Interesting article regarding Gold

[schmidtjas]

I read a monthly publication released by Sprott Asset management and I found their latest article (late February I believe) interesting:

http://www.sprott.com/pdf/marketsataglance/02_2009.pdf

I think it is interesting that they recommend owning physical gold, as if that is something that you can easily accomplish. When I looked into it it appeared that privately buying physical gold is pretty tough, and most of what was available was in coins through dealers.

Anyone have any stories about buying/selling physical gold? It seems kinda foolish unless you really know what you're doing.

 

[ziggy29]

It's not quite as bad as it was late last year, but there is still a pretty high premium on physical gold as opposed to paper assets representing gold.

 

[FIREd]

I have bought and sold gold coins in the past. I bought the coins from a reputable dealer on the internet in 2003 (I think that I paid around 5% over spot). I sold them last year to a local coins dealer (I paid about 7.5% in commission).

Buying and selling physical gold is really easy in my experience. The hard part is keeping the commissions low. In my case, I didn't mind the steep commissions so much, because I had a 250%+ gain on my investment, but if your gain is much smaller it can be a loser's game.

P.S. I would stick with well known gold coins, and my favorites are the 1 oz. gold Maple Leaf coins.

 

[Cruising2022]

I view physical gold as a hedge against complete financial collapse. There is no rational reason that it is viewed as the default universal human currency, but it is; in countries that have experienced a collapse in currency, the vendors aren't refusing to take gold.

As an investment, assuming no financial collapse, paper is of course superior... but I am generally not fond of commodities as long term investments because technology is changing all the time and that radically influences the demand in these commodities; that is one reason Ehrlich lost his bet.

We do have a few oz of physical gold; we do not plan on selling it. It is a hedge against doomsday -- which we were supposedly only three hours away from last fall.

LearCapital.com will sell at about 5% above spot for its best offer, and offers free shipping/insurance on the first purchase (look around for coupon codes).

 

[schmidtjas]

But doesn't now seem like kind of a bad time to buy physical gold when it's valued at (almost) higher than it ever has been?

Also, when you own physical gold, where do you store it? Are there special storage considerations beyond keeping it someplace secure?

 

[schmidtjas]

Also what about physical silver? Is it thought of in the same way as gold?

 

[Cruising2022]

But doesn't now seem like kind of a bad time to buy physical gold when it's valued at (almost) higher than it ever has been?

IF you buy physical gold as a hedge against an Argentina-like scenario and not as an investment, and IF you actually think there is a chance of currency collapse happening, then no price is a bad time to buy it. These are two pretty big IFs though.

Also, when you own physical gold, where do you store it? Are there special storage considerations beyond keeping it someplace secure?

I won't go into details about how I do it, but there are lots of options out there if you google for them. Anyway, assuming you're buying gold as a hedge against financial collapse, then bank deposit boxes aren't going to be there for you.

Here's an article on how gold is treated in Argentina (disclaimer: I don't read the blog. I just googled.): The Silver Bear Cafe

I have no idea about silver.

 

[Koolau]

That was a frightening scenario in the blog. Couple of articles in local paper recently about (apparently) unprovoked attacks on people in public housing and elsewhere. Hope it never gets as bad as the blog.

Interesting take on gold. Always had heard of it as a crisis investment, but never thought about the exact way to keep it (guy suggested gold jewelry such as old rings since most dealers "discounted" ALL gold to junk prices.) I would think the "known" gold coins would hold their value here in the US, but it is a "crisis" investment, so who knows?

US silver coins are what I've put in the lock box. Seems like they are a known quantity, not easy or worth faking. (These were my dad's idea of a crisis investment and I didn't have the heart to sell them.) Very small denomination compared to a gold coin so you wouldn't need "change" from your Krugerand.

 

[FinallyRetired]

True story. I tried to buy physical gold in the form of coins a couple of months ago. Felt uncomfortable doing it over the internet, so I found a local dealer that was listed on the US Treasury site. Went to their locale, and found a pawn shop. The pawn shop owner said the coin guy was downstairs. So I went down dimly lit stairs to another level and found a gun dealer. Gun dealer said to go down the hallway, take a left and go to the third door, the coin guy was there. Went that way, eventually found a locked door. Knocked, the coin guy opened the door to say he was closed that day. Left with no coins. Got the feeling I was trying to bribe the border guard.

 

[Leonidas]

I view physical gold as a hedge against complete financial collapse.

For complete financial collapse I prefer a combination of the base metal lead, with a touch of copper coating. For a currency collapse physical gold would probably be better.

