Author Topic: How to invest in Gold?  (Read 2465 times)

Deleuze

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How to invest in Gold?
« on: February 11, 2018, 08:41:38 AM »
Hello Mustachians,

I am looking to diversify my folio and to move some funds into gold. I'm looking for help
on what options are best when buying gold. Any gold investors out there willing to give
some advice?

Many thanks in advance!
Deleuze

MrSpendy

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Re: How to invest in Gold?
« Reply #1 on: February 11, 2018, 09:14:29 AM »
If you want to buy as a gold bug, there's only one way to own it, physical, locked in a safe with your guns and canned food, preferably in some kind of re-inforced bunker, in small denominations to allow for barter/trade when our financial system collapses and life becomes a mix of Fury Road and the Postman.
Apmex or your local pawn shop will do, but be wary of big commissions.
https://www.apmex.com/

If you want to buy as a portfolio diversifier, but believe that our financial system/society will ultimately remain intact, GLD is probably the easiest and gold futures is probably the cheapest and most capital efficient. Futures will also be more tax efficient since they are a 1256 contract versus being taxed as a collectible.
https://us.spdrs.com/en/etf/spdr-gold-shares-GLD
http://www.cmegroup.com/trading/metals/precious/gold.html
http://www.investmentnews.com/article/20100307/REG/303079971/the-most-tax-efficient-way-to-own-gold

If you are operating a small central bank, I suggest good delivery gold bars, for the bargain price of $530K
https://online.kitco.com/buy/1026/400-oz-Gold-Good-Delivery-List-Bar-9999-1026
« Last Edit: February 11, 2018, 09:35:59 AM by MrSpendy »

JAYSLOL

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Re: How to invest in Gold?
« Reply #2 on: February 11, 2018, 09:39:06 AM »
+1

ingrownstudentloans

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Re: How to invest in Gold?
« Reply #3 on: February 11, 2018, 09:56:10 AM »
JM Bullion is another option for physical delivery.  At one point they were providing an intro to new customers for 10 oz at spot cost (no premium)...not sure if they still do that.

I would also look to the gold-silver ratio and think about silver at this time, based on historic prices and the ratio.  I try to keep about 5% of my portfolio in gold/silver because i like the diversity and inflation hedge.  There are other (Arguably better) was to obtain the same result, but to each their own.

Octotat

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Re: How to invest in Gold?
« Reply #4 on: February 11, 2018, 12:03:21 PM »
If you do decide to get a portion as physical silver, I like

https://www.monarchpreciousmetals.com/

as they seem to have the lowest prices above spot.  They don't do much with gold however.

Dicey

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Re: How to invest in Gold?
« Reply #5 on: February 11, 2018, 01:11:18 PM »
Or just don't. Have you read the jlcollinsnh stock series?

http://jlcollinsnh.com/stock-series/

Your future self will thank both of us.

Mighty-Dollar

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Re: How to invest in Gold?
« Reply #6 on: February 11, 2018, 07:28:24 PM »
The ETF GLD. Can be bought and sold instantaneously during trading hours. Hassle free. With GLD you pay less than $10 per trade and then 0.4% per year for the expense ratio.

With physical gold you have the risk of theft when being transported and stored. You also pay about a 6% commission when buying.

And why gold? The gold bear market before last was 22 years long! Now we're what... about 7 years into a bear market. With history as our guide this could go on for another 15 years. And gold pays no dividends.

ChpBstrd

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Re: How to invest in Gold?
« Reply #7 on: February 11, 2018, 09:28:41 PM »
Cash is actually a better hedge against the stock market than gold. When a critical mass of investors have decided to hold X% of their portfolio in gold, a rise in the stock market means they must rebalance by purchasing more gold. Similarly, a decline in the stock market means they rebalance by selling gold. The net result: gold demand increases when stocks are rising, and falls when stocks are falling. It's not 1:-1 but it's more cyclical than most people realize.

Like cash, gold is a non-yielding asset. Unless, of course, you "invest" in GLD by selling puts. For example, you can sell puts to buy GLD at $122 (it was last $124.74) that expire March 9 for about $0.66. That might not sound like much, but if you could earn that 14 times in a year it would be 7.6%. Of course, you'd eventually be forced to buy the shares at the strike price, but you'd be buying on a dip below current prices. It's like earning 7.6% on a bond until your limit order kicks in. Once assigned, you sell calls until your shares are called away, earning money that way. This strategy is the 2nd best way to invest in gold.

