Gold as an investment

[bobbee25]

How does gold work as an investment. I like other types of investments because at the end of year I can go to the web sites and know how much I have.
How does that work with gold.
I asked one company and they said that if you call them they will tell you how much THEY would give you.

 

[GrayHare]

Over the long term, gold keeps up with inflation but does not itself grow in value because, unlike companies, gold does not add value by providing a service or selling a physical item. You can hold physical gold in the form of coins and bars. If you know the total weight you hold, you can calculate the value by looking up the price per ounce.

 

[pb4uski]

IMO gold is a better investment than cryptocurrencies, barely.

I suggest that you stick with stocks and bonds and real estate... stick with things that generate cash flow or are known to appreciate.

 

[silvor]

Depending on the kind of gold, you buy (eagle, maple, bars, loafs) you’ll pay a certain % more than spot price. When you sell it, you’ll get less (assuming the spot price is the same).

Speads on gold

 

[Jerry1]

This is a good/quick read to get an idea of investing in gold ETF’s.

https://www.nerdwallet.com/article/investing/best-gold-etfs

Much different than holding physical gold but a better investment vehicle. If you want to hold gold, that’s a very different discussion that includes the spread mentioned by silvor plus things like storage costs and ability to use the gold in a “stuff hits the fan” scenario. Either way, there’s not problem getting a price to value out gold but there’s way more to consider.

Gold pricing:

https://www.kitco.com/price/precious-metals/gold

 

[GrayHare]

Note that ETFs that hold physical gold rather than stocks in precious metals mining companies typically sell a bit of their holdings each month to fund operation. A pro-rated portion of those sales will be passed to you, which makes for a tedious capital gains calculation come tax time.

 

[erkevin]

I hold physical gold and silver. Not for an investment, but as a hobby and as a store of wealth (basically, an emergency fund). I don't even calculate it in my net worth.

 

[FiveDriver]

Gold Coins are pretty to look at, but very illiquid. Coin Grading is a mystery science and the NGC and PCGS Grading levels are subject to change over the years. Coin Dealers work out of two sets of books Red and Blue. Red Book pricing is what the Dealer will charge you to buy his coin. The Blue Book is what he will pay you to buy the same coin back from you -- guess which book has the higher prices.

A person holding Gold Coins or Bullion Bars has to worry about storage. Put them in a Safe Deposit Box and never look at them again ? Or build a secret safe in you home ?

A Gold Eagle may be useful if you have to buy passage on the Last Tramp Steamer out of your Harbor. Beyond that....you can just admire the design work of sculptor Augustus Saint-Gaudens. I have a few in the sealed plastic PCGS holders. A beautiful coin.

Best way to 'invest' in gold is to buy one of the ETF's that specialize in that. Easy to trade, highly liquid, current value widely published, not much of a buy/sell spread.

I'm not sure where NerdWallet is getting their 1 Year Return figures of 13% in the above link. Most ETF's I see are around 5% or thereabouts.

 

[MarcJoli]

The argument to buy gold is to hedge against the world's central bankers and governments printing money.

The dollar is slowly collapsing against Gold, real estate and other "real" assets. Gold in dollar terms is near an all time high. In other currencies it is at all time highs.

When the central bankers become more dovish (cutting interest rates and quantitative easing) gold gets a bid. When deficit spending increases, gold gets a bid. When foreign governments try to reduce the power of the US dollar (Russia, China, Iran) they buy up lots of gold to help settle transactions without a US dollar swift account.

With our high debt to GDP and uncontrolled deficit spending there are only going to be two ways it ends in the long term:

1) US Dollar is devalued to a large extent slowly over time. Printing money to pay the interest on the debt and paying for all of our social security checks.

2) Sudden devaluation of the dollar against other currencies in a crisis of confidence.

One thing is for sure, raising taxes and GDP growth is not going to be enough to pay down this debt.

if you plan to live 30-40 years after retirement you better have an opinion on what you think currency devaluation will do to your retirement savings and buying power.

Many think a 5%-10% allocation to Gold is prudent. I also have a 5%-10% allocation to bitcoin for similar reasoning. Also own some rentals and invest in commodity producing companies and cheap companies with oil reserves in the ground.

