investing in gold help

Okay for the last 6 or 7 months I have been doing nothing but collecting all the gold i can get my hands on, nuggets anywhere from a grain too 2-3 grams, then i tried my hand at buying some gold flake/leaf and tried melting it down but too no avail, but i sorta knew that would happen going into the investment, so therefore i didn't put much money into it ( i bought 15 grams of gold flake in bulk for $29.99 I tried melting about 5 grams and making a small nugget, but that didn't quite work (which i wasn't surprised, so i guess i will be one of those people who sell vials now, just too recover some of my loses of that transaction, but anyways, I have two houses I am building coming in the next month and there will be alot of extra "put away money") I usually bring home around $300 a week net and now with this next two jobs I will be making a flat rate of $700 a week net so my question is this, should i continue on my path of collecting nuggets or should i start investing in gold coins (before they get too expensive) I am thinking I am gonna put 300/week into investing in this, so I can afford a $10 piece/ week or 3 $5 pieces/week. What would be the best option as far as profit in the end (not numerical value of the coin, just melt value?)

option 1) continue too collect nuggets
option 2) buy 1 1/4oz piece a week
option 3) buy 3 1/10oz pieces a week.

thanks in advance guys.

 

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My first advice to you would be to register on http://goldismoney.info/forums/index.php and post this on there. Then, undoubtedly, many of the members from that site will advise you to start hunting around for "intro deals" where you can purchase Gold or Silver for below spot. You've already missed out on a couple of great deals that expired last week (ie silver eagle for $4.95, Franklin Halves for $4.30, etc.) but many of us did order the Martha Washington Gold Spouse coins for $409 delivered this week. That is well under gold's current spot of $972.40/oz. I believe that deal is still available but you have to call them because they pulled the ad from their website. Anyways, this is a great site for your numismatic interests but if your looking to invest in bullion then it's GoldisMoney.info Good Luck!

 

If I were in a position to buy gold (which I'm not really) I would go with 1/4 ounce. Premiums are higher on the 1/10 ounce I've found in the past.

You might also look into foreign gold pieces. I've bought them in the past at my local dealer as low as 2% over spot.

 

This page pretty much sums up the advice I have for you:


http://www.the-moneychanger.com/commandments.phtml

I would stress knowing and trusting your dealer. Especially finding a local dealer(in case of an emergency and you need to liqiudate a small amount, etc.) Remember the liquidity and the abilty to readily do so is extreamly important when it comes to investing in gold in the end.

 

In my opinion, the best bet to make money in gold is to learn to cherry-pick burnished eagles.

 

From experience, option 2 as the buy price for each coin is inflated a good bit beyond its bullion value...For example, a $10 piece might cost $319 but each $5 piece could cost $135 from the same source so you get less gold for the dollar buying a lot of smaller coins.

If you really are simply interested in the gold, look at foreign gold. The price for swiss and french gold coins is a good bit better than US. At my favorite site, an uncirculated British Sovereign (1/4 oz coin) costs $269 while a 1/4 oz US $10 piece costs $319...pretty much the same amount of gold but $50 cheaper.

More gold, less cost

 

In your financial situation, unless you have a pretty large bank account and other more traditional investments, that money probably should not go into physical gold.

 

well I am not starving for money but I am not a millionaire either. But anyways,what would be a sound investment in your opinion if gold is not the way?
and I thank you for your input, along with everyone else. I appreciate it.

 

I have bought gold in the manner you describe since 2004 and today have a nice quantity worth a good bit more than I paid for it. I also bought coins for their numismatic vale and the pure joy of buying BUT, that is not why I buy US gold.

 

recognize the danger involved in this sort of run up.

 

I am cheap with buying gold lately, I bought this on Friday:

http://www.geocities.com/scottishmoney/europegold/hungary100kr1908.jpg

for melt. With gold going bullish in value, I would never pay more than melt for it. I do buy collectable gold coins, and pay premiums for them, but for bullion melt is the rule. If gold starts going bearish, then you might have to pay extra.

