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Precious Metals Investment Guide for Beginners

A few back and forth messages with some members who ask me about this very topic is the inspiration for these writings. Its well within your right to agree or disagree on any specific points contained within. In fact, I encourage an open dialogue and running ideas about my philosophy on this matter. I am by far not an expert, but I'd like to consider myself well beyond the "newbie" as far as experience and knowlege of the subject matter. This guide is aimed at those who might want to try their hand in the realm of precious metals accumulation, and have little or no previous experience.


Part 1: Know your intentions!

There are a few different reasons why people buy gold and/or silver. Some do it as a way to speculate on quick movements in prices and try to realize short term profits. Others use it as a diversification of their investment portfolios in order to include assets other than just stocks or real estate. Still others buy gold and silver as a hedge against inflation (usually the value of a given amount of gold or silver will retain its purchasing power throughout the decades of ownership). And there is what I believe to be the fastest growing segment of metals buyers....those who have simply lost all faith in paper money and want an "insurance policy" against a possible monetary system collapse. While most owners of metals have various reason for buying gold and silver, they all will fall into 1 or more of the above categories.

Since this guide is devoted to beginners in metals, I will state upfront that getting into this for short term gains is probably the least appealing of the above categories. If those are your intentions, I wish you all the best, but I have nothing useful as far as info to give you. If you fall under one of the other 3 categories, please keep reading.



Part 2: Paper prices VS Physical metal

Almost any major newspaper in the world with a business section will have the current "spot" price of gold and silver. These prices are the value of gold or silver when bought as a 3 month contract. For silver, that contract is 5,000 ounces, for gold, its 100 ounces. Most of us dont have that type of money to play around with, but its important that you are aware of what "spot" price means.
Because I strongly recommend taking physical possesion of your metal, I will not go into details about ETF's. Those are basically paper ownership of metal that you dont ever get to see, feel, or hold. You buy "x" ounces of a metal....send in your money...and hope that the actual metal is on deposit. Its a very risky way to own gold or silver for all but the very short term investors!
Physical possesion is the key in buying metals, especially if you are buying them as that "insurance policy". If you believe that our monetary system has the capability of collapsing overnight, ETF's will be about as useful as a stack of $100 bills in that case.
Now we need to discuss "premiums". A premium in the bullion world is the amount of money above and beyond spot price that you pay a person or dealer to aquire the metal. Since most dealers enjoy eating and paying their bills, premiums are basically a part of the dealer's profit. Its an "upfront" cost. The dealer will make yet another portion of his profit upon buying. The difference between a dealer's selling price and buying price is his "spread". For example, a dealer may charge $50 over spot as a premium on a 1oz gold coin. Since gold is $1150, that is about 4%. That same dealer may buy your 1oz gold coin from you for $1125. Thats about 2% behind spot. So the dealer's spread on that gold coin is roughly 6% or so. This is a very tight spread, and very fair to John Q. Public. However, that is not to say this dealer makes 6% profit on those coins. He may not be lucky enough for someone to walk in and sell 1 to him at $1125. In fact, he may have to actually pay $1175 for the coin from another dealer, only to sell to you at $1200. In this regards, the profit margins overall on bullion are VERY THIN!
Premiums play a big part in deciding what I will purchase. Everyone wants the best deal, and since gold is gold, that best deal will almost always be the cheapest deal when comparing apples to apples. For example, if I have my heart set on buying 3 ounces of 1/2oz gold eagle coins, Im going to buy from the guy who is selling them at the lowest premium above spot. However, because there are MANY different forms of gold bullion, there are many different premiums attached to those different forms. Its almost always cheaper to buy a 1oz eagle than to buy 10 of the 1/10th oz eagles. However, if you feel its justified to spend a little more to have that 1oz be divisible, than thats your call. If you are not too picky on what form of silver or gold bullion you are willing to buy, then it becomes somewhat advantageous to seek out items with the lowest upfront premiums. Although its true that you will usually recoup some of that premium upon selling, its usually just going to be a percentage, and not the entirety.

What are fair premiums in today's market?

