Gold Investing: How To Invest In Gold
Gold Investing: How To Invest In Gold
Gold Investing is becoming more main stream as governments around the world continue to print more and more paper money. In this post I talk about how to invest in gold, why to invest in gold, gold coins, American gold coins, gold bullion, gold bullion coins, gold bullion bars, gold prices, and other related stuff.
The thing about gold investing that makes it so great is that gold has been money for over 6,000 years. People have used gold and silver as a unit of exchange because it has real intrinsic value.
Gold is recognizable in every country in the world. Our U.S. fighter pilots even carry British Sovereign gold coins in their survival kits, not dollars. Aristotle, who lived from 384-322 b.c. stated the qualities of good money. Gold is the only money, other than silver, that has all of the qualities to qualify as a unit of currency.
- Gold is rare.
- Gold is easily divisible and easily measured as a currency. For example, diamonds are not a currency because of the simple fact that diamonds are graded for their quality. That would make each diamond a different value. Gold is not because gold is gold. Period.
- Gold is small enough to be carried and used as an exchange of currency, and is durable enough to last virtually forever.
Gold is rare and that’s what gives it value. Oil could technically be used as money, and there have been currencies backed by oil, but it does not meet all of the requirements listed above. You wouldn’t buy oil and store 100 barrels in your backyard to use as currency.
But my financial advisor said…
First, I just want to say that nobody will look after your finances better and in more detail than YOU! A financial advisor is not going to take an hour a day, each day to look after your finances. Only you are going to be that diligent about your money.
That seems pretty straight forward and practical, but it’s amazing how many people don’t get that or say they don’t have the time to look after their own money. Do your own research and determine what’s best for you. Trust yourself.
It’s important to note that financial advisors get paid a commission on the products or services that they sell you. It is their job to promote their products or services. They are there to make money and give advice, however, many times they are selling products that bring the biggest commission.
If your advisor is arguing against buying gold and tells you to keep your money in stocks and just wait out the storm, he is either intentionally giving bad advice to make money or isn’t informed himself. Let me tell you why.
The Media
Our mainstream media is bought and paid for by the powers that be. By that I mean that everything that is shown on the major news networks, be it a two hour special on Michael Jackson every night for two months, or someone spouting off about how our economy is showing “green shoots” is put there to distract you.
What they do on those news networks everyday is far from reporting the truth. They are calling for a “jobless recovery”. That’s like being almost pregnant as Gerald Celente would say.
What the media and our government won’t let you know is that if people sell their dollars and buy gold, it could cause a systematic collapse of our economy. That sounds bad on the surface, but it’s important to know that our government has created the collapse by printing trillions of dollars.
Bill Murphy-Fed Audit=Gold To The Moon!
The media and government hide the need to protect other forms of investment from nonperformance due to economic conditions. While a mortgage bond can protect certain
assets, only gold and silver are guaranteed to weather the storm.
The Dollar
Gold, and silver for that matter, are the only sound money. The dollar is what is referred to as a fiat currency. This simply means that the currency is not backed by any gold, silver, oil, etc. All of the currencies in the world now fiat currency. The Euro is the only currency backed by gold, and it is only a 7% backing.
What is gold backed currency? A currency backed by gold means you can take your paper dollars and exchange them for gold. For example, in 1930 you could take a $20 bill and exchange it at the bank for a $20 gold piece.
So, every dollar you had in your wallet could be exchanged for gold at the bank. The paper dollar was simply a means of making your money more transportable.
Here lies the problem
President Nixon took us off the gold standard in 1971. Today, if you took your $20 dollar bill to the bank and tried to exchange it for a gold piece they would laugh hysterically. Why? It’s because today the gold price is at $1,032 for a one ounce coin.
So, you may be asking what your paper dollar is worth since you can’t exchange it for gold. Well, I’ve got news for you. Your paper dollar is just that, paper. The only thing giving your dollar any value at all is the faith that you put into it.
We have all read this note written on a dollar bill:
This note is legal tender for all debts public and private.
This is the governments’ way of saying that you have to accept paper dollars as a currency, even if it has zero intrinsic value like paper does. This is the fraud of the dollar. There have even been governments who have enforced the death penalty to citizens who refused to accept the government printed fiat currency.
