Investing in Gold-Coins or Stocks?
bgman
Posts: 473 ✭✭
I am going to invest in gold. I am trying to figure out the best avenue to invest for the long-term, 20 to 30 years. I have found positive reasons for both, and thought I would see what everyone from the boards thought.
If you think coins are the best investment, what kind of coins? If you think stocks, what stocks are the best?
Thanks for your input.
Randy
If you think coins are the best investment, what kind of coins? If you think stocks, what stocks are the best?
Thanks for your input.
Randy
0
Comments
it is a hobby to buy coins that you like with money you can afford to lose in other words with discretionary funds
if you think otherwise that is okie just let the buyer beware
gold is NOT AN investment it is a speculation
sincerely michael
Gold is OK as a hedge against disaster, but certainly should not be a central part of one's investment portfolio. Given that many indicators suggest that we are in a long term deflationary trend, this is even more true than it would have been, say, 30 years ago.
But I also was buying them from a local dealer I've known for over 20 years, they were from an unsearched lot, in the first generation pcgs slabs and he sold them to me one by one at sheet price. This is very unusual and also gold was at about the 260.00- 270.00 range. So I felt pretty comfortable at these prices. I also bought the Bullion Maple Leafs. I like the GAE better, but the Maple Leafs with .9999, if gold ever took off no one could try and give less for them saying they need to be refined like the GAE which still has the same ounce of gold but not as pure. Well, they could TRY and give less but if you know what you're doing they shouldn't get away with it.
But I wouldn't buy any now as gold is up too high. These 20.00 saints in 63-64 kind of follow the bullion trends.
Edit to add.... even when I bought the bullion Maple Leafs, I gave them the evil eye and made sure they weren't messed up
There are also more ways to go rather than just coins (which have to appreciate quite a bit to make up for markup/taxes if you have to pay them, storage fees etc). That is not counting numismatic value which is not addressed by your average financial advisor (other than 'don't invest in collectables'). You can invest in mutual funds that can hold physical gold, stocks in gold companies and other more esoteric gold related thingys (okay I'm running low on my finance 101 memory).
So do I invest in stocks or gold? The answer is yes, plus bonds, real estate and cash.
However I buy my gold coins because I like them (not very sophisticated, but I like the look of many of the modern bullion coins, plus the circulated gold like sovereigns,roosters, the swiss helvetica and of course our own libertys and Indians--I like the $10 best as you may have guessed by my icon).
I buy the coins because I like them and they are worth their weight in gold (minus a bit for fineness). I call them investments so my husband thinks I am buying them for a good reason
Stork
Liberty: Parent of Science & Industry
My take on the issue is that gold (not numismatic gold) is a hedge that belongs in a diversified portfolio of assets and investments. Some experts say that 5% of a diversified portfolio should be invested in gold. Bill Fleckinstein, on the Real Money.com investment website makes a very cogent argument for investing in gold and silver, both the commodities and the stocks of the minimg companies.
Numismatic gold coins, to me, come in two general flavors, best typified by two coins: the MS Saint and a nineteenth century branch mint half eagle (for the sake of argument, say my 1884-CC $5 AU-58). The MS Saint will rise in demand and value with some correlation to the price of gold. In times when gold prices have been very strong, the prices of MS Saints have risen to a greater degree than the price of gold. In my mind, owning Saints is like owning bullion with a little leverage kicker. Rare date gold coins, like the 1884-CC $5, appears to track the rare coin market in general. The amount of gold in a half eagle (its "intrinsic value"), about a quarter of an ounce, provides a small fraction of the value of the coin. Over time, many rare coins will rise in value. Which ones? I dunno. Just because the price of the coin is rising (or has risen) in Trends does not mean that I will get more for the coin than I paid for it. To me, neither is acceptable as an investment in part because the buy/sell spread is so great. When I buy either, if I wish to immediately sell to another party, I would be fortunate to get 85% of my purchase price. In fact, I might get considerably less. In contrast, if I buy shares in Intel and immediately sell them, the value of the shares may be pennies more or less, and the transaction costs should be no more than 1-2% of the entire transaction and may be considerably less.
Gold bullion rises and falls with the price of gold. From my experience, which is admittedly limited, the spread between buying and selling bullion (a 1 oz American eagle, as an example) is in the range of 3-5%. Buying gold bullion is mostly a speculation. Over time, gold prices may vary wildly. If you buy at the bottom of a cycle and sell at the top, it is very difficult for the average person to catch the entire benefit of this rise because of the buy/sell spread.
