How do I invest in gold?

[Phantom Warrior]

Just a heads up.  I've been in the field for a month and I have a back log of thoughts, ideas, and questions.  So you will probably see a slew of posts from me in the next few days.


Here's the first one.  I'm out of school and in the Army, so I finally have disposable income.  I'm already socking away money in a small portfolio of mutual funds and throwing 10% into TSP.  My next goal is to diversify into gold.

How do I go about doing that?  I've heard of buying rare coins or gold coins.  Can I buy gold in some raw form?  Bars/ingots/etc.  Do I need to physically store the gold somewhere?  Because I'm not a huge fan of that idea, living in the barracks with a roommate and being highly mobile.  Can I just buy gold certificate or have an online account, like stocks?  

Do any of you invest in gold?  How do you do it?  What strategies and companies do you recommend?

As you can tell, I have lots of questions and no answers.  Anything you can contribute would be appreciated.

[The Rabbi]

My first advice is to evaluate your mutual fund portfolio and purge it of anything smacking of managed funds.
Second, you can invest in gold in a number of ways, including buying coins or ingots which you then have to store.  You could also buy shares in gold mining companies.  You could also buy a closed end fund that invests in shares of gold mining companies.  Or you could invest in the new ETF (exchange traded fund, symbol GLD) that invests in gold.  They all have advantages and disadvantages.
But the biggest disadvantage I see is that gold has already had a huge increase over the last 2 years.  It is imvh poor investor behavior to chase yesterday's winners.  I would class investments in oil and real estate in that category as well.

[280plus]

A safe deposit box is a good place to store your valuables, especially in your position. I buy what I like. Get online with the US Mint and get on their mailing list and as commemoratives come up, buy the ones that appeal to you. I bought a Jackie Robinson commemorative gold and silver coin set a few years back and it has gone ballistic. Wish I'd bought a couple. I've also been buying the silver proofs every year since the start of the quarters series and some of those were doing very well last time I looked. I like Morgan dollars too. Old west and all that. They're just fun to look at. Then there's doubloons and pieces of eight. I don't have any of that though. I've looked at a few here and there but didn't like any that I saw. Not for the price anyway.

[longeyes]

If there's still an orderly market, ETFs are the easiest vehicle: GLD, IAU.  You can buy mining shares and natural resource equities through a closed-end fund (GGN).

If there's no orderly market (SHTF), small gold coins or inexpensive jewelry.  I think in that scenario ammo makes more sense.

[280plus]

Yea, if I invest in metals it because I want posession of the metal. Then, if the SHTF and worse comes to worse, at least you could CAST it into bullets. LOL...

[Bogie]

Coins generally have two grades: bullion (sovereigns, krugerrands, etc.) and collector grade (pieces of eight, etc...

My advice would be to stick with mutual funds, etc... Maybe put a small amount into metals, but keep in mind that hindsight is 20/20, and it doesn't predict the future. Yeah, gold has gone up a lot recently, but it was in a heck of a slump for about 20+ years...

[TarpleyG]

Isn't gold at an all-time high right now?  Buy low--sell high you know.

Greg

[Art Eatman]

It seeems to me that entiering the precious metals market right now is more speculation than investment.  Silver is up some on the speculation of the effects of this new trading mechanism, the "ETF".  ETF is a way of speculating on silver's ups and downs, much like the S&P.

Gold?  I dunno how much farther it can go up.  Largely, it's a fear-factor thing about the decline of the dollar, and uncertainty in the world about such things as oil prices and warfare in the Persian Gulf area.

Doesn't mean I'm not a goldbug, but I'm cautious about it.

Art

[Telperion]

I'd echo others that gold is very speculative right now.  Contrary to adage that gold is stable, it is quite volatile and can move 5% in a day.  It is also trading at 20 year highs after a long run up.  Buying now would be basically performance chasing.  I've even seen posts on DU of people wanting to buy gold; folks, when people on DU are buying, the investment has run its course.

But, if you end up wanting to buy actual metal, I think coins are marginally better than bars since they are easy to recognize and authenticate.

[Guest]

Isn't gold at an all-time high right now?  Buy low--sell high you know.

Greg

I'll be the contrarian here, Greg. Gold once sold for about $850 an oz. in 1980. So, adjusted for inflation of the US dollar, it would have to sell for US $2,100. or so to be at an "all-time high".

 Also, there was a time that one could buy the DOW Jones Industrials for about one oz of gold. (DOW 800; gold $800) Now, it takes almost 20 oz of gold to buy the DOW (11,000/$565.). I'll go out on a limb and predict that we may see gold and the DOW selling for the same US dollar price again.

What price, you ask? I don't know, but I've heard $3,000. as an educated guess.

 The central banks and bullion banks have surreptitiously manipulated the price of gold (downwards) for many years by selling and leasing government gold (and futures/derivatives) into the world markets. They are running out of gold and will soon lose control of the price - if they haven't already.

 Members have two choices: get in the game now or hear me say, "I told you so." later.

[The Rabbi]

Members have two choices: get in the game now or hear me say, "I told you so." later.

The third choice is to sit back and yell "sucker" later on.  That's my vote.

For gold to go as high as $3,000 or even $850 you would have to assume that inflation will reach the same levels it was in the late 1970s, about 12-14%.  I don't see that happening.  I see the Fed, that instrument of the Devil, raising rates aggresively to forestall that and see a recession coming about the end of the year.
My call is for short term rates to be 5-6%, the Dow to be at least 100 points lower by December and gold to go back to $350-400.