How did the gold price go from $20 to $1,032? It is what our government calls inflation, but I will give you an easier and clear cut definition. Inflation is not when prices magically rise over time. Have you ever thought about that? Why would prices just rise for no apparent reason? Inflation is just that, inflation. Have you ever inflated a balloon? Well, that’s what they are doing to the money supply. They are inflating it which simply means printing more and more.
Taxation vs. Inflation
See, our government gets funding for their everyday operations either by taxing the citizens or by printing the money they need. Governments want to use taxation as a means of funding first. When they can no longer tax the citizens due to outright revolts, they opt for the other choice which is to print money.
This printing of money is why all fiat currencies in history have failed, and there have been hundreds of them. There has actually been more than one fiat currency in the U.S. The first was called the “continental”. The continental was around about 200 years ago, and it became so worthless due to over printing that it earned the saying “not worth a continental”.
Inflation is a hidden tax
What the Federal Reserve and all other central banks would hate for you to know is that they are stealing from you everyday, and it’s not by accident either. Every time they print more money to bail out companies or wage wars, that means there are more dollars chasing the same amount of goods and services.
Overtime, prices gradually begin to rise because the businesses must adjust prices to the supply of currency. That means the value of your dollar is going down, to certain death even.
The only winners in this scenario are the gold owners, because the same amount of gold has historically bought the same amount of goods. For example, in Roman times you could buy a nice toga and pair of shoes for a one ounce gold coin. In 1930 you could have bought a nice men’s suit for a one ounce gold coin. Present day you can still buy a nice men’s suit for a one ounce gold coin. So, gold never loses its value. It may fluctuate in price, but it will never lose its value. Before you even get started investing in gold and silver, check out this information.
Hyperinflation
During the 1920’s in Weimar Germany, their people experienced hyperinflation (which is an extreme inflation of the money supply) so bad that it took wheel barrels of money to buy a loaf of bread. The currency finally became so worthless that people burned their money to stay warm. The few people that did well during the crisis were the ones who owned gold. You could even buy up square blocks of real estate in Weimar Germany for a few gold coins.
Many economists believe that we are headed towards this kind of scenario. One thing is for certain, you do not want to get caught holding paper currency in a situation like that.
Stock Market
The pundits on main stream news are all talking up stocks, and it’s no wonder they are. They are not stupid, and believe me they are not ignorant to gold. They just aren’t going to promote something that may not be in their best interest to promote. There are a lot of ties with these financial guys on tv to government and wall street.
It is in everybody’s best interest to keep people invested in the stock market, and out of gold. Why? Because people who buy gold are essentially getting their money out of dollars, and that’s bad for the stock market.
Finally, GOLD!
With all this said, and with your new found knowledge, let’s talk gold. When it comes to buying gold you have several different choices. You could buy government issued coins, numismatic coins, bullion rounds, bullion bars, and mining stocks. I will also talk about gold that you will want to stay away from like the COMEX contracts, ETF’s, and gold jewelry as an investment. The idea behind buying physical gold as an investment is to get the most gold for your money. That is why I would recommend buying government issued or bullion coins and bars only. They offer the best prices for your money. If you are a collecter, then the numismatics would be your choice.
Before you get started investing in gold or silver you should take a look at how to safely buy gold. It will explain everything you need to know before you put your money into gold and silver.
Government Issued Coins
These include coins that are minted specifically by governments. They include coins like the Gold American Eagles, Canadian Maple Leafs, Austrian Philharmonics, and South African Krugerrands. These coins are considered bullion coins which means they are 99.9% pure gold and produced in mass. Each of these coins has a face value on them. For example, the American Eagles have face values of $5, $10, $25, and $50. This is because you can buy the coins in different sizes. Sizes include 1/10 oz, ¼ oz, ½ oz, and 1 oz.
The face values mean nothing and are just there to show that the coins are legal tender. In other words, a one ounce gold coin will always be redeemable for $50. I say the face value means nothing because it drastically undervalues the price of the coin, and who knows if the dollar will even be around to redeem your coin even if you wanted to.
I highly recommend buying government issued gold coins.
- They are 99.9% pure.
- They carry a low premium.
- They are recognizable around the world.
Numismatic Coins
The first time I heard the word numismatic I was taken back. It is just a fancy way of saying that the coin carries some kind of rare or distinguishable quality. A one ounce numismatic gold coin may fetch twice as much or 100 times as much than the gold content itself.
