Investing in gold

[paul253]

I was thinking about investing some money in gold (actual gold) and was wondering if anyone knew anything about this and had any suggestions. I was looking at goldline the other day and noticed most of what they sell is coins. My main question is, when buying coins, should I be more concerned the actual amount of gold in the coin (1/2 ounce, 1/10 ounce, etc) or the resale value of the specific coins I am buying? In other words, is a 1/4 ounce gold Canadian Maple Leaf coin going to be worth essentially the same as a 1/4 ounce gold American Eagle coin? Why are certain coins with the same weight of pure gold in them more expensive than others? Also, obviously this would be a long term investment and from what I hear gold tends to just keep going up. Is that an accurate statement? If I'm going to buy some coins, how long should I expect to hold onto them before I even consider trying to sell them? Any advice would be much appreciated.

[bball123h]

I would definitely say, don't do it!

 

Read this:

 

BAD IDEA 1

BAD IDEA 2

 

Long term, everything goes up. The question is at what rate....

[JoeHova]

I read an article a little while ago where the author says that because there is currently a bit of run on gold, he decided to put a little extra cash into "Fidelity's gold fund, which invests in gold mining companies, gold bullion, gold coins and

companies that manufacture things like watches or jewelry that consume

a lot of the metal." He said it gained 22% over a month and a half, although he didn't actually buy gold coins or whatever. Plus, that was a couple months ago, so I'm not sure if that trend is holding (I kind of doubt it). Still, investing in a fund which owns gold-related companies seemed like an interesting twist on investing in gold. Then you don't have to worry about keeping a stash of Kurgerrands under the bed.

[endaround]

Gold is a terrible investment long term and buying gold through gold brokers is always a bad idea.

[nate82]

Gold doesn't always keep on going up it is like the stock market the price for gold will fluctuate over time. It does go down in price from time to time though not as much as stocks do.

 

Gold per ounce in US dollars for the last 10 years

http://goldprice.org/charts/history/gold_10_year_o_usd.png

 

Gold compared to the S&P 500 for a 8 months not really a good picture but it was the best that I could find at the moment.

http://www.crossingwallstreet.com/image806.png

 

 

Gold alone is a terrible investment long term but you do need to diversify your portfolio if you are using this as a retirement fund. It is always a good idea to have some gold, silver, platinum, and other commodities in your portfolio but I wouldn't dedicate more than 3-5% of your portfolio to commodities though. Gold should really be a small part of your investment and there are other ways to get into the gold rush that is happening right now buy doing what JoeHova posted about.

[And That]

IMO, the only good reason to have gold is to keep it as a hedge against inflation and market downturns, and if you buy any, keep it as a very small part of your portfolio, say 2-3%. As was mentioned, it's not even necessary to buy physical gold - buy a gold mutual fund or ETF. You don't have to worry about storage at home or paying someone to store it for you, which itself decreases the value of the investment.

 

I say it's a hedge because of the following... It's true that there was a significant run on gold from 2001-2008, and there was another run in 2009. There was a big run in the late 1970's, too. It's also true that had you decided to buy gold in early 2007 (towards the end of the '01-'08 run) at around $825/oz, you would have bought gold at the same price it was in early 1980, which was the zenith of the last big gold upswing. Finally, it's true that the price of gold in late 1979 was the same as the price of gold in early 2004. That's a 0% return over almost 25 years, not even counting inflation. Check out how flat gold was during the 80's and 90's:

 

http://goldprice.org/charts/history/gold_all_data_o_usd.png

 

It's ok to have a 0% return as long as the stock market was taking in <0% returns, but that was not the case:

 

http://chart.finance.yahoo.com/c/my/_/_gspc

 

I trust the stock market about 99% more than I trust commodities, but it's a personal preference. I'm failing to find a historical bond chart that I like, but since bonds almost always have a return, their aggregate return over the same period is also >0%.

 

If you feel the price of gold is likely to go up some more, go for it, but make sure you know why you feel that way, and please please please do not rely on Goldline (and their ridiculous commercials), or anyone else trying to sell you gold, convince you that you should buy it. They make money by selling it to you. It's like buying a car just because you saw a Ford commercial on TV.

 

Edit: Dah, Nate beat me to it.

[paul253]

That all sounds like some solid advice....I appreciate it.

[homer]

The dollar is a fiat currency. It will collapse. The only question is when. Gold is a great hedge.

[endaround]

No it won't. Well not unless the US collapses and then there is a lot more to worry about than portfolio return.

 

If you want an inflation hedge (at this point inflation hedges seem weird since the only central bank that is allowing inflation is China in order to devalue their currency) look to a TIPS bond fund

 

http://www.treasurydirect...cts/prod_tips_glance.htm

[davego]

The only gold I invest in is teeth.

[And That]

The dollar is a fiat currency. It will collapse. The only question is when.

In that all government-backed currencies eventually fail, yes, it will collapse. The when is almost certainly well off into the distant future. The dollar is still the world's dominant currency... more than 60% of reserves in the world's central banks are in dollars. China and Japan, our largest debt holders, need the dollar to be valuable as much as we do because they peg their currencies to the dollar. I don't think it's wise to invest in gold just because the dollar will someday collapse. I'm not going to buy a jacket due to the impending ice age.

