Long ago our currency was backed by gold to make it valuable. Now that the dollar is losing it’s value – People are scared to death. Many are turning to other types of investments for a fail safe in our falling economy. Gold is what many think are greener pastures in tough times, but is it for you?
Any short venture into history will tell you that gold has long been a sought after article. Cortez was obsessed with it, and the Egyptians considered it the skin of the gods. It’s valuable in virtually every economy, and can be traded for whatever is desired most times.
It can be as unpredictable as the stock market though, because its price is heavily dependent on supply, and demand. Timing is very difficult, and it’s not likely to be a ‘flip investment’. Meaning something you buy, and then sell very quickly for a profit.
The real value of gold is that it is not based on the decision of others like a business. Precious metals never go bankrupt, and they don’t hand over their chairman position to a moron. People typically buy it, and stash it away as a sort of rainy day fund. If their stocks are not looking well, and they’re in need of cash they can turn around and sell this reserve for fash cash.
There’s a few ways to invest in gold, and all of them have their ups and downs. What you choose is mostly based on personal preference, but all can be solid ground when used properly. I’ll go over them, and you can draw your own conclusions!
Probably the most popular way to invest in gold no surprise is to actually own bullion. This is the most trusted way of investment, because you are owning something material. Once you purchase this item it is yours to do whatever you want with it. Keep it in a safety deposit box or bury it in the backyard if you wish.
Many people favor this option, because they are in control of it. Which is honestly where you’d want to be if you’re in a situation where you’d need to rely on this type of resource. To me this seems like great depression paranoia where people are hiding money in their mattresses. Honestly I don’t like the idea of having valuables of this magnitude around the house.
Gold being about $777 an ounce at this time; having a few coins around would mean leaving thousands of dollars as burglar bait in your house. Deposit boxes are an option, but they can be expensive, and will probably be eating away at your investment unless it’s quite sizable.
Physical gold is traded in several forms, and sizes. The most popular amoung investors being bars, and coins. Ranging in size from as small as 1 gram to as big as a kilo! The later will run you in the $25,000 area at the time of writing. Gold coins like the South African Kruggerand pictured above are very popular.
You can purchase gold from many dealers, but make sure they are reputable! There’s plenty shifty business going on in the precious metals chain, and if you don’t know what you’re doing you could be had. Some people like to pick up gold on places like eBay, but this could be very risky business.
Some reputable online dealers are Kitco, and Apmex. They offer gold bars, coins, and bullion in various weights. Take note that not all coins contain the same amounts of gold in them. While the Kruggerands always contain 1 oz of gold the American Eagle coins very. Some are 1 oz, 1/2 oz, 1/4 oz, and even 1/10th oz. Certain coins may be more valuable based on their collector value, but they will always be worth their gold content even if they are not in premium condition any longer.
Gold certificates could be the answer to the above problem of gold storage if you don’t want to manage it yourself, but only if you can afford a big investment. These little sheets of paper will run you a cool $10,000 minimum.
The Perth Mint is in Australia, and they are the only government guaranteed certificate program in the world. By purchasing this paper they will store your gold investment for you, and look after it. They have a large upfront investment, but they charge you no storage feesfor ‘unallocated’ storage.
The difference between allocated, and unallocated being direct ownership. Allocated storage is where the gold actually belongs to you, and not Perth essentially. They do not report it on their asset sheets, because it is not their asset. Buying unallocated gives you an ‘interest’ in their holdings. You are basically investing in their vault, and not really in physical gold. You can at any time choose to invest in ‘specific’ gold coins or bars where in it’s yours at any time – however you will then be charged for storage.
The way I’m equating this in my head is it being similar to the bank using your money. It’s still your cash, but it’s on their data sheets as their company’s wealth. You can withdraw it any time you like though, because it belongs to you. They’re simply ‘using it’ for the time being.
This could be the start of your large off shore accounts that Uncle Sam always asks if you have come tax time! I am thinking it’d be really fun the next time somebody jokingly asks about my hidden swiss bank accounts to say “Nope, but I do have a gold vault in Australia.”
Still not the option for me though. I’m looking for a slightly smaller gold investment. Let’s move on to some other options, and see what else is out there!
Gold Stocks & Exchange Traded Funds
While not exactly the same as investing in solid gold it only makes sense that gold stocks would flow with the price of their product. This can be very tricky to dance around though. By investing in a gold stock you are assuming that said company has the man power, means, materials, equipment, and funding to extract gold. Not only this, but there’s a concern about how much gold reserves are actually present at their mines.
It’s very trying to find the right company to invest in. Gold prices are fickle, and depend much on supply, and demand. They often fluctuate, and the stock price could tumble if investors get scared. The best way to deal with this would be to buy on a tumble, and hold on tight.
It’s not always a good idea to follow the pack, and your stead fast posture could be rewarding if the price surges back up. Patience is key, and while this is much easier it may not be the best way to invest in precious metals. This method will take plenty know how, and lots of practice to master.
If individual stock picking is not your ball game you can also go for an ETF specializing in gold. Think of an ETF as sort of like car pooling. Everybody pays in a little bit of money to reap the same benefits in large companies. The fund manager (whom hopefully knows what they’re doing!) chooses stocks in that industry to the best of their knowledge. Your cash buys a percentage in several companies to give you a balanced portfolio spread across several gold mines instead of just one. ETFs can be good or bad depending on the fees charged, companies involved, and management adminstrated.
Investing In Gold Online
There are also a few online gold investment firms. You don’t buy digital gold per say, but you’ll more have a holding. The good thing about these places is it makes it easier for the average Joe to take on this type of investment. You can have lower risk investments in real gold, but without the high price tag.
You will be required to pay an account maintenance fee, and low commission fees on your accounts though. Bullion vault offers you the option to purchase gold in real time online for cheaper prices than you normally would be able to. They also offer to store your gold in one of three mints of your choice in New York, London, or Zurich.
The company is also offering a free gram of gold for new accounts. You will have to fund or validate your account to keep the money though. If you do the gold (approximately $26) is yours to keep.
Some people are very wary of this type of investment, but I see potential. I’m always ready to explore new terrain in the online world, because I see ease of use it offers. I do my research, but if it’s an interesting offer than I’m definately on board. I see this as the way I would go for gold investment; though I’d perhaps purchase some gold coins for the novelty of it when I find a place to keep them.
Natural resources like gold can be a very solid addition to any investment portoflio, but it’s not for everyone! If this whole thing is giving you a headache then you may want to move back to the other side of the fence with your stock broker!
Originally posted 2008-12-15 22:10:45. Republished by Blog Post Promoter