A Guide To Investing In Gold Bars
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According to most experts, investment portfolios should contain 5 – 15 percent gold. It is up to the investor to decide in what form this investment should be made. The first option is to invest in coins, which can be collectible coins or the gold bullion variety, coming in standard sizes and denominations. Another is to invest in gold, and there are a number of ways to invest in physical gold.
You can either invest in it directly without storing it yourself or invest through a mutual fund. Another option is to take care of the storage yourself. This option is not the best possible one, even though it may give you a false sense of security. Not surprisingly, though, a lot of people are going for this.
All the fears about the world’s banking system collapsing all of a sudden have caused this phenomenon. You can bury gold bars in your back yard or somewhere else to make sure you will not lose them. You can also keep them in a safety deposit box or somewhere else in your home. The disadvantage is that they could be stolen or lose liquidity. One way to keep your gold safe is to insure it but this will add to its cost. Finally, if you need to sell your gold urgently, bear in mind that this may take a couple of days. gold coins, on the other hand, are easier to sell, and you can sell them in small or large quantities. If you have invested in gold bars, you cannot sell them in pieces, even if you wish so.
Another option is to invest in a pooled account. You can purchase gold through a dealer in the exact amount you want, but the bars will not bear your name. Actually, the bars simply represent a guarantee that you will get that amount of money back once you decide to sell them. You can request to have the bars delivered to your home or another location. This is when you become a physical buyer.
Finally, you can buy physical gold directly from a gold bank. The bars offered by gold banks come in a variety of denominations. If you choose this option, the bars will bear your name. You will get the amount you have paid for – if you purchase two ounces, two actual ounces of gold will go to your vault. The bank will make sure your gold is stored and insured. Your gold will be liquid because it can be converted into four currencies, and this happens automatically. Of course, you will have to pay a monthly fee for these services, which will be deducted from your total balance in gold. Eventually, your balance in gold will dwindle down to nothing. However, this will take a really, really long time and is naturally contingent on the gold price, which, as you know, will always keep changing.
Here you will find a lot of information about gold futures and options and gold certificates investment.
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Is gold still a good investment at $1,800 and higher?
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Precious metals have been the best performing asset class of the past 10 years. Gold hit $1,800 mark recently. Gold is up over 32% compared to April 2010 and 470% compared to April 2001. At $44.8 per ounce, silver is up 149% from April 2010 and an unbelievable 911% from April 2001. At today’s prices, many investors ask themselves if this precious metals rally is nearing its peak. As you will see, there are many reasons for it to last for some more time.
Basically, a high gold price is the reflection of how bad things are or are about to become. Any force that creates uncertainty and negatively impacts major asset classes such as currencies, stocks or bonds tends to increase the investment demand for gold. Hence, we need to identify such negative future forces in order to confirm the positive price outlook for gold. There are plenty of them. Find them presented below, divided into short-, mid- and long-term clusters.
Yes, the following list is a conscious indulgence in the pleasure of confirmation bias. Yes, perhaps a follow-up article should try to confirm the opposite thesis. Yes, a few hints sketching the opposite view will be provided. But for now, enjoy the exercise and don’t say you weren’t warned!
Short term (2-3 years) The euro: Greece, Ireland, Portugal – who’s next? The fear of further bailouts that could become bottomless pits is not subsiding. The heated political discussion, the wide spectrum of possible solutions, the veto threats from member countries and the ECB’s unpredictability – they all create additional uncertainty. Will the political decisions come fast enough to prevent blows to the eurozone’s credibility? How many more euros is the ECB going to print while buying up the maturing debt of the default candidates? There are some rough times ahead for the euro. The lack of reliable currency alternatives feeds the investment demand for gold.
The dollar: Same story, but worse. The Fed has been buying up outstanding US debt with freshly printed dollars, only on a much grander scale. This real-time dilution of the dollar demonstrates itself in the dollar continuously falling against most major currencies, commodities and precious metals. Look at any of the relevant indexes (DXY, CRBQ) over the past 10 years. They speak a thousand words. Any businessman who expects future dollar payments asks higher prices, reflecting on dollar’s ongoing inflation. This is a self-feeding spiral and the Fed has not made any effort to stop it.
