Gold Buying Tips: What's Your Best Advice?

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How about this. As a financial advisor and a coin collector... here is what I quickly learned.

Never confuse buying and speculating in gold bullion with collecting numismatics that just happen to contain gold.

Buying gold coins is NEVER the most economical. Buying bars in higher oz is most economical as you are paying less of a commission/premium per oz.

If you want to hedge your portfolio with gold/precious metals, buy ETFs (exchange traded funds) or mining stocks. If you want something pretty to look at knowing you paid a good chunk for premium, buy gold coins/bullion.

If you are holding alot of precious metals/cash at home...raise your insurance coverage! God forbid you get a break in, or a fire/flood. The burden is on you to prove you have it in your house.

Accept the fact that buying gold right now because you see it on tv, and everyone talking about it might be the dumbest move you do. You are speculating on the collapse of the free market economies... and people are preying on your fear and greed. Just like when Oil was over $140 a barrel and you heard everyone saying it will go to $200, and $8 gas coming next week. Just like you learned that buying a house, flipping it was easy. Just like Google at $700 a share is a great deal.

Buy gold and gold coins in moderation, and do it for the appeal.

There is more to life than gold. I personally love silver and platinum at these points. Less speculators, more rational market. Silver coins just as pretty. =)

Do hedge your portfolio of coins/bullion if you have more than 100oz. There are economical ways of doing so and putting a floor undearneath this potential bubble.

edited

 

I approach gold from the standpoint that it is NOT an investment, it is strictly an insurance policy for asset protection. No matter when, no matter where, gold has NEVER lost it's value. It will buy food, safe passage, and security.

As an insurance policy, think of it as like your life insurance, you have it, you don't think about it unless you or your heirs have to. Don't sit and worry about what it is going to be worth next week, or next year. Just sit on it.

With buying gold now, the premiums are usually ridiculous on just about everything available. Where I was buying $20 Libs and Saints a few years ago for 4-5% over spot, forget about that now, they are usually almost 20% over spot. Bullion is often going for up to 10% over spot. In other words, the time to buy may have passed unless you can eat the margin.

I can still find coins that I will buy, but it maybe something inane like a $10 Olympic commemorative from the 1984 LA Olympics. Usually those and a few of the $5 commems are all you are going to find that are close to spot. They are not attractive coins, are common, and not collected as numismatic items but only for the bullion. Similarly I bought several of the $20 Canada Centennial from 1967 commems a few months ago at under spot. They are common coins, attractive, but not avidly collected as such.

 

I prefer gold mining stocks for investment, namely because physical gold such as bullion or numismatic gold coins are slower to move in and out. True, the second aspect can serve as a reservoir that is enjoyable as well, and futures and option contracts usually have a larger difference between bid/ask.Stocks you can buy or sell as quickly as you want usually. Gold stocks with trailing puts for protection is safer IMO. Also US based mines are safer in my mind :goofer:

Today had some encouragement for the banking system, but I still look to precious metal stocks to fare much better this quarter. My opinion of course.I think there will be a pullback soon as some holders of gold stocks want to get back to mainline stocks like Apple, Walmart, etc., but the trillions of extra dollars will influence the price of precious metals to much higher levels later.
I am not a qualified financial advisor.

Jim

 

Don't buy now. Buy below $500. Numismatic gold is another story though, I am only talking about bullion here.

 

Comment:Scarcer dates that are not much more of a premium over common dates. Coins you enjoy. AU64 gold coins. Buy and hold silver and gold; and pass it on to your kids.
Question: If you had 10k and wanted gold, would you get lower %over spot if you bought it all from the same dealer (like a price break for a larger ammount) or would it be better to pick really nice examples from several dealers and negotiate?

 

There is some good information already posted. I'd like to see people's ideas for different approaches to entering gold.

For pure investing, the safest bet, as has been suggested, is straight bullion (ingots, bars, etc.). According to the market philosophy of buy low/sell high, now is a bad time to invest into gold. Even with cost averaging, it doesn't make too much sense.

For a hedge, think of this like scottishmoney posted, gold is insurance. The "insurance premium" you pay in the current price of gold is high because the risk is high with this economy. You can, however, mitigate this current premium by going deep into gold on the downturn and averaging down your cost per ounce. Not to mention insulate yourself from the next high-risk environment.

For pure numismatics, because you are a gold junkie, you can try starting with older gold coins where the value is also tied to the rarity of the coin in addition to metal content. When gold inevitably returns to sane price levels, you can go berserk and pick up the things you seemingly missed in this current gold-buying frenzy.

My $0.02

 

Here's the way I see it and and always have. Gold is gold. If you're going to put some away as it were do it as close to spot as possible.

Things have changed drastically in the recent past whether or not anyone wants to "admit" or "buy into it". Premiums are high. St. Gaudens tend to go for WAY over spot although the number of MS pieces has not changed. U.S. Bullion is getting good premiums as well.
Sure, some of the "big dogs" can offer it cheaper but a lot of that goes to the middlemen looking to fill orders.

Personally, I am in no position to buy gold these days but I see it EVERY day at work. I've seen the boss pay full spot and then some for "walk ins" so he can fill the demand. I've been working there less than a year but been a customer for about 15 and NEVER seen this pattern. Heck, when I traded in my Krugerand for silver he gave me full spot plus because he needed it.

What little gold I do own was bought at least a few years ago BEFORE the insanity. Like I said gold is gold and if I could pick up Mexican or Austrian gold at 2% over spot I'd get it.

Availabilty is a problem if you don't have a fairly large budget and even then it can be. We're seeing customers traveling 50-100 miles to buy gold because they can't get it locally.