The absolute best way to invest in gold is to melt it into collector coins in sell it to rubes on the internet for 30-40% markups, with help from ads on Fox News.

Scandium

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Re: How to invest in Gold?
« Reply #8 on: February 12, 2018, 12:12:24 PM »
If you want to buy as a gold bug, there's only one way to own it, physical, locked in a safe with your guns and canned food, preferably in some kind of re-inforced bunker, in small denominations to allow for barter/trade when our financial system collapses and life becomes a mix of Fury Road and the Postman.

I read that as Furry road, and started to imagine a dark and horrible future..

aboatguy

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Re: How to invest in Gold?
« Reply #9 on: February 12, 2018, 01:37:16 PM »
BLUF :  IMO let someone else pay for it!




My wife and I have some gold and silver, however, we didn't purchase any.  Every blue moon or so my FIL sends a package with some double eagles, peace dollars, morgan dollars etc.  They are pretty and I track them using their silver or gold weight.  Overall they look like money losers.
I hope that since they are encased and have been professionally graded  that their value as uncirculated/proof/collectable coins has been increasing.
But I have come to expect that things that are supposed to be collectible rarely are truly collectable or rare.
Mike
« Last Edit: February 12, 2018, 02:29:22 PM by aboatguy »

effigy98

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Re: How to invest in Gold?
« Reply #10 on: February 12, 2018, 01:57:23 PM »
Gold is a great diversifier and tames a volatile portfolio. When things are going up, up, up in the market you will get very little love for it on this forum. Ask yourself, if gold is so worthless, why do central banks hold so much?

Example where gold can be awesome:
https://portfoliocharts.com/portfolio/golden-butterfly/

IAU is the cheaper of the gold ETFs

My two favorite physical gold places are apmex and jmbullion. Never had a problem with them. Link your bank account to get the cash fee and do not use credit cards. I just have my bank send them a check using billpay which is free at my bank.


RWD

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Re: How to invest in Gold?
« Reply #11 on: February 12, 2018, 02:30:40 PM »
Example where gold can be awesome:
https://portfoliocharts.com/portfolio/golden-butterfly/

You can't just link that, say it's awesome, and not mention the skepticism surrounding it. There is a lot of good discussion (on both sides) in this thread:
https://forum.mrmoneymustache.com/investor-alley/portfolio-charts-the-golden-butterfly/

Re: How to invest in Gold?
« Reply #12 on: February 12, 2018, 02:34:41 PM »
A problem I know of with precious metals is that they tend to be marked up significantly when sold, then you have to pay a second time because you'll get less than spot when you sell.

If you have the money, buy yourself some silver, especially junk silver, that will serve as a hedge against an extreme black swan hyper inflation event. But don't bother getting it if you want it to be liquid under any normal circumstances.

Supposedly -supposedly-silver is a much more undervalued then gold. It also can be broken up into much smaller units. For selling and such.

Also, depending on how conspiratorial you are, don't keep it in a bank safe deposit box because the government has banned ownership of gold before, resulting in people having their safe deposit boxes seized.

terran

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Re: How to invest in Gold?
« Reply #13 on: February 12, 2018, 03:29:03 PM »
One does not invest in gold, one speculates in gold. Investing is the purchase of an asset one expects to produce value. Speculating in the purchase of an asset one expects another to purchase for a greater amount at a future date.

Re: How to invest in Gold?
« Reply #14 on: February 12, 2018, 03:41:21 PM »
One does not invest in gold, one speculates in gold. Investing is the purchase of an asset one expects to produce value. Speculating in the purchase of an asset one expects another to purchase for a greater amount at a future date.

Gold and silver are better seen as stores as value.

FI4good

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Re: How to invest in Gold?
« Reply #15 on: February 12, 2018, 03:42:08 PM »
In the UK i've traded with chards.co.uk and found them to be easy and pleasant to deal with i think they will post worldwide, they will also store customers gold for a small % + vat .

J.Blundell & sons on St cross st near Hatton garden, london were fine to deal with.

Gold is tax free in the UK .
« Last Edit: February 12, 2018, 03:55:39 PM by FI4good »

gimmemore

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Re: How to invest in Gold?
« Reply #16 on: February 12, 2018, 09:07:12 PM »
If you are starting out GLD is a good way to get your feet wet

Telecaster

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Re: How to invest in Gold?
« Reply #17 on: February 12, 2018, 09:24:49 PM »
Today the world's gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce gold's price as I write this its value would be about $9.6 trillion. Call this cube pile A.