 

please explain, I am more than willing too listen too any and all feedback with an investment as big as this. so please voice your opinion if you have one.

 

Buy low. Sell high.

Past performance is no guarantee of future returns.

Gold has increased something like 50% in the last year. Those that bought gold before and during the runup have done OK and can handle a drop in price.

If you start buying gold today you will be buying high (relative to a year ago). You will need gold to go even higher to make a profit. If this happens to be the peak of gold's price you can lose big time if you buy now. (I have bought stock at its peak. It's not fun to watch the price drop and drop and drop. I remember holding one stock for 2 or 3 years so I could sell it at a loss of only 1/3 of my original investment.)

 

Unfortunately, we've all been there.

 

The cautious posts are likely from the "Don't put all your eggs in one basket" school of thought. And, there have been several Nobel prizes for economics awarded to people who described the importance and value of diversification when investing.

Your best investment is to pay off any debt you have. Having done this, I would consider three things:
1. What is your goal? (new car, college, retirement, etc)
2. How much risk are you comfortable with?
3. How long do you have to your goal?
Answering these questions will steer you as to how much money you need to save and what types of investments you'll want to look at.

If you choose over-weight in any single investment (in this case gold), you must have an exit strategy. What will you do if gold goes up and what you will do if gold goes down. Every day you should check not only its price, but any relevant news and be prepared to execute your pre-determined strategy.

If you want more diversity in your portfolio, there are many nice mutual fund companies out there. My personal favorite is Vanguard, as most of their funds are indexed funds (essentially an indexed fund provides market typical performance for a fraction of the cost of managed funds). And, they have quite a selection, where you can choose from broad based funds that follow the whole U.S. stock or real estate markets or focus on a particular sector (say, mining).

In conclusion, keep educating yourself; there are a lot of good resources out there (and not just the internet, Suze Ormond, for instance, is excellent).

 

I'm not a qualified investment advisor so this advice is worth what you are paying for it. The basics apply to most people. Put about 6 months worth of expenses in a savings account or money market fund. Pay off debts. Start investing the surplus above that in things like mutual funds. Treat coin collecting [including gold] as a hobby, not as a first investment. And finally and most importantly, don't get angry if the forum talks you out of buying gold and it goes to the moon.:hammer: Nobody can reliably predict the future.:desk:

 

Howdy,

I posted this on other forums, and seeing that it more or less pertains in this situation, here you go. This is longish, and will be beneath the learning curve for many in these parts, but for the rookies . . . .

Investing in Precious Metals – a primer

First of all, what’s an investment and what’s speculation. From my perspective, I consider a small holding of gold (more specifically precious metals) as an investment. It’s what I consider a ‘core’ holding. By small, I mean 3-5%. More than this is speculation and while speculation is fine, you need to be certain that is your intent.

I consider a small holding of precious metals as a core investment for several reasons. It serves, in many cases, as a portfolio diversifier; it is well known as a hedge against inflation; and, it’s also the number one investment in case of ‘black swan’ or Y2K type events such as war, terrorist attacks, and in general outsized uncertainty. Lastly, in recent years it’s been moving opposite the U.S. dollar. To the extent you feel the dollar will continue to drop relative to other currencies and ‘real stuff’ largely due to the twin deficits, but also because our trading partners are so $ flush, they’re starting to seek alternative investments, you will want to own some.

As for speculation, that’s a subject of personal taste and investing tactics. Some approach this from a fundamental perspective, while some from a technical perspective. I’m bullish for the longer term on precious metals for both reasons. Fundamentally, most bull markets in the natural resources (including precious metals) last for years. This is because of the nature of the beast. If the price of gold goes up, the lag time before new supplies can come to market is measured in years. It’s not like automobiles, where they can add another shift and produce more next week. With mining, you have to explore, discover, test, build refining plants, obtain all your permits, and then ship the product to market. This is true for all extractive commodities. Add to this the twin deficits and excessive amount of currency being the precursor of inflation. Further add that our trading partners hold so many dollars that they’re starting to look for alternative investments. From a fundamental perspective, these all point towards a long term bull market in the precious metals.