We know of one dealer that is selling his "scrap gold" - jewelry etc. at this point. Good for him but I wouldn't be buying it unless he was selling way UNDER spot. Dealers don't buy anywhere near that and Cash4Gold sure ain't gonna do it.
Scrap requires refining and unless you have a lot you'll lose on it.

If you want gold buy it. Just realize that you will get different returns depending on what it is. The "cheap" stuff I have bought in the past will not get the same premium as the "good" stuff. Course I paid less for it as well. Overall return would be roughly the same.

It all depends on your budget and how much homework you do.

 

Obviously if you are investing in gold (or any other precious metal) buying as close to spot as possible is key. That basically excludes any product sold directly by the us mint. Bullion (no-mintmark) AGE's and ASE's produced by the mint but sold by dealers are sold much closer to spot and have some investment potential. Bars, rounds, and coins from other governments or private mints can fall into this category too. But do your homework on the ability to sell, and the goverment reporting requirements when selling (with some of these items, depending on quantity, a dealer is required to report your sale to the government and/or the IRS).

There's also the question of do you purchase & store your metals yourself, or purchase ETF's or other certificate sytle investments. I'm not sure I fully trust the ETF's and paper, having a chunk of gold in your hand has some assurances that you actually own the gold, and Bernard Madoff's protege didn't just sell you a piece of paper for $1000/oz. However there come some risks too. Where can you safely store your investment and protect it from theft, fire, etc...

Clembo brings up a good point with refining, especially when it comes to silver. I've read and been told to always invest in .999 or finer silver. Most industrial applications of silver require pure silver. And since industry is by far the largest consumer, it's likely to be the ultimate buyer of your silver. Any silver needing refining will be worth less, and if you are selling silver at a time when many other people are as well, there could be backlogs at refinerys, causing the market value of less pure silver to drop. Buying and hoarding 40% and 90% silver coins for investment may not be the best approach. My understanding is that gold is less sensitive to this, obviously your 10K jewelry isn't investment grade, but the 22K AGE's shouldn't pose a refining issue.

Overall, clembo said it best:
"Do your homework"

and while reading this and other web forums is part of your homework, I'd suggest getting some advice from real investment professionals as well (One of which, I am not)...

--Paul

 

ill talk about coins, the rest is too boring and tiresome. buy gold coins so that their value remains the same even if gold goes down to $1 an oz and you will do well

 

Hey, flipping houses was vedy vedy good to me, and most fortuitously I bailed out at the vedy vedy tip top of the market in late 2005 and put the funds in...

 

Gold investing for newbies... hmmmm

If you see the company your buying from on TV or they cold call you.... RUN!!!!

I hear horror stories ALL the time. The last one was from a gentleman who bought MS63 graded common date $10 Indians from a "gold investment" company. He paid $1,700 3 years ago... Worth close to $1,100 today... even with gold kissing a thousand...

These companies do this with bullion as well...

 

I AM a newbie, and my advice is,, your to late the price is to high. wait and see what happens, if it goes back down to around $800, then buy. in the mean time, buy silver coins, Proof and DCAM silver coins are just as pretty, And you can display your favorites, so you can see then all the time. If a few silver coins got stolen, it wouldn't be the end of the world.

Silver will be good to trade later anyway when the dollar tanks.

 

That's not true, at all. The all-time high price of gold was $850 in 1980. That's the equivalent of $2,178 in 2009 dollars. It has been far below the 1980 level for the past 29 years. There are people somewhere who bought it at the all-time high price (or even at significantly lower prices) and if they did and are still holding onto it, they will be waiting a long time to recover their investment.

People keep referring to today's price of gold as near an "all time record", but that doesn't take into account inflation. If you consider inflation, today's price of gold ($1,000/oz) is equivalent to $390 in 1980 dollars; we are nowhere close to an all-time record.

 

It is nice to get into a commodity such as gold or silver when the price is down. I bought some common dates and bullion when gold was under $300 in 1999, and few were buying any gold at all as they were sure it was going to $200.

If one sees gold going down, they don't want to lose money so generally they don't buy, if gold is going up, they are afraid that it is too late, and they would lose money, so they don't buy. Coin Collectors make very poor speculators in gold if they buy numismatic coins as they don't easily want to sell when the profit is there. They will hold it in up and down cycles.

The main thing is, if a person really has hope that the financial crisis is going to be solved before unemployment reaches 12%, and somehow every country in the world is also so bad off, that the American dollar, horribly diluted, is still the strongest fiat money, and even though nationalization of some banks might be the best alternative, the same group of failures will be running them on yours and my money, then it is too late to buy gold.

If not a "Hoper" then you might believe gold will go beyond 1200 this year and a much higher amount in 2010, So buying at this level would not be a mistake. A year ago, less than 2% of wallstreet would have predicted today's stock level, the price of oil, or the unemployment.

Jim
all opinions within are personal. Act on financial advice you can trust and sue later. ( If you can find them)

 

congrats. =P Unfortunetly, most of the people entering the market was when the infomercials started in 05. :hammer:

 

Jim, will agree with you on most accounts.... cept on oil. Most every analyst, hedge fund manager, and mutual funds managers I know, with the exception of 1 or 2, deeply believed oil was overpriced and would popl down. Only isssue is, just like every bubble and pop, they tend to overshoot on the up and down.

 

DYODD...

I won't call this my best advice but the simplest, basic and most affordable for beginners.
Au = 1oz for you age... 30y/o = 30ozs
Ag = 50ozs:1oz of Au... 30y/o = 1500ozs

 

And when is this going to occur?