Let's now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 ExxonMobils (the world's most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B?

A century from now the 400 million acres of farmland will have produced staggering amounts of corn, wheat, cotton, and other crops and will continue to produce that valuable bounty, whatever the currency may be. ExxonMobil will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The 170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond.


--Warren Buffett

Surf

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Re: How to invest in Gold?
« Reply #18 on: February 13, 2018, 12:52:06 AM »
Today the world's gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce gold's price as I write this its value would be about $9.6 trillion. Call this cube pile A.

Let's now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 ExxonMobils (the world's most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B?

A century from now the 400 million acres of farmland will have produced staggering amounts of corn, wheat, cotton, and other crops and will continue to produce that valuable bounty, whatever the currency may be. ExxonMobil will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The 170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond.


--Warren Buffett

That thought exercise is equally powerful both for showing the illogic of choosing gold over productive assets, and providing the thought of 16 ExxonMobils wreaking havoc on the earth for a century.

MustacheAndaHalf

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Re: How to invest in Gold?
« Reply #19 on: February 13, 2018, 07:09:08 AM »
Expense ratio is 0.25% for IAU, and 0.40% for GLD.  So iShares Gold Trust sounds like the better option with a lower expense ratio. 

Whenever I see arguments in favor of gold, the history invariably includes the years 1972-1974.  Why?  Because if you measure 1972-now instead of 1975-now, the performance of gold doubles.  In other words, gold earned roughly as much in 2-3 years as it did in 45 years.  So make sure you measure gold's performance after 1975, since the events before then are nearly impossible to repeat.

When I looked into gold as part of a portfolio, the only benefit I saw was during corrections.  Like high quality bonds, gold tended to rise quickly during a panic.  So if you're willing to sell gold during a panic to buy stocks, the lower correlation might offer something.  But overall I think it's very expensive portfolio insurance that subtracts from returns.

Car Jack

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Re: How to invest in Gold?
« Reply #20 on: February 13, 2018, 07:30:47 AM »
Buying, you want to go to a reputable seller like Apmex and the like.  There are fake gold coins out there and even fake silver coins.  The last thing you need is to buy a couple 1 oz gold maple leafs for a bargain $1k each from some craigslist clown only to later sell to Apmex and find you've got gold plated lead.

Selling on craigslist has been pretty easy for me.  I'm dumping my silver coins that have done nothing but lost value since I started buying them.  I first sold some at the bullion dealer where I bought before and decided to try craigslist.  I limited the amount to about $300 worth and was able to collect 10% more than the dealer and all in cash.  If you'd be scared to sell a car on craigslist, this is not for you.


Timodeus

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Re: How to invest in Gold?
« Reply #21 on: February 13, 2018, 07:48:07 AM »
I opened a Goldmoney account last year. At the time they offered 1,000 grams stored free but they've since moved away from that model to a storage fee for all amounts. It's still low and depends on which vault you store it in (you can store it at multiple vaults across the world). It is supposed to be audited and fully backed with no fractional reserve banking. You also are supposed to have full ownership of the gold, meaning even if Goldmoney went out of business you can get your gold out of the vault (I'm sure for a nice fee). You can also request Goldmoney to send you the physical gold in a minimum of 10 gram increments at any time.

It's what I use for most of my gold holding and I've found it more convenient than ETFs because it is less complex and doesn't rely on ordering during market hours. You also can redeem the gold directly, which unless you have millions of dollars can't happen with an ETF.

For all those making fun of gold as an investment, while I can sympathize (gold is going long on fear), it doesn't answer the OP's question.

Mighty-Dollar

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Re: How to invest in Gold?
« Reply #22 on: February 13, 2018, 03:30:51 PM »
Whenever I see arguments in favor of gold, the history invariably includes the years 1972-1974.  Why?  Because if you measure 1972-now instead of 1975-now, the performance of gold doubles.  In other words, gold earned roughly as much in 2-3 years as it did in 45 years.  So make sure you measure gold's performance after 1975, since the events before then are nearly impossible to repeat.
Either way you had to wait 22 years for the bear market just to bottom out. I would rather make money in something less erratic than gold. That means bonds. 

JAYSLOL

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Re: How to invest in Gold?
« Reply #23 on: February 13, 2018, 04:12:56 PM »
Buying, you want to go to a reputable seller like Apmex and the like.  There are fake gold coins out there and even fake silver coins.  The last thing you need is to buy a couple 1 oz gold maple leafs for a bargain $1k each from some craigslist clown only to later sell to Apmex and find you've got gold plated lead.