From a technical perspective, the current bull market began in 2002 and since then the gold index has not dipped below its 200 day moving average.

There are many ways to invest in gold – mutual funds, ETF’s, individual mining stocks, futures and the actual bullion itself.

Mutual funds that invest in the precious metals include natural resource funds, precious metals funds and some types of ‘defensive’ funds such as hard currency or Permanent Portfolio (PRPFX) type funds. With each of these funds, you need to do your research and determine exactly what they own. The easiest place is Morningstar using their Portfolio selection and Top 25 Holdings choice. Most mutual funds investing in the precious metals do so by owning shares of mining companies, although some own a little bullion. There are exceptions, such as the defense funds above that invest mostly in bullion.

Probably the least risky way to invest in precious metals is with a good broad based natural resource fund. These funds invest in energy, base metals, timber, and among other things, precious metals. A couple of examples are Price New Era PRNEX and US Global PSPFX.

Then there are precious metals mutual funds. With these there are pure play gold funds and true precious metals funds. The former only invest in gold mining stocks, while the latter also invest in silver, platinum, palladium, copper, etc. In all honesty, the vast majority of funds in this sector invest in all of the precious metals to a greater or lesser degree. First Eagle FEGIX is the only pure play gold fund I found while in the precious metals category, there are dozens. Examples include Vanguard VGPMX, Midas MIDSX, US Global UNWPX, Rydex RYPMX, Tocqueville TGLDX, etc.

In recent years, there has been the onset of ETF’s, or Exchange Traded Funds. These are sort of like mutual funds but trade like stocks. There have been some introduced that invest in bullion. These are primarily gold, but also silver. Gold ETF's include GLD, IAU, GDX, while silver has SLV. Note that there is also a metals and mining ETF XME, which includes base metals.

A word of warning: Bullion ETF's have been determined by the IRS to be ‘collectibles’ and as such their capital gains are taxed at 28%. This is unlike mutual or closed end funds which are taxed at 15% for Long Term Capital Gains. This means you want to own a bullion ETF tax deferred account and NOT in a taxable account.

One last similar category that needs to be mentioned is Closed End Funds. There is a fund, the Central Fund of Canada CEF that invests in gold and silver bullion in about a 60/40 mix. This fund has NOT had an adverse IRS determination to date, so it’s still taxed at 15%.

Mining stocks provide the most leverage but are tied to the overall equity market. Bullion and mining stocks parallel each other over time, but often lag each other, sometimes by a significant amount. In this arena, the most leverage is with the smaller companies, but they also carry the most risk. With individual mining stocks, you can target a specific precious metal such as platinum or palladium and many actually mine more than one precious metal (e.g. Freeport-McMoran FCX is copper and gold).

Lastly, for those that wish to actually own some of the stuff, you can buy bullion. In large amounts, this is normally warehoused and insured and you don’t actually take possession. In smaller amounts, folks buy various bullion types and keep them in a safe deposit box or safe. The cheapest form is with plain vanilla bullion types such as rounds (coin like disks) or ingots. By cheapest, I mean that they sell for closest to the spot price. With gold, platinum and palladium, you can buy 1 ounce ingots or rounds and fractional sizes, such as1/2, 1/4, and 1/10 ounce sizes. With silver you can buy ingots and rounds in 1, 10 and 100 ounce sizes. The one caveat with buying plain bullion ingots or rounds is that they should be stamped and marked as to weight, fineness, etc. Indeed, you’re better off going with one of the major producers such as Engelhard, Johnson-Matthey, or Credit-Suisse as these are easier to sell. Also, as with most things, there are volume discounts meaning the more you buy at one time, the cheaper (closer to spot) they are on a per ounce basis.

