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Investing in Gold

by Charles Rotblut, CFA

Investing In Gold Splash image

Investors who are interested in allocating a portion of their portfolio to gold have several choices. Direct investments can be made by purchasing physical gold or gold certificates. Exchange-traded funds and futures provide semi-direct exposure. Mining companies provide indirect exposure.

Physical Gold

The most direct way to invest in gold is to buy the physical metal itself. Registered dealers sell bullion coins and gold bars. Deciding between the two is dependant on the amount of money being invested. The most common weights for bullion coins are 1/20, 1/10, 1/4, 1/2 and 1 troy ounce. “Good delivery” bars in the United States weigh either 100 ounces or 1,000 grams. (However, bars do come in many other weights.)

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Charles Rotblut, CFA is a vice president at AAII and editor of the AAII Journal. Follow him on Twitter at twitter.com/charlesrotblut.


Discussion

Kenneth from Oregon posted over 3 years ago:

What would some of the issues be if an ETF liquidated their product (i.e. gold or silver holdings?


Robert from Minnesota posted over 3 years ago:

Primarily tax implications if there was a capital gain.


Carl from Arizona posted over 2 years ago:

What situation would prompt the liquidation of an ETF like GLD? Would there be any warning to shareholders?


Gary from Washington posted over 2 years ago:

After much study, in my mind the only acceptable way to own gold is to own the physical gold itself
Even the largest Gold ETF (GLD) is surrounded with unknown consequences for the investor
Anything other than physical GOLD is not a GOLD investment, it is a stock or ETF/Mutual fund investment
One of the better articles I have read on this subject is located at the “Seeking Alpha” site and is written by Jack Holland and posted Dec 7, 2011
<5 Questions GLD Investors Need To Ask>
Also it is a mistake to not read the Prospectus available at the various websites for any GOLD ETF you are even thinking of getting into

http://seekingalpha.com/article/312311-5-questions-gld-investors-need-to-ask


Peter from California posted over 2 years ago:

If one were to buy gold coins, say the one ounce American Eagle from a reputable dealer, what "markup" is reasonable? Right now, for example, gold is selling for $1,733 per ounce. How much would I expect to pay for a single American eagle or say I wanted to purchase 10 of them, or even 50. Are quantity discounts customary? Conversly, if I wanted to sell the coins today to a reputable dealer, what might I actually expect as the redemption value? Is this also variable based on the quantity involved in the transaction? Anybody have experience with this?


Gil from Virginia posted over 2 years ago:

The investment analysis on Gold was quite good. The flawed public and investment discussions by analysts, are usually clear out of the ball park.

SOME good info is available from web sites but take ALL of it with a grain of salt.

The best resource I know is the Northern Miner which covers mining world wide.

Gold stocks are HIGH risk for all the reasons stated and many more as are ALL mining stocks. That said, MOST PRODUCTS USED IN MANUFACTURING AND OUR DAILY LIFE IS THE RESULT OF COMMODITIES THAT COME FROM MOTHER EARTH. Therefore, it is difficult to talk about gold stocks without including other commodities like silver, zinc, molybdenum, copper and a host of other elements, many of which may be a side product of gold and silver mining, which reduces the cost of producing gold or silver.

Pick 3 or 4 mines and google their home page and look at the number of mines the own, often in several countries with several products.

The Mines Handbook might be worth buying to become better educated before investing in mining stocks. THERE ARE SEVERAL NEW GOLD/MINING LOCATIONS WITH HUGE NEW RESOURCES . IT TAKES 2 TO 10 YEARS OR LONGER AND 500K TO 7 BIL. to bring a mine on line.

Become knowledgeable or find someone who is, before investing in mining stocks...Canada/USA/Mexico are places I like. Oil, coal, diamonds, rare earths, cooper and many other commodities look good for the future although some are looking for a gold downturn in 2013 and some are looking for $5,000. gold in 5 years.......


G from Virginia posted over 2 years ago:

On holding physical gold or coins. You MUST HAVE THEM assayed before you can sell and be sure you have a safe place to store them!


Paul from Pennsylvania posted over 2 years ago:

Gold is real money & Silver. All the Pro's say take possession of your metal. Personally i keep mine in a Del. Repository. Don't overlook Pre 1965 coins called Junk silver, sold in priced right sizes,..from 50:00 up to 1K. There are computer sites to help you determine it's daily market value,...a dime should buy a loaf of bread ..a quarter possibly a sm size Tyenol. My Greek Dentist is willing to take metals for any of my tooth related repairs! Does anyone keep their metals in any other commercial buildings [Repositories]? Regards .Paul


Thomas Grzymala Cfp from Virginia posted about 1 month ago:

With today's global security uncertainty, investment volatility and its present relative position market-wise, how wise is it to keep 1-2% of one's retirement portfolio in a gold mutual fund?

Thank you,
Thomas Grzymala

tom@blueserenity.us


Charles Rotblut from Illinois posted about 1 month ago:

Gold will give you different return characteristics than bonds or stocks. Keep in mind, however, that if you invest in a fund that holds gold mining stocks, you will not get as much diversification as you would by owning a fund that purely holds gold.


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