Selling on craigslist has been pretty easy for me.  I'm dumping my silver coins that have done nothing but lost value since I started buying them.  I first sold some at the bullion dealer where I bought before and decided to try craigslist.  I limited the amount to about $300 worth and was able to collect 10% more than the dealer and all in cash.  If you'd be scared to sell a car on craigslist, this is not for you.

I agree.  These are excellent points.  With physical precious metals, there is always the issue of buying at a good price from a reputable dealer, and then being able to get a fair price when selling.  This can be a challenge.

If you go the route of investing in more collectible-type PM coins, then it is also possible to sell them on eBay.  I have been dabbling in this.  A local coin store sells  silver dollar culls (i.e. not rare or particularly attractive) at $17-18/ea right now depending on the silver spot price.  I have been able to find nicer looking ones ones in the bucket, take decent pictures of them and list them on eBay and sell them for $22-25+S&H. After the 13% PP+eBay cut, I can make a few bucks on each one.  But, I send some to auction, and sometime end up loosing a few bucks, too.  I understand that the prices could also drop and I could be stuck with these coins or have to sell them at a loss -- I only ever have about 10 coins at a given time, so NBD.  Also, eventually I will reach the end of the nicer looking ones in the cull bucket of the type I buy at the local dealer and I'll have to pick through something else, or give up.  I look at it as a hobby mostly, since I think I barely cover my gas and time-value costs.  I am starting to find the coins interesting and have picked up a few graded ones for a collection that I intend to keep for a while.  And, if I ever get bored of it, I know I should be able to sell these and get at least some money back out of them.

I buy at garage sales and have come up with some great deals on coin collections.  Thats the only way i invest in metals - at a discount.  I also keep it to only a few % of my portfolio.  It also doubles as my emergency fund, so i'm not losing any returns because it would have been cash otherwise. 

GuitarBrian

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Re: How to invest in Gold?
« Reply #24 on: February 14, 2018, 04:00:48 PM »
I have been buying gold for many years. Stocks/ETFs and later coins/bars.

I now basically buy everything on eBay since you can find items that qualify for eBay bucks (anything not listed in "bullion"). And eBay runs Bucks days (like today) that you earn 8% in eBay Bucks.

Combined with a 2% Cash back credit card, or meeting a minimum spend... You can find coins well below spot price.

For example right now,

https://www.ebay.com/itm/SPECIAL-PRICE-10-Liberty-Gold-Eagle-XF-Random-Year-SKU-160047/142638375382?

This is $675 for .4838 OZ of gold. With discounts you pay an effective rate of $1255/oz.* That is a 7.5% discount from spot price. And includes shipping to your door.

Since other options have already been mentioned, You can also buy the stock CEF (Central Fund of Canada) it is strictly a gold/silver holding company that holds physical bullion in a vault in Canada. It has been trading at about a 5% discount lately. I just checked, http://www.centralfund.com/Nav%20Form.htm and it is at 3% now.


* eBay Bucks are great if you spend money regularly on eBay. I buy more on eBay than Amazon... I find most prices better on eBay, this is a great program. It is capped at $500 per quarter. So about 9, or ~4.5oz, of the above mentioned coins. Also you don't need a referral to sign up for eBay Bucks, just do a search and you'll find the right page.

harvestbook

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Re: How to invest in Gold?
« Reply #25 on: February 15, 2018, 06:18:53 AM »
I have just enough silver to get me to the border in an extreme black swan. Other than that it will just drown me crossing the waterways.

Car Jack

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Re: How to invest in Gold?
« Reply #26 on: February 15, 2018, 07:23:03 AM »

Whenever I see arguments in favor of gold, the history invariably includes the years 1972-1974.  Why?  Because if you measure 1972-now instead of 1975-now, the performance of gold doubles.  In other words, gold earned roughly as much in 2-3 years as it did in 45 years.  So make sure you measure gold's performance after 1975, since the events before then are nearly impossible to repeat.


Don't forget that from 1933 until January 1, 1975, it was not legal to own gold in the US?

Another tidbit that lead to the legal ownership is that the US tied the dollar to gold until Aug 15, 1971, at which point, the US dollar began to float on the world market.  So the changes from then until 1975 when US citizens could legally own gold, the value of the dollar vs gold made adjustments to match value of other world currencies.