 

As a side note, I just spent about 20 minutes reading various websites telling me that the dollar was about to collapse, and the measures I should take to prepare myself for it. Most of the websites were trying to sell me gold, and more than one told me I needed to update my passport NOW so I can get out of dodge at a moments notice. Honestly, if the dollar collapses, where am I going? I can't afford the plane ticket.

[bball123h]

If the dollar collapses, you'd be better off investing in things like food, water, and means of protection than gold. I can't eat gold, live in gold, or protect myself with gold (other than the fine example of dental work suggested above).

[jrodbrewcrew]

The only gold I invest in is teeth.

Awwww yeaaaaaaaaaaah!

[twobrewers]

Some of the charts make gold look like a great investment (Disclosure: I own some), it really isn't. Those charts focus on the last 10 years mostly - the 100 years before that the price was very steady.

There is no potential for compounding interest. With stocks, the base company (presumably), is able to take their profits and reinvest over and over again into a venture that makes money. Hence, the investment and the company grow exponentially. The same thing can happen with dividends or interest - your investment grows, so the return on your investment grows even more. Gold does not have that luxury.

As mentioned, it is a hedge against the fall or civilization. The best thing about gold is how easily it is transferable. Any large cash or stock transfers during life or in a will is subject to various potential taxes. Gold can just be "given" without the tax man knowing.

Lastly, I think silver is probably a better investment right now anyways.

[sgtcluels]

Is Glenn Beck suggests you buy gold, its probably a good indication that it's the wrong thing to do http://forum.brewerfan.net/images/smilies/wink.gif

 

If Oil changes it's currency to the Euro, offft... dollar will take a pounding.

[The Active 33]

kitco.com has some great tools/ resources.

 

apmex.com is a very reliable site to purchase gold.

 

Gold will always have value

[bbrauch2000]

Gold will always have value, but probably not near the value it has right now. Gold and Silver both look terribly bearish technically right now. Buying gold here is like buying $130 crude oil

[owbc]

The dollar will not collapse any time in the next decade, at least.

 

If the US goes down, the rest of the developed world goes down with it. The Euro is even worse than the dollar due to Europe's aging population and stagnant economy. Japan has more debt than we do. China is hostage to the dollar due to the amount of our debt that they have bought up. The oil countries have to deal with commodities being quoted in the dollar, so if the dollar goes down, so does the price of oil. Changing the global currency takes decades.

 

If you are investing for the long run, your best bet is a stock mutual fund. If you think the market is headed down, switch to a money market. Bonds are a really bad idea right now due to the risk of inflation.

[endaround]

Europe does not have a stagnant economy.

[And That]

If OPEC moves to the euro, they're nuts, but in the long run it may help the US if you believe that sometime in the next 100 years, the mass transportation fuel of choice will no longer be petroleum. I have doubts about the long-term efficacy of the Euro anyway, and wouldn't be surprised to see that collapse first. When you have that many separate independent interests all involved with trying to hold together one currency... it seems difficult to me to see it sticking around longer than the dollar.

 

One of the best things that happened to the US since the US came into existence was that it convinced the world that our currency is best. Most people still believe it. Without some significant and dynamic change, China and Japan will not allow our currency to collapse. They can't afford it. Most of the world can't afford it. The dollar is in no danger of collapsing soon, or later.

 

Good hedges, such as gold, are an important part of any portfolio. Just don't believe the hype/propaganda of Goldline, or anyone whose business it is to sell you gold. If you want an objective look at gold, go to Morningstar, the Wall Street Journal, or anyone who doesn't have a business or ideological interest in selling it. Most people - even that Motley Fool article linked above (and the Motley Fool method is about as anti-gold as it gets) - will tell you to buy it, just buy in extreme moderation.

[igor67]

Someone else brought this up, but gold makes no sense as an Armageddon currency. Actual commodities that you will use make way more sense during a complete economic collapse. Gold has 1 actual economic value, as a good conductor for electronics outside of that all of it's value is tied up in as much faith as any paper currency. I urge more people to adopt the attitude that gold is worthless.

[sgtcluels]

Invest in bottle caps. They are worth a ton of the post apocalyptic world of Fallout.

[mothershipconnection]

Nah man, Chuck-E-Cheese tokens. No matter what happens, people will still have a hunger for Skee-Ball. They make up 10% of my portfolio and I'm gonna laugh at all you suckers when the economy is in shambles and you're stuck holding stocks. I'll trade you a couple of tokens for your portfolios to hold my massive amounts of skee-ball tickets in.

 

Most people who proclaim gold as the ultimate investment are either paid by gold investment companies, or are speculators who are currently making a killing talking paranoid people into stashing their money in gold. Sure, it's OK to have, but so are T-Bills, Euros and Yen. Society is not crumbling anytime soon, as the same percentage of people have declared it inevitable in our country since it began.

[BREWCREW5]

No offense bro, but I probably wouldnt go looking for advice on investing on any forum on the internet.

[davego]

...but BF-fans know all there is to know on all subjects...