Gold stocks tend to do better when gold prices go up in large part because the value of their proven reserves goes up. Often, they are hedged such that price swings tend to smooth out their earnings and are influenced as well by currency exchange rates. I have a small investment (2%) in the American Century Global Gold Fund (BGEIX) in my retirement fund. It tends to go up in value when gold does but is also tends to discount gold moves in advance.
Overall, to me the benefit in owning rare date gold coins is for the fun of it. If I buy these properly, hopefully I will break even but my dividend will be the enjoyment I have putting the collection together (tax laws aside, this dividend will never be taxable!). Generic numismatic gold and bullion is for a hedge, estate planning and asset protection, and speculation. If gold ever really spikes again, I would be very tempted to unload these for a profit. If not, I will throw these in the safety deposit box in the bank and forget about them. The stocks in gold companies are an investment that tends to not corrrelate with more typical stock investments and is useful only as a small part of a diversified stock portfolio, perhaps 1-5%.
JSmineset.com or www.safehaven.com as well as www.financialsense.com You'll get many varying views and can make your own choice as to what makes sense.
Gold looks to be a good short term hedge. But would agree that planning on 10-30 years in ANYTHING is a crapshoot.
roadrunner
Thanks for all of the well thought out replies.
I guess I am going to do some research on mutual funds and individual mining companies, as well as the costs for the holding companies.
Randy
<< <i>I am going to invest in gold. I am trying to figure out the best avenue to invest for the long-term, 20 to 30 years. I have found positive reasons for both, and thought I would see what everyone from the boards thought.
If you think coins are the best investment, what kind of coins? If you think stocks, what stocks are the best?
Thanks for your input.
Randy >>
Personally I would have said gold stocks generally are going to be higher risk (more volatile) than bullion or coins, relatively small changes in the gold price seems to have quite large effects or gold miners earning esp if they have no hedging.
I remember here (Australia) during the gold price decline a few years ago, the gold price here fell maybe from $340-350 $US per ounce to perhaps $280 in a fairly short space of time, the majority of gold stocks here didn't just lose 20% of their value it was more like 70%, I would assume those kinds of falls were similar world wide.
PRO for pre 1933 gold coins are,
1. Currently there is no reporting mechanism on profit. Which means that if you made a tidy profit Uncle Sam does not take a big bite of it.
2. Unbeknownst to many Americans there is a law on the books that F.D.R. push through congress in an emergency session, that gold U.S. coins in the possessions of Americans were to be turn in to the mint except those of numismatic value.
3. Gold prices are stable over the long term and are somewhat predictable, in general as the dollar weakens gold goes up and as it strengths it goes down as determined by interest rates, lower interest rates cheaper dollar = weaker dollar=higher gold prices. Once the fed sees the dollar devaluate to low they will raise interest rates, which will strengthen the dollar therefore lower gold prices.
4. There are bargains to be had for scarcer gold coins since alot of attention is on toned morgans, liberty nickles and seated quarters.
CONs
1. Harder to liquidate assets, for example you invest $10,000 in coins, if you buy common grade Saints at $500 each equates to 20 coins trying to liquidate that many coins when gold is up will be much harder than liquidating 5 coins worth $2000 each.
calvet, actually the pre-1933 thing is not an issue, it's perpetuated by some sellers with a vested interest. Regarding reporting profit, there is a well-defined way to do so to the IRS, with theoretically severe penalties if you don't. Whether you are likely to get caught is a different question.
If you buy stocks, the sales are reported to the IRS. Also, the broker maintains a record.
If you buy gold with cash, who knows what you are doing? Of course large amounts would be
notable, but not $500 here and there.
"Your tax-sheltered retirement account is much better utilized for something that produces income."
Thanks for making that point. I guess I need to think about this a little differently now.
Randy
"The silver is mine and the gold is mine,' declares the LORD GOD Almighty."
up trend in stocks at this time.
Paper assets are currently in a long term bear market that started in 2000. Hard assets have taken over as they did in the 1974-1980 period. Gold is in a long term bull market and in my view has far less risk to lose half it's value as does the Dow or S&P. On the flip side, gold and hard assets have far more potential to increase 50% in value than the Dow/S&P. Once the mortgage refi market implodes
the last leg of the last financial bull market is gone. There will be nothing left to keep this huge credit mania alive.
In my opinion, the 20 gold pieces at $500 a pop would be easier to liquidate than the 5 pieces at $2000. Any one of the dozen or so major gold dealers would be willing buyers of 20...50...or even 100
Saints in a strong market. To those who say they cannot buy gold without a 15% markup are not looking very hard. 3-5% is readily achievable especially on older gold coins. Paying $460 for a gold coin wholesaling for $400 is indeed ludicrous. You should be able to get it for $420 or less if you have have gotten out and done legwork.