The Middle East & Northern Africa: The military conflict in Libya and further potentially contagious unrests in the Middle East (Bahrain, Yemen, Algeria, Syria, Jordan) continue. The outcome and long-term effects on the oil price are yet unclear. High oil prices would dampen economic growth, reverse the fragile economic recovery and negatively impact the stock markets. Unpromising and turbulent stock markets force investors to flee to safe heavens such as gold.
Japan: The earthquake/tsunami/nuclear disaster will result in a long-lasting drag on the Japanese economy and the Yen. Those who argue that the rebuilding processes will actually boost Japan’s economy need to familiarize themselves with the Broken Window Fallacy. More importantly: Japan, being one of the top three lenders to the United States, may need to redirect outbound financial resources towards rebuilding its own infrastructure. This would further negatively impact the U.S. and the dollar, thus increasing the attractiveness of gold.
Mid term (+-5 years) Central banks: Fearing devaluation of their forex reserves, central banks around the world have been lately increasing their gold purchases (becoming net buyers in 2010, after 21 years of net gold sales).
China: Has been looking for ways to diversify itself away from the dollar without causing too much damage to its dollar reserves. One of the ways is to motivate savers to invest in gold. China has a yearly savings rate up to 40%(!) of income and its government actively encourages citizens to put 5% of savings in gold.
The abandonment of the dollar: Investors and countries are evidently moving away from the weakening U.S. dollar. China abandoned the dollar in its trade with Russia in 2010 and has been working on a similar deal with Brazil. These BR(I)C countries now settle a notable part of their trades in their own currencies. Could the OPEC follow? Some sources indicate that talks with this subject have been taking place. Also, some prominent investors and entities took similar bets against the dollar: John Paulson made a fortune during the 2007-2008 crisis while most investors lost money. Today, the GLD ETF accounts for 14.93%, and the gold-mining conglomerate AngloGold Ashanti for 6.89% of his portfolio. A few days ago, The University of Texas put $1 billion or 5% of its $20 billion endowment into gold bars stored in a New York vault. You can expect many more stories like this as the weakening dollar forces countries, investors and institutions to look for alternatives.
US debt: Historical benchmarks suggest that the US debt as well as the debts of many European countries are now past the point of no return. In other words, any way politicians tweak the system (taxes, stimuli, laws), this debt is now too high to be paid back – virtually no country managed to recover from such high debt levels in the past without destroying its currency or its economy or both in the process. This destructive process is already under way – quantitative easing, government purchases of toxic assets, liquidity injections, etc. are just fancy names for money printing and the last desperate attempt to create the impression that these debts are being paid back – alas, with soon to be worth-less fresh paper money.
Long term (5-20 years) Baby boomers: Because most countries have no savings (rather, they have massive debts), in order to pay the promised pensions (at least on paper) to retiring baby boomers, they will have no other option than to print large amounts of money and debase their currencies. Gold, being the closest tangible yet liquid alternative to currencies will benefit from this development.
Military conflicts: From the historical perspective, the gold price tends to rise in times of heightened military activity. While the reserves of natural resources are shrinking, the global population is growing at a rate never seen before. Because a country’s standard of living depends directly on cheap access to natural resources, fights over the remaining reserves are not unlikely-we have seen a few just lately (Middle East, Afghanistan), and new areas of tension are already on the map: Russia has newly started voicing its claims in the untouched and resources-rich Arctic continent, but so have Denmark, Canada and the United States; the Chinese are heavily investing in exploration in Africa, just to name a few.
Peak oil: Oil production reached its peak in 2006, which was admitted by the International Energy Agency (IAE) in November 2010 (in the preceding years and decades, the IAE would repeatedly deny such scenario). Now it is official that we cannot increase oil production above today’s levels with the current and new technology available in foreseeable future. Demand for oil, however, is projected to rise sharply. For the first time in history, oil production will not fully satisfy the demand. As a result, the oil price may start increasing rapidly. Increasing oil prices will create inflation, dampen economic growth, decrease tax revenue and further amplify the need for printing money (which in turn creates more inflation) and force people to look for alternatives to cash savings – gold will be one of them.
Now, what may be the opposite forces that could drive the gold price down? Let’s address the most obvious:
Trust (in the dollar) is powerful, and theoretically, it could last forever. Is it likely? You decide.
The power of the West to convince the rest of the world and its own citizens that everything will somehow be alright. Never underestimate it!