For 1oz gold eagles.....3%-5% over spot
1/2 oz gold eagles.......6%-8% over spot
1/4 oz gold eagles.......9%-11% over spot
1/10th oz eagles..........15%-20% over spot

Silver bars 1oz.............$1.50 over spot
Silver Eagles.................$2.00 over spot
Silver bars 10oz............$0.70 - $1.00 over spot (per oz)
Silver bars 100oz..........$0.50- $0.80 over spot (per oz)

There are countless forms of silver and gold bullion, so I cannot possibly list all the fair premiums for each product. The above list is for some of the most commonly traded forms of physical bullion though.

Part 3: How much should I buy, and how should I buy it?

The best way to invest in anything in my opinion is through "dollar cost averaging" or DCA. Some people may want to run out tonight with their life savings and buy as much gold or silver as possible. Thats a bad idea in my mind. By making a consistant pattern of purchasing, you are downsizing your risk. Although I do not have any particular set amount of dollars that I budget each month to make purchases, I have continually bought throughout the past 3 or so years. I have paid as much as $1200 for an oz of gold, and as little as $700. I have spent as much as $20 for an oz of silver, and as little as $9.50. But because I have bought at all levels inbetween in a consistant manner, I lessened my exposure to risk in case of a huge downturn in prices. My best recommondation is to make a budget in dollars that you are willing to invest with. As an example, you could put aside as little as $200/month towards the purchase of gold and silver, and at the end of each month buy a 1/10th oz gold eagle, and 4 or 5 oz of silver. After a year, you would have a mini warchest of metal with over an oz of pure gold, and perhaps 50 ounces of silver!

Silver or gold? Which should I buy?

As with any investment, diversification is key. 50/50 is a good place to start until you begin to form your own opinions on which metal has more potential. Buying metals can become addictive, but its a good addiction. You are not really "spending" money when you buy an oz of gold, or 100oz of silver. You are simply exchanging paper for metal. Its not like when you buy $300 worth of designer clothes, or a Gucci handbag. Those outlays are gone as soon as you leave the store. Metals are so easily converted back into cash that you could even use your metals stockpile as an emergency reserve! I have made a couple of 5 figure metals purchases in my life, and my pulse never went any higher than normal. I honestly believe in that what im doing is right for me and my family....in fact, I actually consider it IRRESPONSIBLE to not buy gold and silver! But those are my personal beliefs. The liquidity of the metals just makes it so much easier and comfortable to aquire them. I know that they are there in case I need funds. With metals, and most things in life, slow and steady wins the race. Start off small, but consistant. Find out what you like, there are tons of choices! Try to learn as much as you can as you go, and soon you will have more knowlege about metals than 98% of the people in this world! Hope this guide was helpful to anyone wanting to start out in metals.

Comments

  • WeissWeiss Posts: 9,935 ✭✭✭✭✭
    Nice.
    We are like children who look at print and see a serpent in the last letter but one, and a sword in the last.
    --Severian the Lame
  • CiccioCiccio Posts: 1,405
    Thank you Gecko, well written and full of good advices and information.

    image

    I am happy that after only one year into PM/Coin collecting, I am not that far from your guidelines.
    Let's see what other forum members have to add.
    It is an interesting topic and since we, newbies, are quite a few now, it may really help us not throwing our money away.
  • secondrepublicsecondrepublic Posts: 2,619 ✭✭✭


    << <i> You are not really "spending" money when you buy an oz of gold, or 100oz of silver. You are simply exchanging paper for metal. Its not like when you buy $300 worth of designer clothes, or a Gucci handbag. Those outlays are gone as soon as you leave the store. Metals are so easily converted back into cash that you could even use your metals stockpile as an emergency reserve! I have made a couple of 5 figure metals purchases in my life, and my pulse never went any higher than normal. I honestly believe in that what im doing is right for me and my family....in fact, I actually consider it IRRESPONSIBLE to not buy gold and silver! >>



    I would add that many people who buy precious metals consider gold/silver to be "real money." So when you exchange those little pieces of paper (Federal Reserve notes) for precious metals, you are really exchanging something with no innate value for something that for thousands of years has had value regardless of country, politics, etc.

    PMs are incredibly liquid... not as liquid as cash, but very close. I also view PMs as essentially a savings mechanism, though there is obviously an investment risk (up and down) there also. But right now, with everything that's happening and the trajectory we seem to be on as a country, I think it's much riskier to keep your money in cash.
    "Men who had never shown any ability to make or increase fortunes for themselves abounded in brilliant plans for creating and increasing wealth for the country at large." Fiat Money Inflation in France, Andrew Dickson White (1912)
  • TomohawkTomohawk Posts: 667 ✭✭
    Gecko...add me to the fan club...very well written and I like all the great suggestions in one post...