It's all end-of-the-world kind of thinking though isn't it? Gold to buy the lives of your children from the secret police and so-forth.

Edit to add: The firm publishing the article that OP posted, in which they explain the importance of owning gold, are pushing their Gold Bullion Fund which opens in six days. Not that I suspect their motivations behind writing the article, or that their financial interests might be superior, in their minds, to those of their customers. But there is that pesky saying, to a guy with a hammer every problem looks like a nail. Perhaps the analogy plays over to something like "to a guy with a gold bullion fund, every disaster can be prevented with a little gold"?

 

[windsurf]

What are the hucksters charging as a commission on coins on the average? I am sure there are savy folks who claim to pay as little as a nickel on the dollar but I expect that there is generally a much higher markup than that nickel. I also suspect that when the average guy (most of us) goes to sell, it is for closer to the base without any appreciable commission that even remotely approaches what we paid to acquire. Why would coins, as a matter of speculation, be better than an ETF like GLD? I'm naive about all of this. I do think if things would get so bad that you were looking to trade gold coins for sustenance that it would be more important to be part of a muscular communal group. Frightening scenario. No comfort in a handful of coins. The more likely precursor to a barter system is mass capitulation to a fascistic military state.

 

[Cruising2022]

It's all end-of-the-world kind of thinking though isn't it? Gold to buy the lives of your children from the secret police and so-forth.

One could argue that a realistic scenario wherein the US currency or financial system collapses is the mainstream alternative, and that believing otherwise is the conspiracy-minded alternatives, because we were supposedly only three hours from such a scenario last fall. I've never been a big believer in global conspiracies & lies, so I bought gold for the first time after hearing that.

 

[Gardnr]

Edit to add: The firm publishing the article that OP posted, in which they explain the importance of owning gold, are pushing their Gold Bullion Fund which opens in six days.

Surprise, surprise!

 

[nphx]

imo Credit Suisse in a sealed hologram package in 1oz increments is a very viable currency. I would think coins don't translate as directly to todays gold price. Gold in your stash is a great defense to pilosi, reed and clinton looking to do a means test on if you dollars paid in should qualify you for payouts.

 

[REWahoo]

Stocks are on sale(?), gold is near a historic high. Isn't the idea to 'buy low & sell high'?

 

[haha]

What are the hucksters charging as a commission on coins on the average? I am sure there are savy folks who claim to pay as little as a nickel on the dollar but I expect that there is generally a much higher markup than that nickel.

I wonder why you choose a perjorative word like "huckster" for someone who is in the business of selling gold coins? Is a pharmacist who is in the business of selling drugs a huckster? Is Nordstrom which is in the business of selliing clothing and shoes a huckster? Or is that word reserved for those who are selling something which you personally do not want or need for yourself?

I also wonder why you use a perjorative form like "savy [sic] folks who claim to pay as little as a nickel on the dollar", and then why you guess as to what the markups might be. Vendors are quoting a click away, so no need to guess.

It appears that these folks you refer to are about right, the spreads on bullion coins seem to be around 5%+-. I suppose you could find larger ones, but this appears to be a fairly competitive market.

Gold Coins and Bullion Dealer - American Gold Eagle, Canadian Maple Leaf, Panda and Krugerrand Gold Coins

If a dealer makes a gross margin of $50 to $75 on a $1000 purchase, to me at least that seems not too bad from the consumers POV. What is Nordstrom's gross margin on a $500 suit? $450? $500?

No one is making anybody buy gold coins, but for whatever reasons of their own some fair number of people want to buy them; and it appears that another group of people want to sell them. Isn't that what markets are for? Serving people's needs and wants?

Ha

 

[Bimmerbill]

I used to buy "junk silver" coins from a local collectible coin shop. They are pre 1965/6 silver coins that are too worn to be "collectible." They were some multiple of the face value, can't remember now, its been a long time.

 

[windsurf]

Quote by HaHa:

I wonder why you choose a perjorative word like "huckster" for someone who is in the business of selling gold coins? Is a pharmacist who is in the business of selling drugs a huckster? Is Nordstrom which is in the business of selliing clothing and shoes a huckster? Or is that word reserved for those who are selling something which you personally do not want or need for yourself?

My apologies, HaHa. I didn't intend any gratuitous insults. I guess my choice of term was a reaction to the ubiquitous ads and infomercials, particulary on the radio, that extol the virtues of gold no matter what the state of the market. They often use a pitch that grates me. For example, one guy says "Gold has never gone to zero." Well, so what? I know it has never gone to a penny but the assertion is somewhat misleading as it implies rock solid safety whereas many people have been burned in the gold market like any other market.