Solid, sustained recovery: Such recovery would reverse the current trend in the gold price. However, this type of recovery doesn’t set in overnight – solid foundations take years to build. Right now, no foundations for a new period of prosperity are being laid. The focus is on the preservation of the (fairly rotten) status-quo. The recovery is either fragile, or purely nominal (due to inflation), or not present at all. Therefore, there is no need to fear a genuine reversal in the next years.
Speculation, gold price manipulation and high volatility: Yes, (sharp) corrections or whatever you choose to call them are possible in the short term – and they will shake out gold from weak hands. However, the dominant mid- and long-term trends should eventually prevail.
Deflation: Don’t worry about gold. Deflation means a lot of uncertainty, which is one of the key drivers for gold. Gold was in such high demand during the deflationary 1930s, that the U.S. tried to prevent a depletion of its gold reserves by the Executive order 6102.
The altogether positive perspective for gold and silver doesn’t mean that everybody should jump to them or put all their eggs in one basket. In the short run, the precious metals markets could become very volatile (silver more than gold). But still these commodities always do well when the economy turns sour.
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Prepare – Higher Gold Panda Prices Are Coming
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The market is plainly heating up. There has been a great deal of talk recently regarding manipulators hoping to impact costs either up or to the floor in various places, especially a significant auction firm in The far east, where supposedly the society is understanding and views scheming to be culturally good enough.
This is an element of the rationale why several obvious reproductions are adamantly insisted upon as being a “variety”, in spite of facts that says otherwise. Look out for negative people out there – there will be a lot of individuals who are unable to get all the gold pandas they wish they could possibly spend money on, and are regretful that the modern Chinese coin market is coming back to life prior to when they can acquire all the silver panda coins they are looking for. I don’t condemn them!
Bids typically are not generating enormous growth as of yet, in most cases, consequently the opening of advantage remains clear. Interestingly, all suggestions are that the availability investors presently are blessed with isn’t really lasting, and will dry up at some time eventually this coming year, perhaps commencing around the last part of September or very early October. I seriously anticipate sector interest to remain frenzied during the “holiday” months, for both investing in and reselling, into the very early spring of next year.
For those of you that were involved in silver panda investing throughout the last chaotic season, you already know what to prepare for. It certainly won’t be strange to see 300% gains as normal for a lot of unusual silver pandas throuhout the hectic months’ time. We will have sector rotations into and out of popular silver coins , so be cognizant of that tendency. In an immature investment arena, there is not much constraint to the increase, so the pandas that an investor should be in search of isn’t “too costly” gold and silver coins (an opportunity to market, which may very well be quite misguided), but alternatively for silver and gold coins that have not yet obtained a good deal of notice up to this point.
I have never got word anybody who wishes they’d sold off at some suitable time. Rather, I only come across collectors wishing that they had purchased. So, when you evaluate the market place to figure out how you think the areas are revolving, I cannot underline enough that your particular attention really should be fixed on overlooked or passed over silver and gold coins, and not “too expensive” silver and gold coins.
Of course, if you have extras, there is certainly nothing wrong with offering a several to fund even more acquisitions. But, it is not trading shares. It isn’t the commodities market either. It isn’t very fluid, and buying is much more challenging than putting up for sale. Be very considerate regarding the silver pandas you select to trade.
Whenever I have heard remorse, it is invariably regarding trading a silver pandas, and never regarding investing in one. Even in severe cases of overpaying, there is still almost no regret on the part of the informed new owner, because he recognizes that any error he makes in choosing will be wiped out in a short period of time by market profits. But, errors in reselling aren’t absolved.
Watch your wealth increase along with this market, and it shall be remain available to you. If you jump off the escalator, you are required to climb the slow path to speed back up, and you may always be in back of those that did not step off.
Good luck!
If you would like to learn more about investing in gold and silver numismatic coins, including gold panda coins, then head over to the Chinese coin investment lists at Live Business Chat. Also published at Prepare – Higher Gold Panda Prices Are Coming.
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How to Value Gold Stocks
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To start with, I do not think price-to-earnings ratios are especially purposeful . Gold securities are not your Warren Buffet sort of value stock which can be analyzed employing traditional measurements.
What is important to concentrate on is the fact that once you purchase shares of a gold company is that you are buying is gold in the ground. You have to consider, do I want to buy gold bullion, or do I want to buy gold in the ground via a gold stock?