 

[Sunset]

My view:

If you think the world or at least this Country is going to become a 3rd world Country due to devaluation of the US dollar for whatever reason(s).

Then one should have 50% -> 75% of their money in Gold, Silver, Diamonds, etc...

An amount of 5% or 10% is too little to live on for another 10 years, unless one is very wealthy and willing to live like a commoner.

The problem with a 50% -> 75% allocation to gold is should things putter along for another 40 years, the gold will really drag down the investment growth.

 

[old medic]

I hold physical gold and silver. Not for an investment, but as a hobby and as a store of wealth (basically, an emergency fund). I don't even calculate it in my net worth.

My Grandfather got me interested in coin collecting in the early 70s. They played penny poker 2 night a week and he had coffee cans full of wheatback pennies and silver coins. Still have a dozen or so coin books. From that point on I always searched any change. Still find a coin a two. I have about $150 of rolled wheatbacks I want to sort thru to see if there's any special ones. I have had a few collectable coins that I converted after a conversation with a friend.
Sold a Morgan for $385, and got paid in rolled coins that were just melt value. If SHTF that Morgan would probably have lost most its collectable value, But those 7 rolls of dimes wont....

 

[twirler]

It shouldn't exceed 1% of your portfolio is my general rule with precious metals. My wife wears most of our 1% of that. If you purchasing well, (I.E. going out of country where the price for these things is significantly cheaper.)

Beyond this, there comes a point in your wealth journey that you've purchased all your toys, paid for your home, have enough savings(stocks bonds ect..) to live on forever modestly, and at that point you could consider something like putting a chunk of money into a gold statue, nice jewelry, ect..

The main point of this is diversification and wealth retention which become a bigger thing later on than accumulation. It's easier to pass on to heirs with no taxable paper trail.

some things to think on.

best wishes.

 

[target2019]

Gold just sits there and does nothing. I forgot who said that originally. Maybe Bogle.

We have no precious metals under the bed, in an ETF, or wherever.

 

[big-papa]

I can't say how many times I've looked at it, purely as an investment, having forgotten my previous conclusions. But the answer is always the same. More than a few 1's of percent would have moved my needle in the negative direction. And any less than a few 1's of percent basically does nothing.

So my wife owns jewelry and that's about it. For us, if we were ever to purchase any outright in coin or other form, we would consider it like any other hard asset we own such as our house, cars, furniture, etc... That is, a "thing". But no plans to do so.

Cheers
Big-Papa

 

[DrRoy]

You can hold physical gold in the form of coins and bars. If you know the total weight you hold, you can calculate the value by looking up the price per ounce.

I suggest that you stick with stocks and bonds and real estate... stick with things that generate cash flow or are known to appreciate.

Depending on the kind of gold, you buy (eagle, maple, bars, loafs) you’ll pay a certain % more than spot price. When you sell it, you’ll get less (assuming the spot price is the same).

I hold physical gold and silver. Not for an investment, but as a hobby and as a store of wealth (basically, an emergency fund). I don't even calculate it in my net worth.

I have a bit of gold and silver as part of a coin collection. It has value but I do not think of it as an investment.

 

[sengsational]

A point about spread. My dad had non-numismatic gold coins and I helped my mom sell them. It wasn't much, so the local dealer was fine. But a warning...you can't just go to kitco and put some maple leafs or whatever in your cart, and compare the delivered total to the price they're offering to buy the same coins for. The reason is that there are fees and insurance you need to pay in order to sell to them. It turns out the local guy (hate to say "pawn shop", but that's basically it) almost met kitco once the insurance and fees were accounted for. And, insured or not, sending gold through a package carrier is something that bugged me.

 

[Jerry1]

A friend of mine is just slightly on this side of the fence on being a prepper. He took all of his 401K and moved it into an IRA containing all gold. He had to set it up through a special account where there is actual physical gold identified to his account. He and his DW have other assets and pensions, but I bet this was 20% or more of his portfolio.

If you really think the dollar is going to be significantly devalued then that’s the level you have to buy gold at for it to make a difference. If you think you’re buying it for when the stuff hits the fan - like real Armageddon then you’re just kidding yourself. You can’t eat it.