If you do buy gold stocks, get the certificates sent to you. Half the problem with the recent 15 yrs. manipulation of gold is that the big hedgers are buying and selling the same certificates multiple times because most buyers don't ask for them. It's like a Ponzi scheme only "legal." Right. Even many of the mining companies have hedged their own futures by holding short contracts. No wonder only a few of the gold companies are worth owning as their upside is not limited by their own shorting.
The US does not control the world gold market. While it may seem that the FED along with the central banks and mining cartel have been able to manipulate the gold market for the past 15 years, that time is coming to a close. Once the price of gold rises above $400 an ounce and entrenches itself, the game of dumping gold to depress the price is over. They've been dumping gold for so long how much do they have left (FED included) where they can afford to still dump at will? How many of the $300 billion in gold derivative contracts out there can actually be repaid in physical gold? Hint...it can't. Many contracts will be in default. That's why the gold cartel
cannot affort a higher gold price.
Sure, gold is a lousy investment......during times where paper assets flourish. It's value is when the paper is peforming poorly. The FED has not cured inflation nor created a new perfect society where wealth (based on stocks of course) only increases. They still tell us to invest for the long term, hang in there so you don't miss out, sunshine is just around the corner, and of course most of the country still buys this baloney.
roadrunner
(in spite of this, I'm happy to suggest that people keep 5 % of their assets in gold or gold equivalents as a hedge against disaster. But this is an extremely unlikely scenario. You may not like my 300 year analogy, but there is no long period of time during American history when gold was a comparatively good investment)
That's a long enough term for me. A similar period of gold resurgence is all that I would expect: 5-10 years max.
The poorly performing Japanese economy in the 1990's had a lot to due with the "low" inflation levels seen in that decade. But the US FED has largely been given credit for this small miracle. People are still lining up to buy bonds and stocks because the FED has the printing presses going full bore. Banks, businesses, lenders, etc are making easy credit easier than ever. There has to be a limit to how long we can continue to build our debt exponentially while the actual earnings are linear. I am not comfortable in that type of game. This is no different than if the US Mint could keep on minting
BU Barber halves for customers who asked for them. How long would the price stay up to current levels in that scenario? The current owners of Barber halves (sorry Barberlover) would be forced to sell while they could. No different than to foreign nations who own our Treasuries and cash.
roadrunner
Numismatics is a hobby, never treat any kind of hobby as an investment.
Seth
Sorry, with respect to bonds, this is simply not true. Running the printing presses, and overly easy money should drive interest rates up, not down. Rates are at historic lows. The markets have a big appetite for bonds because inflationary expectations are very very low.
(1) If we go back to 1995-96, gold was not that far from where it is now. Gold Stocks were much higher then. Gold stocks still are trading at about 30% or less from 1995-96 levels. Gold stocks should do well if gold just stays in a trading range above $340.
(2) Interest rates are low and the yield on bonds or CD's are either at or near lows that have not been seen in 40 yrs. For those that feel now is the time for owning coins, it is hard to argue with that because the cost of owning the coins has not been so favorable in years... CD's are at or below 3%...wow... not the best rate or return.
Should gold test $400 or should better date quality coins continue to move, which is better? I am not a gold bug and gold will mostlikely stay in a trading range that could test $400, but what are the options here?
(3) With respect to the Stock Market, usually a Pre-Presidential election year is a good year to be in stocks. Perhaps a 6-9% return or even better for this year would not be surprising.
Coins and gold will do okay as an investment, but stocks should recover some of the lost ground as the year progresses.
Experience the World through Numismatics...it's more than you can imagine.
<< <i>Your assertion that stocks run up prior to the metal is so wrong and it should be obvious to you if you thought it through. If it were a consistent pattern, people would make a killing in the gold future pits by buying A TON of gold futures EVERY TIME they saw the stocks going up. >>
Baseball- Still think my assertion is wrong? Since March the Gold stock index is up 46%! In the last couple of weeks we have seen a renewed vigor in the price of the metal. Far more to come now. After the big move in the stocks.
people buy high and sell low and this will never change. Whatever they're doing, do the
opposite.
Unfortunately gold has always served a much more useful function as money than as an
investment. It was in a bear market for centuries until 1980 and there's no gaurantee that
this move isn't just a bull trap. Gold has and probably still does serve a valuable and effective
store of value during times of crisis and for this reason alone it is wise for all investors to main-
tain at least a small store of the metal. If you already have a portfolio weighed to real assets
then a few percent in gold should suffice. But for investors who concentrate heavily in finan-
cial assets then a significant amount of gold is necessary to protect one.
