Precious Metals ETF's and Mutual Funds

[FiveDriver]

Does anyone have a favored Precious Metals ETF or MF that they have been watching ??

I would like to have something at the ready....just in case these terrorist attacks make the whole world go crazy. Every day you turn on the TV there's another senseless butchering in the Middle East. I make no Political Comment here, I just want to examine the options in case Precious Metals spike upward.

I don't want to buy Numismatic Coins. I have some already, and they are not really a liquid investment. Not easy to Grade, Not easy to Trade. I like to look at them and it goes no further than that.

I used Fidelity Select Gold back in the 2002 timeframe, and rode a nice wave upward til about 2011. I would like to see if anybody's found any current ETF's or Mutual Funds to have on the Watch List.

 

[joesxm3]

The standard ones are GLD and SLV.

If you care about having actually physical metal held in the fund, then PHYS and PSLV might be an option. These are the Sprott funds. I think they are actually closed end mutual funds.

For gold miners, there is GDX for the larger and GDXJ for the smaller ones.

Keep in mind that GLD, SLV, PHYS and PSLV are treated as collectables for tax purposes and taxed at the 20% rate, but that might only be for long term capital gains. If you plan to trade them, short term might be at normal income rate. Not sure how that works if you are in the 15% bracket.

GDX and GDXJ are just like regular ETFs.

 

[FiveDriver]

joe --
Thanks for those pointers. I'll start some research on those. Have you been tracking them for a while ?? How did they perform during an uptick in Gold Prices, like early 2016 ?? I'll look into that.

The Sprott name kept coming up in my early research......are they reputable ??

Taxed as "Collectibles" -- Interesting.

 

[joesxm3]

If this is done in an IRA, then the collectible tax does not apply. Otherwise, there is a place on the long form and I think your brokerage tax statement itemizes it so you know how much to put in the spot.

I imagine GLD and the other metal ETFs track the price of the underlying metal as well as ETFs that track the S&P500 do. There probably is a little lag or deviation, but not much.

GLD is the huge one.

Sprott the man seems to be well regarded in the "gold bug" world. However, since the closed end fund is simply traded like a stock, it does not really matter how reputable they are, unless there is some huge scandal where they are discovered to have no metal. That is unlikely. The "tin foil hat" crowd worries more that GLD does not really have the gold bars that they claim that they do.

I suppose "reputable" would matter more if you were buying physical coins. I imagine in that case you should deal only with a firm you are really sure of. I have heard that deals on EBay etc. have a lot of fakes.

The ones that would like to have gold or silver for the sake of having gold or silver and plan to hold it for a long time would tend to choose PHYS over GLD because they feel more confident that it really has what it claims to.

If you just plan to try to time things and make a trade, I suppose GLD or SLV would be the way to go. However, anytime I try to trade the news like you are suggesting, I get my fingers burned. Luckily I only trade a tiny dollar amount. Just enough to get the urge out of my mind.

On a slightly different topic, some brokerage firms that administer IRA accounts have deals that allow you to hold gold or silver coins in your IRA. You should be aware that these seem to have quite a mark up compared to buying the coins yourself. I suppose there are storage and security issues that might partially justify the markup, but I imagine like all things they have their beak in the bowl.

 

[FiveDriver]

joe--
I was just looking at the charts for these, I just see it better in graphical form (not that past performance means anything in the next days trading session). I chose to look at a time-frame when Gold last made a strong upmove -- January 2016 thru July 2016. Gold moved from $1080 up to $$1372 -- about 30%
GLD moved just about in lock-step -- 30%.

SLV had a stronger runup of about 47% during that time.

The real eye-opener was GDX, the Gold Miners ETF. It went up 110% during that time.
Yes, the Mining Stocks more than doubled on a 30% move in the Metal itself, GDX also exhibits a slight lag after the start of a Metals rally and stays up a little longer at the top.

I'm not ready to dive in, but this could be a good trade to have in the Vest Pscket, as they say. Thanks for the pointers.

 

[joesxm3]

The gold mining company stocks are a different animal from the gold metal ETFs. While they somewhat correspond to the price of gold, they also factor in the financial condition of the companies, the cost of digging up and processing the gold, the amount of gold that each company might have still in the ground etc.

The gold mining stocks are considered much more speculative, and, as you have noticed, tend to move in both directions several times as much as the price of gold might.

Be careful, whatever you end up doing. Remember, this sort of trading is more like going to the casino.

In fact, there is a good book, "Trade Your Way to Financial Freedom" by Van Tharpe, which illustrates how trading stocks frequently uses the same techniques that professional gamblers use such as properly sizing your trade so as not to lose too much on any one trade, cutting losses, letting wins ride but taking some out etc.

Good luck.

 

[LOL!]

Whatever you do, you probably want to avoid something like the leveraged ones discussed in this bloomberg article about pretty-piss-poor millennial investors investing:

Young Americans Piled Into Some Horrendous ETF Trades Right After the Election

By and large, young Americans betrayed dim expectations of [the election's] economic impact, flooding into a pair of triple-levered ETFs that own gold miners (NUGT and JNUG) and therefore benefit when the safe-haven asset gains in value.