You can also buy actual bullion coins issued by many countries. These include the U.S., Canada, Australia, South Africa and many others. Bullion coins will have a greater premium over the spot price, but because they are ‘official’, they can be much easier to sell. Bullion coins come in two basic varieties – Proof and Uncirculated. The former are special coins made for collectors and carry an even higher premium than uncirculated. They make great gifts, but are a terrible way to buy bullion. Bullion coins should be the uncirculated variety. Gold and platinum can be had in 1, 1/2, 1/4, and 1/10 ounce sizes while silver come in the 1 ounce ‘silver dollar’ size. In this category, the American Eagle series is the primary U.S. offering. While these have a higher premium than some of the other national offerings, they’re very easy to buy and sell.

Lastly, you can buy ‘junk’ U.S. silver coins. These are dimes, quarters, and half dollars from 1964 or earlier when they were 90% silver. These are normally sold either circulated or uncirculated and by the ‘face value’ of the coins (e.g. $50, $100, $1000).

As for futures, they’re a subject beyond my understanding, and can be very complicated. I would suggest that this is NOT an arena for the novice.

Web sites of interest are:

www.gold-eagle.com - great commentary

www.kitco.com – current spot prices

www.apmex.com – good source for buying bullion in its various forms

Note that these are all sites that are bullish on gold and the precious metals so their commentary may be biased.

 

Rono, the problem with this very good advice is that it assumes an investor with a LOT of money. Say one has $100K to invest, using his 3-5% in precious metals, one is speaking of say $5K in metals, or about 5 Double Eagle coins...That is a nice bit of gold but really not enough to mitigate the market drops or inflation pressures we are seeing.

If one is like me, somene who has a few hundred a month to invest, sticking to gold coins makes more sense, as I can buy one every month.

Another issue is taxation...the government loves our money and fully expects to steal as much of it as they can. If you buy gold in the form of stocks and mutual funds, the government has a record of your transactions and WILL get their cut. If you buy and sell coins in a small way as a hobby, as most of us do, they have no record. As they have done nothing at all to merit my gain and will not give me a dime in credit if I lose money on the exchange sometime in the distant future, I preffer to own my modest investment in the form of gold coins.

In short, do ot confuse a hobby with an investment strategy. In the latter one needs a lot of money and the government eats your profit. In the former, you are collecting interestng coins that happen to have a bit of value.

 

I believe this is right on, as far as people have asked in previous post's, Yes I can afford too loose the money for now, the money I am investing will not be missed, no car payments anymore and house payment is however much i want too put into it each month, and all the other bills are taken care of for a long while. To who ever posted info on bonds and stocks, i would rather keep my investment in hand not on paper, as that can lead too disaster. at least i know if i buy (6) 1 oz eagles they are mine too keep and like the above poster said there is no paper trail too the US Govern. this is both a hobby and an investment, In my eyes I am not buying High, yes i am buying high # wise but i do believe that there is alot of headroom for gain in this investment. There is still many factors too figure in when estimating the projection price of gold, and i am willing too gamble on those factors. thank you for all your responses guys, it is much appreciated.

I see that no one has even blinked an eye at the prospect of buying nuggets, all the votes are either too stocks and bonds or strait gold currency. I am actually surprised about that :/

thanks again.
John

 

JIMV and JMC,

You both make good points and as admitted, my pm investing primer was designed for investing types with 401 type monies.

I agree fully with not trusting uncle. Cripes, I'm a 'nam vet - do you really think I have an misconceptions about putting faith in my government?

Nah, I don't trust them a bit and personally prefer the real stuff to paper. My problem is that much of my 'ready' money is in the form of retirement accounts, so securities of one form or another are about it unless you want to get serious about red tape.

Now, to answer the orginal question, I'd very carefully check the prices for world fractionals as compared to American Eagle fractionals. AE's have a huge bloody premium. Krugerrand's and Mexican Pesos are cheaper on the margin. Around the edges, if you can swing 1/5 sizes, I believe you'll find that British Sovereigns, Franch 20 Franc and Swiss 20's are cheaper than the equivalent in an AGE.

Note that bullion in ingot/bar form would also be cheaper - say 1/10 oz. ingots.

Now this all pertains to someone wanting to simply buy bullion and doesn't really have much of anything to do with collecting coins.

For silver, in this same situation, I'd be going for circulated pre-1964 US common.

just some thoughts,

rono