    I'm about 1 year into real bullion buying, but I'm one of the Silver is King buyers (have dabbled in the yellow stuff, but find it too rich). However, I can't rule out I may try to trade some silver someday for gold, especially if the ratio comes back down to a more historical 15 to 20. I find I enjoy silver much more because there are far more products available, and it is so cool to hold a whole bunch of pure silver coins, instead of 1 or 2 gold coins, in your hands at once.

    I actually did commit 10% of my monthly paycheck to metals purchasing for about 6 months...if I keep up (and silver stays about where it is today), I'd have enough silver to swap for several ounces of gold, if I ever become so inclined.

    ASE Addict...but oh so poor!
  • RedTigerRedTiger Posts: 5,608
    Some good stuff there Gecko.

    As is my tendency, let me add a note of caution for those relatively new to the forum that may be buying their first gold and/or silver this year. Gold has enjoyed ten straight up years, and has quadrupled in price from the lows. No matter how sound the fundamentals may look, or the news background may seem for future price appreciation, there is no guarantee that up trend will continue. Most of the fundamental news that folks read and report, has for the most part already been factored into today's price.

    All markets go through cycles. Ten up years, might well be followed by ten more up years. However, no one really knows, no matter how sure they sound, no matter how good their past track record may be. A bull market can make a lot of people look very smart. A bear market can make a lot of those same people look stupid. Ten up years are often followed by a flat market or even an extended period of down market. It happens.
  • gecko109gecko109 Posts: 8,231
    Red Tiger makes a valid point. There is a risk of a downturn. Thats is why I stress using DCA when buying metals. The only counterpoint I have to offer is this: While gold and silver MIGHT lose value, cash is GUARANTEED to lose value! Always has, always will. Thats just the nature of fiat.
  • JustacommemanJustacommeman Posts: 22,847 ✭✭✭✭✭
    Very nice piece Mr Gecko! Well done, well done indeed..............image

    MJ
    Walker Proof Digital Album
    Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
  • Very nice. Good read.
  • renman95renman95 Posts: 7,037 ✭✭✭✭✭
    Thx Gecko
  • laserartlaserart Posts: 2,255
    I wished I had seen this last saturday when my wife's sister and her husband were here at the house for the evening.He was telling me he has somewhere around $20K to do "something" with. He just doesn't know how to spread it around, all gold, all silver or some of both but what is the ratio? I told him some of each.
    What say ye?
    "If I had a nickel for every nickel I ever had, I'd have all my nickels back".
  • OnlyGoldIsMoneyOnlyGoldIsMoney Posts: 3,278 ✭✭✭✭✭
    Gecko, nicely done. image Thanks for taking the time to write a good deal of wisdom in just a few paragraphs.
  • meluaufeetmeluaufeet Posts: 746 ✭✭✭
    Major kudos to the G-Man for an excellent topic/thread!!! image

    I would just like to add that buying during a new york spot price drop of gold -1.5% and silver of -3% makes me smile... since those days are not exactly rare... the DCA strategy deployed on that timely basis has worked for me...

    btw: buying on a drop of gold -2.5% and silver -5% (appx targets; have become a mandatory move in my portfolio) and turns any anger into jubilation... those days also tend to be a great time to check ebay auctions. Hence... having some dry powder is also mandatory IMHO.
  • gecko109gecko109 Posts: 8,231
    Hey guys, just want to say thank you for all the kind comments, and positive responses.image
  • guitarwesguitarwes Posts: 9,237 ✭✭✭
    "You are not really "spending" money when you buy an oz of gold, or 100oz of silver. You are simply exchanging paper for metal. Its not like when you buy $300 worth of designer clothes, or a Gucci handbag. Those outlays are gone as soon as you leave the store. Metals are so easily converted back into cash that you could even use your metals stockpile as an emergency reserve!"


    Great wording. Some people just can't grasp this concept.

    Great post Geck. Thanks for your efforts and time on doing this.

