Investing in Gold
by Charles Rotblut, CFA
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.
In this article
- Physical Gold
- Gold Certificates
- Gold ETFs
- Futures Contracts
- Mining Companies
- Gold Mining Funds
- Factors to Consider
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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.)
Gold jewelry can also be purchased but its value may differ from the price of gold depending on the design. As a result, bullion coins and bars are better options for investing directly in physical gold.
The inherent problem with physical gold—or any other commodity—is storage. Space must be allocated to house the metal. In addition, and more importantly, the space must be in a secure location to deter theft. Small amounts of gold can be stored in safe deposit boxes. A safe can be used, but it should be immobilized.
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Discussion
What would some of the issues be if an ETF liquidated their product (i.e. gold or silver holdings?
posted over 2 years ago by Kenneth from Oregon
Primarily tax implications if there was a capital gain.
posted over 2 years ago by Robert from Minnesota
What situation would prompt the liquidation of an ETF like GLD? Would there be any warning to shareholders?
posted about 1 year ago by Carl from Arizona
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
posted about 1 year ago by Gary from Washington
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?
posted about 1 year ago by Peter from California
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.......
posted about 1 year ago by Gil from Virginia
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!
posted about 1 year ago by G from Virginia
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
posted 11 months ago by Paul from Pennsylvania