As an example at this time the price of gold bullion is about $1850 however one can buy a gold producer that will extract the gold for under $1200. Effectively, you can buy gold for $1200. Not surprisingly you will find important risks in mining making it possible that you will still lose money.
We know precisely what the price of gold bullion is. It’s quoted on a regular basis. Yet figuring out the value of a mining company’s gold in the earth is, at any moment in time, not so clear. Proven and probable reserves are pretty good estimates that also are a function of the price of gold. Often, a mine will discover its proven and probable reserves go up because the price of the commodity increases. That is because there’s a cost connected with yanking this stuff out from the ground, and the higher the gold price, the more “higher-cost” ore may be mined. When the precious metal price drops, this process works in reverse.
To offer a clear example, Barrick (ABX) currently trades at a price of $53 and one can essentially pay less than $1000 an ounce because of its proven and probable reserves. The estimated cash cost for Barrick’s gold production is about $450 an ounce, meaning that if you “buy” the reserves and combine that with the cash costs to mine the metal, you are basically paying something on the order of $1400, plus or minus, for an ounce of gold. Nonetheless, the examination cannot stop there, because in fact, cash costs are not the only expenses related to mining. There are exploration costs, the expenses for amortizing equipment, not the least of which is the mill, etc.
However on the other hand, you have a land package. Every single mine and its adjacent land package will vary. One has to make a mental trade-off between those noncash costs, as well as the value of the land package and whatever exploration may go on. This is something of an oversimplification but it is helpful nonetheless.So, the choice today is, do you want to buy Barrick at an imputed price of say $1400 an ounce, plus or minus, or do you want to buy gold at $1850 an ounce?
Now, there is no point in acting as though these estimates for Newmont or any other firm are highly accurate, because they’re not. Also, there is absolutely no rule saying you have to insist that the imputed per-ounce price be lower than the spot price of gold, although clearly, the situation is more compelling when it is.
However, doing the math offers a framework for further analysis, and it can help you to get a greater sense of which corporations seem cheap and which look high-priced vs. each other. I’d just note that regarding smaller corporations or exploration plays, in particular, the estimates obviously go out the window, because you can’t determine what you’re going to get. Those companies might be wildly overvalued and attract plenty of hype, sort of like we saw with small cap stocks.
If you’re wondering about how to invest in gold you can visit our site that has a ton of information about gold stocks.
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Are Gold Coins A Good Investment
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gold coins are getting more attention these days amongst the investing communities. Why? Well, that’s what we’re here to discuss. Hopefully we can get to the heart of the matter in five paragraphs or less…
Gold is Safe
It’s not as if gold ONLY climbs in value, but to look at the ten year differences, you’ll see that it’s definitely smarter to buy gold than it is to stuff that cash into your mattress. The fact is that the dollar will be worth less in a year. Gold is not likely to be subject to that same drop in value, and if it is, it will be only a matter of time before it’s back on its feet again in terms of value. It’s simply a smart investment, a safe investment, and a good way to keep your money where it belongs: In your possession.
It’s Not a Scam
People are desperate these days. Stocks don’t work anymore, real estate doesn’t work anymore, what the heck to invest in? Some people turn to these ridiculous get rich quick scams, others turn to metal investing. If you want to get rich quick, you won’t. If you want to simply be smart, be safe and put your money into something that is almost guaranteed to improve in value over time, that’s what precious metal investing is for.
It’s REAL
Gold is real. Stocks are not. Paper money is not. Stocks and money are really only as valuable as people are willing to pretend they are, because at the end of the day, it’s just imaginary numbers. With gold, on the other hand, nobody is making any extra. The gold that exists right now is all the gold that will ever exist, because you can’t magically produce something that isn’t imaginary.
It’s Easy
Really, investing in gold is the easiest thing in the world as far as economics goes. You buy some gold, and there you go, you have a gold investment. You can put it in your safe. Stocks can be incredibly confusing, and you have to keep an eye on it every day. With gold, you just plain buy it and forget about it until you actually need it. How many other investors can rest easy at night knowing they’re safe? Knowing that they’ve looked at all the angles? Not many. Metals investing is not something that will keep you up at night. It’s not even something that requires you to understand the market in the first place! You can just buy it and call it a day.
Learn more about gold coins like Gold Maple Leaf, Gold Eagle, Kruggerrand and Chinese Panda.
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