Personally, I think I’m doing better than most financially and I’ll do better than most if things get crazy. I think most on this forum are in the same financial position. But, in the end, if things get so crazy as to wipe me out, it’s going to be ugly and a few gold coins isn’t going to make any difference. Having said that, I have a few coins and a couple bars that, in total, are worth just over $10K. My plan is that they will end up in my daughter’s hands as they split up our estate. Most of it I bought decades ago when gold was around $300/oz. The bars I bought recently when Costco put them up for sale. What can I say - shiny objects.

 

[Qs Laptop]

Gold just sits there and does nothing. I forgot who said that originally. Maybe Bogle.

Gold is dug up out of the ground then put into a vault in the ground and guarded against theft. It does nothing but sit there and wait for a catastrophe to happen whereupon it is assumed it will be priceless and the new world currency.

No thanks.

 

[Fermion]

In 2011 I bought $10,000 worth of i-bonds. I recently converted those to paper and cashed them in for $13,700.

In 2011 I also bought two one ounce Canadian gold maples for $1550 each (I bought really close to the peak in gold lol).

Those two maples today I can sell instantly for $2,000 today.

The i-bond return was 37% and the gold return was 29%.

It took 13 weeks to sell the i-bonds because no bank would take the paper ones.

 

[erkevin]

In 2011 I bought $10,000 worth of i-bonds. I recently converted those to paper and cashed them in for $13,700.

In 2011 I also bought two one ounce Canadian gold maples for $1550 each (I bought really close to the peak in gold lol).

Those two maples today I can sell instantly for $2,000 today.

The i-bond return was 37% and the gold return was 29%.

It took 13 weeks to sell the i-bonds because no bank would take the paper ones.

But assuming a 22% tax bracket, your Ibond return is going to be a bit less.

 

[pjigar]

Over the long term, gold keeps up with inflation but does not itself grow in value because, unlike companies, gold does not add value by providing a service or selling a physical item. You can hold physical gold in the form of coins and bars. If you know the total weight you hold, you can calculate the value by looking up the price per ounce.

+1

And no matter what, DO NOT buy gold if you are not going to have it in your own bare hands. The only reason I hold a small amount of gold is as a hedge to a total collapse of the financial markets and the economy as we know it. Gold (and some other metal objects) is the only thing you can "have" with you. Repeat after me: Gold is NOT an investment.

 

[Fermion]

+1

And no matter what, DO NOT buy gold if you are not going to have it in your own bare hands. The only reason I hold a small amount of gold is as a hedge to a total collapse of the financial markets and the economy as we know it. Gold (and some other metal objects) is the only thing you can "have" with you. Repeat after me: Gold is NOT an investment.

Hah, I saw an article about investing in Uranium (it is going up in price fairly rapidly the past few years) and my first thought was all the people who would say "make sure you hold physical uranium"

 

[pjigar]

Hah, I saw an article about investing in Uranium (it is going up in price fairly rapidly the past few years) and my first thought was all the people who would say "make sure you hold physical uranium"

I hear you but you buy gold for a specific purpose. For me, gold is not an investment nor inflation hedge; but gold is an insurance.

 

[MichaelB]

I collect gold in 2 ways.The first is a set of 4 gold coins (Venezuelan caciques) gifted by DW’s parents to my parents when we married. They weigh 1 gram each.

The other is DW’s gold jewelry, mostly 18k chains and earrings. We’ve never weighed them but I would guess the total weight is a couple of ounces.

As for investing, we stick to equities and fixed income. We invest in businesses that produce goods and services, bonds to help offset the equity risk, and keep some money in cash.

The people that do best with gold investments are the ones generating all kinds of fear and uncertainty, then selling gold linked products.

 

[Aerides]

The people that do best with gold investments are the ones generating all kinds of fear and uncertainty, then selling gold linked products.

I hear these ads from time to time on various Sirius channels, and it really bugs me. They take a few half truths and twist them, loaded with a whole bunch of "what would you do if" stuff, and then declare gold is the only solution.

Good investments don't advertise nearly as much.