    @ Elite CNC Routing & Woodworks on Facebook. Check out my work.
    Too many positive BST transactions with too many members to list.
  • fastrudyfastrudy Posts: 2,096
    A little off-topic, but

    All markets go through cycles

    Other than looking backwards at the past performance of a material commodity, is there any mathematical or logical reasoning as to why this statement is true? I hear it all of the time, and am just concerned about the truth of the matter. For example, I am aware that there is a mathematical proof for Dollar Cost Averaging, so that is true. Looking at the past performance of the price of something can't be used to predict its future with any certainty. Are the cycles inherent in all markets a result of the "Law" of Supply and Demand? Is that a mathematical or scientific truth, as well? Or is it just an economic observation? Economics is certainly not a science, as it has no predictive ability.

    BTW, that was a great primer on PM, good job!
    Successful transactions with: DCarr, Meltdown, Notwilight, Loki, MMR, Musky1011, cohodk, claychaser, cheezhed, guitarwes, Hayden, USMoneyLover

    Proud recipient of two "You Suck" awards
  • gecko109gecko109 Posts: 8,231


    << <i>A little off-topic, but

    All markets go through cycles

    Other than looking backwards at the past performance of a material commodity, is there any mathematical or logical reasoning as to why this statement is true? I hear it all of the time, and am just concerned about the truth of the matter. For example, I am aware that there is a mathematical proof for Dollar Cost Averaging, so that is true. Looking at the past performance of the price of something can't be used to predict its future with any certainty. Are the cycles inherent in all markets a result of the "Law" of Supply and Demand? Is that a mathematical or scientific truth, as well? Or is it just an economic observation? Economics is certainly not a science, as it has no predictive ability.

    BTW, that was a great primer on PM, good job! >>




    Without getting into too much of a debate, and trying very hard to NOT sound like the guy who says "but this time is different", it just truly is "different". While "cycles" do exist in the financial markets, its hard to try to apply past performance of metals to what may happen in the future. Someone is going to ask...."Gecko, how is it different this time?". My answer lies with our national defecit. 12 trillion dollars (thats 12,000 billion dollars, and a billion is 1,000 million) in the hole is not good. We cannot sustain the pace we are on without a national default (bankruptcy), or the printing of obscene amounts of new money (hyperinflation). Either way, the dollar becomes worthless very quickly in either scenario. In troubled times of the past, at least this nation produced large quantities of exportable goods....now we produce a small handful. Those two factors coupled together can only lead to one conclusion.....massive financial meltdown (more accurately monetary collapse). Because the void left by this lack of "good currency" will need to be filled quickly, gold and silver will be the most likely candidates to do so.
  • Thanks for the post! I just recently decided to get my feet wet in the PM world and was just about to make a newb post until I saw this thread.

    I do have a few questions though. Does it matter what "brand" (?) or whatever it may be called in the PM world, one should buy? I've browsed Apmex a few dozen times and it seems they have many different silver bars from other companies. (Sunshine, Silvertowne, APMEX, The Wall Street Mint, etc) Do some bars carry premiums/quality over others? Also, what's the difference between Brand New or Secondary Market bars compared to Industrial? Thanks.

    Steve
  • gecko109gecko109 Posts: 8,231


    << <i>Thanks for the post! I just recently decided to get my feet wet in the PM world and was just about to make a newb post until I saw this thread.

    I do have a few questions though. Does it matter what "brand" (?) or whatever it may be called in the PM world, one should buy? I've browsed Apmex a few dozen times and it seems they have many different silver bars from other companies. (Sunshine, Silvertowne, APMEX, The Wall Street Mint, etc) Do some bars carry premiums/quality over others? Also, what's the difference between Brand New or Secondary Market bars compared to Industrial? Thanks.

    Steve >>




    If you stick to any of the brands you just listed, you are fine. If we had to list every known manufacturer over the past 40 years, that would be a huge thread in itself! Try to avoid "generics" though. Johnson Matthey, Engelhard, and Credit Suisse are the big 3, but there is nothing wrong with Silvertowne, Sunshine, Apmex, Wall Street, National, NWT, and the list goes on. Brand new is exactly what it says...freshly minted bars (usually still sealed in plastic sleeves). Secondary bars are those which APMEX might buy from the public that were not in the plastic, and may have a few scuffs, hairlines, and dings. There is nothing wrong with these at all, since any silver end user will just be melting them anyway. Industrial silver is either silver shot (jewelery making) or large 950+ oz bars that a company may buy as a source of their silver for manufacturing products. I'd stay away from both for various reasons, and focus on 10oz and smaller bars from recognizable refiners.