[XLMiguel]

Dollar cost  averaging works for metal, too, buy a couple of Krugerrands or Maple  Leafs are you can afford them.  A handful of gold coins might be real desirable in a BOB is a true SHTF scenario, along with a good assortment of Franklins & Grants.

[brimic]

How do I invest in gold?

You don't. You speculate in gold.
Gold is a commodity, it doesn't produce a product or service. Its value is based solely upon market forces.

Speculating is a time honored tradition that causes men to lose their shirts.

[Art Eatman]

That $800/oz price that gold SELLERS like to yak about was due to the Hunt brothers' efforts to control the silver market.  It was purely a hype-thing, with gold actually following the silver trend.  No geo-politics or national/world economy involved.  Ignore that event when you wonder about the present times.

What's happening right now is an uncertainty thing.  Oil.  Wars.  Terrorism.  And, the possibility of further declines in the buying power of the US dollar.

For the moment--"moment" being maybe a year or three--the boom in commodities in general due to the economic growth of China and India is carrying over to gold and silver.  

A group of wise investment would be in companies selling into the China market, whether construction materials or food.

Art

[The Rabbi]

That $800/oz price that gold SELLERS like to yak about was due to the Hunt brothers' efforts to control the silver market.  It was purely a hype-thing, with gold actually following the silver trend.  No geo-politics or national/world economy involved.  Ignore that event when you wonder about the present times.

What's happening right now is an uncertainty thing.  Oil.  Wars.  Terrorism.  And, the possibility of further declines in the buying power of the US dollar.

For the moment--"moment" being maybe a year or three--the boom in commodities in general due to the economic growth of China and India is carrying over to gold and silver.  

A group of wise investment would be in companies selling into the China market, whether construction materials or food.

Art

I sort of agree, sort of disagree. When gold went to $800 there were definitely events triggering it.  Like oil prices skyrocketing and inflation at double digit rates.  Yeah, at the end it was just a mania and the Hunts definitely played into it, but it was not entirely a psychology.
One thing not mentioned is that the Arabs are big buyers of gold and have been turning some of their petro dollars into it.  When economies cool off and oil prices fall they will sell some of that gold.  Look out.

[Justin]

One thing not mentioned is that the Arabs are big buyers of gold and have been turning some of their petro dollars into it.  When economies cool off and oil prices fall they will sell some of that gold.  Look out.

And then they use it to plate Kalashnikov rifles with.

Money =/= Taste, that's for sure.

[The Rabbi]

One thing not mentioned is that the Arabs are big buyers of gold and have been turning some of their petro dollars into it.  When economies cool off and oil prices fall they will sell some of that gold.  Look out.

And then they use it to plate Kalashnikov rifles with.

Money =/= Taste, that's for sure.

You've been watching Lord of War too often....

[Art Eatman]

I see where Valero petroleum is now buying a bunch of stop'''n'rob gas stations.  That's really getting vertically integrated.  They've never been worse than "hold" in the "Strategic Investment" recommendations.

Rabbi, if gold had "only" gone to $400 or so back in 1980, I'd go along with the notion of economics being the major factor.  I still think the main factor was the Hunts.

Lessee.  Trying to time-frame some stuff.  In November, 1978, gasoline at my usual Texaco was 58.9 ¢.  In November, 1979, it was $1.18.  IIRC, the big runup was  in the spring/summer of 1979, and gas prices "ooched" up during the fall.  They stabilized during the winter at around $1.20 to $1.25.

[Justin]

You've been watching Lord of War too often....

Never seen it.  Nicholas Cage annoys me.

Back on topic, if gold prices are currently climbing, then there would seem to be more risk in buying gold.

I wouldn't be interested in gold as an investment, so much as a physical asset that stores wealth.  But if gold prices are climbing, and likely to fluctuate, it would seem there would be better and more stable investments.  Any idea as to what those would be?

[Nathaniel Firethorn]

Just send your money to:

Nathaniel Firethorn Associates
14 Kapok Street, Suite #18736599240804137
Avaricious Cayman
CAYMAN ISLANDS

You'll see about as much return on your investment that way as if you'd bought gold...

- NF

[The Rabbi]

I see where Valero petroleum is now buying a bunch of stop'''n'rob gas stations.  That's really getting vertically integrated.  They've never been worse than "hold" in the "Strategic Investment" recommendations.

Rabbi, if gold had "only" gone to $400 or so back in 1980, I'd go along with the notion of economics being the major factor.  I still think the main factor was the Hunts.

Art, I wouldnt want to put a number on how much of the gold price was mania and how much was just a response to events.  I will point out that every other hard asset during that time experienced similar price swings, including art, industrial metals, and even Elvis decanters.  Not all of that can be from the Hunts.

[Art Eatman]

NatFire, it depends on your views about uncertainties in the world.  For instance, to believe that gold will stay static or will fall, you must believe there will be no effect from Iran's Euro-denominated oil bourse.  No notable decay in the buying power of the dollar.  Oil will remain at or below $70 per barrel.  The economic growth curves of China and India will flatten.  

Stuff like that.


http://www.bloomberg.com/apps/news?pid=10000102&sid=aB30yaL0GkGU&refer=uk

Good investments?  Companies that make diapers for old folks.  Nursing home corporations...

Art

[engineer151515]

http://goldmoney.com/en/index.php

[Art Eatman]

Everbank.com sells FDIC-secured CDs denominated in foreign currencies and in gold.  You get about 4% interest, plus whatever profit (or loss) has occurred at the time of maturity.

So far, over the last couple of years, no losses.

You gotta do your own forecasting...

Art

[Nathaniel Firethorn]

Art, I bought gold just before Iraq II. I'm glad I lost only a little money.

- NF