Do not invest in numismatic coins unless you are a collecter. Remember, you are investing in gold for the metal itself, not because it is rare. Numismatic coins can cost considerably more money than the bullion coins and are best left to collectors.
Bullion Coins & Rounds
Bullion coins, like the Gold American Eagle, are a good choice for investors. There are, however, bullion rounds on the market that may offer an even better deal than the coins. Coins vs. rounds: what’s the difference? Coins are minted by the government, whereas rounds are minted by independent companies. Many mining companies will mint their own rounds with their company name on the round. Rounds should be on the top of your list because they are 99.9% pure gold, and they do not carry the premium that government coins carry.
Bullion Bars/Ingots
Bullion bars (a.k.a. ingots) will give you the most gold for your money. Why? Well, because you are buying in bulk of course, and with everything bulk you get a discount. You can buy gold bars for considerably less than bullion coins or rounds.
There is such a premium on coins and rounds because it’s more labor intensive to produce. The bars are simply poured and stamped with 99.9% pure gold. That’s it. The only problem with bars is that most people cannot afford to buy gold in bulk amounts. This may not be the best choice for most people.
Gold Mining Stocks
Mining stocks offer unmatched returns for those who choose to take a risk. They can make millionaires in a very short time, as was proven with “Lion Mines” from 1975-1980. The share price went form $.07/share to $380/share in 5 years. You do the math.
There are choices when it comes to mining stocks. By far the highest profits are taken in the junior mining stocks. These stocks usually trade around $.10-$3.00 and can be risky, but the payout is huge. These stocks are referred to as penny stocks since they trade for very cheap.
Diversify
I don’t think that gold is any different than any other investment. You need to diversify your gold holdings. I wouldn’t just buy only American Gold Eagles. I would buy some other coins or rounds.
Caveat Emptor-Let the Buyer Beware
There are some gold investments that your financial advisor may try to push on you, but remember this one thing when it comes to buying physical bullion. If you can’t touch it, you don’t own it. Period.
COMEX
The Comex is part of the NYSE and is set up to trade commodities futures contracts. That is, you buy a futures contract for 100 oz. of gold, and if you are long on the contract and the price of gold moves higher, then you can sell your contract for a profit. The same goes for being short on the contract. If the price moves down and you are short, then you make a profit.
The Comex keeps all of the gold that they use for the contracts in a storage vault. So, if you have a gold contract and you want to take physical delivery, then all you need to do is put in the request. The problem is that the Comex has many more contracts outstanding than they have gold in the vault. So, recently they have been delivering ETF contracts instead of physical delivery of the gold. DO NOT put your money here!
ETF’s
These are known as exchange traded funds. An ETF is a derivative and is similar to a mutual fund, but it’s traded on the stock exchange. GLD is one of the gold ETF’s. With this ETF you do not own the gold, you simply have exposure to the price of gold. The ETF also has a storage vault for all the gold they own, but several problems exist with the ETF. The main problem is that they refuse to prove the gold is there via third party audit. That is a red flag and many experts say to stay away from the GLD.
Jewelry as an Investment
Most people would not invest in jewelry due to many factors.
- It’s too expensive for the amount of gold you get.
- It’s not easily divisible into units.
- The jewelry is not pure gold. Most of the time it is 14K gold.
In India, jewelry is the main avenue for which people invest in gold. It is just not the most economical way to go about investing.
What is a Premium?
The premiums on gold is the additional costs of producing it and getting it to market. It is the cost per ounce over the spot price. For example, if a gold coin has a spot price of $1,000/ounce, then you can expect that gold coin to sell for around $1,040/ounce.
What is Spot Price?
The current price at which a particular commodity can be bought or sold at a specified time and place.
Storing Your Gold
If you are going to put your hard earned money into gold, then I would suggest getting a good safe for your home. Buy something heavy enough to deter someone from trying to carry it out. Also, it needs to be bolted to the floor. Another option is private storage companies.
There are companies here and overseas who will store your gold for a small fee. I would avoid keeping your gold in a bank lock box. During the 1930’s when the government confiscated gold, the first place they went were the bank lock boxes. Not that gold confiscation would happen again, mainly because we are off the gold standard, but it is just better not to keep it at any bank.
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