While being long on gold is the contrarian position at the current time this should be consid-
ered short term position which will be reanalyzed as time goes on. Gold hasn't done well
over a long term for a very long time.
If you are buying gold for long term then the best bet is to buy very low premium numismatic
items. Especially world coins in unc or proof. US gold is often attractive too where there is
real rarity available for a small premium. This will leacve you primarily with circulated 19th
century $20 but don't overlook modern bullion coins and commems either. Some of these are
still cheap. For short term speculation it matters much less the form it takes. Look for low pre-
miums on things that don't need to be assayed to sell.
With every country competing to devalue its currency to maintain some trade and business, gold should be a very good thing to have. (China is even considering no longer tying its currency to the dollar as they already have the cheap labor so they will do fine whatever their currency is.)
I also hold Realty Income Trust (NYSE symbol "O") as my real estate holding as they are a well run co. who OWNS free standing commercial buildings that they lease out to major mid-cap tenants on a NNN basis (tenant pays taxes, maintenance, etc)........and I.....HATE ......tenants so I don't own the properties.
And Aberdeen Asia closed end fund to take advantage of the dollar drop that is happening and coming further (symbol "FAX) and.....7-8% yield.
And SIRI and XMSR (pure speculation) as I think they will EXPLODE as digital radio gets put in cars next year.
And 30 yr treasury bonds......NOT.....repeat.....NOT......bond FUNDS (stay away from em) which I use for spending money and will add as (if) interest rates rise.
And rare coins (which I consider to be an investment in fun and profit regardless of the purist outlook)
I add to all of these regularly.
One think I .....WILL.....advise. Just my opinion...............NEVER hold a speculative investment in an IRA or any tax advantaged acct. Only interest or divident paying instruments.
Buy the spec stuff in your REGULAR acct where you can deduct a LOSS. Let the IRA's build and build with interest and divs as losses won't help you in those accounts.
NOTHING beats interest over the long long haul. NOTHING!
And as a GENERAL RULE........figure you MUST stash away a MINIMUM $100,000 for each decade of your age. Age 30 should have $300,000.......age 40, $400,000 etc etc etc. And that's for a MODEST retirement. Social Security is going away and they are telling us that.
Don't count your HOUSE. You need your house paid off PRIOR to retirement.
Rare coins are a great vehicle as you can ENJOY them as they increase (hopefully)
But we're in a very scary time right now and CASH is a necessity at ALL times. IMO, America has ruined its educational system, its currency, and its manufacturing base................NOT good things.
There!
whew, off da soapbox now.
<< <i>
But we're in a very scary time right now and CASH is a necessity at ALL times. IMO, America has ruined its educational system, its currency, and its manufacturing base................NOT good things.
. >>
The currency and manufacturing base are relatively cheaply repaired.
The educational system is going to be very expensive to repair for a very long time.
On the other hand, it looks like 99.999% of the population has also failed.
Here I am near 50 and by those measurements I'm only halfway there. I guess it's win the lotto or bank robbery for me.
John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
I'd like to say that I'll have a secure future as a WalMart greeter, but I have a gut feeling that I will be competing with many for that position.
Forum AdministratorPSA & PSA/DNA ForumModerator@collectors.com | p 800.325.1121 | PSAcard.com
#1 Gold American Eagles have special tax treatment. No taxable IRS reporting of 1099's is required. Immune from bankruptcy, identity theft, and bullsh!t lawsuits. Is that important to you? If so, that affects your overall decision.
#2 Stocks can have more volatility - at this moment gold is up 1.73% but my little gold mine DROOY is up over 10%. Of course the reverse is true when gold falls! Other mining stocks like AU and ABX will be less dramatic. NEM is also in the mix. Check out the Philadelphia Gold & Silver Index (symbol XAU) for other options. Also check the top 10 holdings of precious metal mutual funds.
#3 You can cheaply leverage stocks on margin. I doubt you would succeed at this. Maybe you could do this in a round-about way with Gold eagles also?
#4 MOST IMPORTANT - before buying and holding gold or any stock, for 20 or 30 years, you *must* learn something about Risk Management and Money Management. The odds of your success with your current plan are POOR. Learn to tilt the table in your favor, rather than play the lottery.
Ameritrade is the best place to trade stock,
and eBay is the best place to trade coins!
"Coins are always worth at least face value!"
I think our Canadian friends would disagree!!!!!!!!!!