during the 80's"
You must be joking.


Inflation cut the value of a dollar roughly in half through the 80's and 90's. What was response of the price of gold?

Hint: It did not hold its value in nominal terms, let alone real terms.
 
(What was response of the price of gold?

Hint: It did not hold its value in nominal terms, let alone real terms.)

because of supply and demand outpaced inflation. that was then, this is now. it's a bull market in gold, they happen. the fundamentals are all there. it's not like these cycles haven't happened before, they'd been going on for a few hundred years. stocks go up for about 17 years, then commodities take the lead for about 17 years. just look at the dow/gold ratio. it's saying gold is a buy and stocks aren't. gold has doubled while stocks have basically done nothing.
 
Ama,

First of all, we just sold our home and the proceeds will be invested properly (over $150k) so there is no need to worry about not having a down payment if gold looses value. The money I was talking about investing in gold/silver coinage would be coming from the savings we will have by paying rent instead of a mortgage. We will probably have around $800 mo. extra each month and I thought we could use about $100.00 or so and buy the gold/silver. The remaining $600-$700 again be properly invested. We throught this would be something that could (not definitaly "will") rise in value over time and could also be fun for my children to learn about.

I still don't have an answer to my question though. What is the best way to sell them when the time comes.

Thanks again,
Angela
 
Angela,

Physically buying PMs always runs a premium, but all the major dealers -- not the corner coin shops -- post their buy/sell prices daily.

I assume "IE" means "Inland Empire"? A few things to know:
* CA doesn't charge sales tax on purchases over $1000.
* Uncle Sam doesn't know about cash transactions under $10000.
* Krugerrands and selected other coins are tracked by the Feds.
* Eagles, etc. are beautiful but once you've seen one you've seen them all. OTOH, true collectibles can command too much of a questionable premium over their metal content.

For fun, you might consider "junk" silver. These bags of older 40% to 90% silver-content US coins are both interesting and educational for kids, plus the margin over spot is minimal.
 
TJ
Where I can buy those bags?
 
Don't know in Chicago, but these dealers can ship:

www.golddealer.com
www.goldline.com
www.NWTMintBullion.com

A full bag (295 to 715 ounces) will set you back a bit, but some sell partial bags.
 
Angela, I use APMEX.com they are fast ,and reliable. Sometimes have a wholesale blowout sale on the top links for .25¢ over spot on silver,
so you can buy alittle on the pullbacks. The beauty of them was when I first started ,and was unsure,but you can use a credit card under $1500., but adds a premium.

..Good reading at kitco.com
 
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