But you are right. It is not proper to take cheap shots at an entire class of people in a particular business.

 

[schmidtjas]

I'm thinking I may go and purchase some Canadian Silver Maple Leafs, if anything they'll be a nice thing to pass on to my children years from now. Even if they trade sideways or drop in value they should be worth something 20-30 years from now.

Of course I'll have to buy a rifle to protect against the inevitable roving bands of looters and pillagers . No ones getting me lucky charms! haha

But seriously, One more question I have though is if anyone knows of a reputable silver coin seller website that charges in Canadian dollars rather than American? They all seem to be in USD and the exchange isn't the greatest right now.

 

[FIREd]

I'm thinking I may go and purchase some Canadian Silver Maple Leafs, if anything they'll be a nice thing to pass on to my children years from now. Even if they trade sideways or drop in value they should be worth something 20-30 years from now.

Of course I'll have to buy a rifle to protect against the inevitable roving bands of looters and pillagers . No ones getting me lucky charms! haha

But seriously, One more question I have though is if anyone knows of a reputable silver coin seller website that charges in Canadian dollars rather than American? They all seem to be in USD and the exchange isn't the greatest right now.

Since maple leaf coins are legal tender in Canada, can you just go to your local bank to buy / order them? Can you buy them directly from the Royal Canadian Mint?

P.S. While I sold most of my gold last year, I still have lots of silver on hands.

 

[Lsbcal]

I bought some gold coins back in 1980 -- they were Maple Leafs and very beautiful. Sold them at a loss around 1982 I think. But I kept one to remind me how dumb I was then. I still get adds in the mail from the dealer I bought from back then, and we've moved to another town but the adds keep coming. The guy who was working in that dealer's store had a gun on his belt in full display.

I'm reading Alternative Investments by Swedroe right now. He has a chapter on gold in the "Flawed" section of the book.

 

[schmidtjas]

I've been doing a lot of thinking and reading on silver and gold in the past few days and now I'm on the fence on whether or not I want to buy some.

Seems about half of the articles (or comments on articles) that I read say gold is in a bubble that will pop soon, whereas the other half say the bubble is only just beginning and won't peak until 2-3k / oz.

That and it seems like both silver and gold have really been swinging the last couple years.

 

[FIREd]

I've been doing a lot of thinking and reading on silver and gold in the past few days and now I'm on the fence on whether or not I want to buy some.

Seems about half of the articles (or comments on articles) that I read say gold is in a bubble that will pop soon, whereas the other half say the bubble is only just beginning and won't peak until 2-3k / oz.

That and it seems like both silver and gold have really been swinging the last couple years.

Precious metals (and commodities in general) are not for the faint of heart. Their value swings wildly and I think that they shouldn't account for a huge portion of your portfolio (no more than 5% IMO, FYI precious metals represent less than 2% of my portfolio). Precious metals have plenty of pros and cons, they are surrounded by plenty of myths too, but I think that they are good diversifiers. As for buying precious metals right now? Well, I bought my precious metal holdings between 2003 and 2006, gold at an average of $380/oz and silver at an average of $9/oz, so today's prices seem pretty high to me. But if I had to pick what looks cheaper, I'd pick silver. At $13/oz, unlike gold, it's way off its 2008 peak (above $20).

 

[ziggy29]

Well, I bought my precious metal holdings between 2003 and 2006, gold at an average of $380/oz and silver at an average of $9/oz, so today's prices seem pretty high to me. But if I had to pick what looks cheaper, I'd pick silver. At $13/oz, unlike gold, it's way off its 2008 peak (above $20).

I would agree that silver is more attractive at the current spot prices. The problem is that it's hard to buy one-ounce silver bullion coins for much less than $4-5 above spot, which represents a much higher percentage of "overhead" as, say, Canadian Maple Leafs which can be had for maybe $40-50 over spot.

 

[FIREd]

I would agree that silver is more attractive at the current spot prices. The problem is that it's hard to buy one-ounce silver bullion coins for much less than $4-5 above spot, which represents a much higher percentage of "overhead" as, say, Canadian Maple Leafs which can be had for maybe $40-50 over spot.

That's why, for silver, I do not buy coins. I buy sterling silverware (usually at or below spot). A few years ago, you could find great bargains in used/antique silverware because silver had lost its luster in our hectic modern society. It requires too much maintenance (cleaning, polishing, etc...) and people couldn't be bothered with it. So it was easy enough to find people willing to give you a good price to get rid of "grandma's stuff" (and I was happy to oblige). I am sure they are now regretting "giving away" the family jewels.