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.
 
Yes, physical silver coins would provide a great short term investment if SLV is approved.
 
(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.
 
(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
 
(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!
 
pretty much since gold and silver were first used a couple couple few thousand years ago!
 
(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.
 
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.
 
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.
 
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