  • << <i>

    << <i>Thanks for the post! I just recently decided to get my feet wet in the PM world and was just about to make a newb post until I saw this thread.

    I do have a few questions though. Does it matter what "brand" (?) or whatever it may be called in the PM world, one should buy? I've browsed Apmex a few dozen times and it seems they have many different silver bars from other companies. (Sunshine, Silvertowne, APMEX, The Wall Street Mint, etc) Do some bars carry premiums/quality over others? Also, what's the difference between Brand New or Secondary Market bars compared to Industrial? Thanks.

    Steve >>




    If you stick to any of the brands you just listed, you are fine. If we had to list every known manufacturer over the past 40 years, that would be a huge thread in itself! Try to avoid "generics" though. Johnson Matthey, Engelhard, and Credit Suisse are the big 3, but there is nothing wrong with Silvertowne, Sunshine, Apmex, Wall Street, National, NWT, and the list goes on. Brand new is exactly what it says...freshly minted bars (usually still sealed in plastic sleeves). Secondary bars are those which APMEX might buy from the public that were not in the plastic, and may have a few scuffs, hairlines, and dings. There is nothing wrong with these at all, since any silver end user will just be melting them anyway. Industrial silver is either silver shot (jewelery making) or large 950+ oz bars that a company may buy as a source of their silver for manufacturing products. I'd stay away from both for various reasons, and focus on 10oz and smaller bars from recognizable refiners. >>



    Thanks for the clarification - much appreciated. My original intentions before reading this thread was to do what you state in Part 3 - just set aside X amount of money each month and pick up some silver regardless of the current price. For me this would be easy to do because I'll just think of it as a monthly "bill" and budget myself accordingly but I'm not actually owing anything just converting my paper to a precious metal. Thanks again for the tips.
  • RedTigerRedTiger Posts: 5,608


    << <i>A little off-topic, but

    All markets go through cycles

    Other than looking backwards at the past performance of a material commodity, is there any mathematical or logical reasoning as to why this statement is true? I hear it all of the time, and am just concerned about the truth of the matter. For example, I am aware that there is a mathematical proof for Dollar Cost Averaging, so that is true. Looking at the past performance of the price of something can't be used to predict its future with any certainty. Are the cycles inherent in all markets a result of the "Law" of Supply and Demand? Is that a mathematical or scientific truth, as well? Or is it just an economic observation? Economics is certainly not a science, as it has no predictive ability.

    BTW, that was a great primer on PM, good job! >>



    Market cycles are caused as much or more by human psychology as anything else. All trading markets are driven by greed and fear. While computerized models are doing more and more, it is still a human pushing the button, still a human constructing the computer models. Some try to analyze the greed and fear cycles, one technique used is Elliot Wave theory.

    At the top of any market, the fundamentals are mostly all blue sky and sunshine. New participants throw caution to the wind because so many others have made huge money on the up move. Old timers in the market may shake their head at disbelief at the price action, but don't want to miss the next leg up. A relative maximum in the number of buyers and a low in sellers is what produces a top. That will never change because that's how markets work. The opposite is what produces a bottom, when no one wants to buy, when potential buyers want to wait because it is sure to go lower, that is a cycle market bottom.

    Sometimes the cycles can be very long because of economic and demographic trends. One recent example is real estate. The overall secular uptrend lasted 40 years. During those 40 years, there was never a single year when all top 20 U. S. markets showed simultaneous declines. Never until 2006 that is. Many real estate folks said it would never go down because they "aren't making any more." Folks piled in because they believed it. Look at how psychology has changed in just a few years. Would anyone buy that load of baloney today? Would anyone say real estate can never go down and believe it?

    The gold bull is 10 years old and prices have quadrupled. A lot of new money is coming in. It is important for newcomers to the market to realize that there is risk, no matter what the fundamentals look like. A 10% correction can happen at any time. A 30% to 50% bear market decline over a period of several years is a possibility. I'm not predicting these things, just pointing them out to those that think there is only upside.
  • WeissWeiss Posts: 9,935 ✭✭✭✭✭


    << <i>

    The gold bull is 10 years old and prices have quadrupled. A lot of new money is coming in. It is important for newcomers to the market to realize that there is risk, no matter what the fundamentals look like. A 10% correction can happen at any time. A 30% to 50% bear market decline over a period of several years is a possibility. I'm not predicting these things, just pointing them out to those that think there is only upside. >>



    This is sage advice. Gecko's piece is a great starting point. But I'm a little concerned about his implication that when you buy PMs you're not spending money--you're exchanging one form of money for another. That's true in the most pure sense. But the fact is that the market could collapse. We fans of PMs like to point to recent history for evidence of hyperinflation, political turmoil, etc. as reasons to hold metals. But as students of recent history we also must remember that within the last five years, gold was $415 an ounce. Silver was $6.67. That's roughly 1/3rd of spot as I type.

    If your life savings are $10,000 and you put it into metals today, you need to be aware that tomorrow your $10,000 investment could be worth $3000. OR LESS. I don't believe that's the case, but those 5 year low prices are facts and matters of record.
    We are like children who look at print and see a serpent in the last letter but one, and a sword in the last.
    --Severian the Lame
  • mikeygmikeyg Posts: 1,002



    Thank you gecko for a well written and comprehensive piece.I am in the process of increasing my PM holdings.Your thread was a big help in clarifying my objectives.


  • << <i>

    The gold bull is 10 years old and prices have quadrupled. A lot of new money is coming in. It is important for newcomers to the market to realize that there is risk, no matter what the fundamentals look like. A 10% correction can happen at any time. A 30% to 50% bear market decline over a period of several years is a possibility. I'm not predicting these things, just pointing them out to those that think there is only upside. >>




    I am a newcomer and the 50 year chart shows me that gold lost 200 points at the most over that 50 year time period.
    That is good enough for me. Also, being that the USA and Germany own the most gold, and they are two big players in the
    world economy, couldn't one conclude that these two countries would do all they can to sustain a bullish gold market ?
  • jmski52jmski52 Posts: 22,308 ✭✭✭✭✭
    being that the USA and Germany own the most gold, and they are two big players in the
    world economy, couldn't one conclude that these two countries would do all they can to sustain a bullish gold market ?


    That is one conclusion that I don't believe you can make. The debt markets - the markets for government bonds that are the basis for the fiat currency systems are much, much larger and much more important to governments than the gold market. Gold is only important if the governments are planning on making it a bigger factor in the financial system (as part of a basket of various commodities to back the currency, for instance).

    I don't see that happening to any great extent, because physical gold is not subject to being inflated to pay for unpopular government programs that would otherwise be subject to much greater scrutiny by the public. Fiat currencies allow governments to act as if everything is free when it is not free, and it allows politicians to act like benevolent stewards of the pubic trust when they are not that either.

    Gold has always had the problem in that it does reveal the relative strength or weakness of a currency, and whether that currency is being abused by the government that issues it. In the end, all governments abuse their currencies because politicians are generally in it for themselves and are busy feathering their nests while they are also busy funding their next campaign using our tax dollars to curry favor to special interests. Is that great or what?

    From the perspective of a government that is full of corrupt politicians whose No.1 Goal is to stay in power, it is more important to keep gold from becoming a competing currency because a competing currency that has more integrity than a fiat currency will damage the ability of any government to sell debt in order to fund its vast and pervasive network of branches, departments, bureaus and agencies.

    One problem for the government (and its fiat currency) is that working people don't want to pay for the massive government programs that benefit only special interests and the politicians. Politicians don't like to be put into a corner where they have to be clear about spending priorities, because someone is not likely to get what they want from the government when spending has to be limited in some way, budget or otherwise. These factors work against gold and they work towards maintaining a fiat currency that can be created from thin air (and immediately deployed) by the government on demand.

    However - those large, pesky debt payments (Treasury Notes & T-Bills) keep coming due faster and there is no way to hide where the money is going to come from. Furthermore, people start to notice when their incomes shrink while their living expenses keep going up. A coming barrage of new taxes will be foisted on us to keep the bureaucrats in business, unless there is a large tax resistance movement of some sort. Such a thing wouldn't surprise me.image

    In that type of environment, most people tend to like gold as a store of value that is not part of the troublesome currency system that always seems to be in trouble. The gold market might be bullish, but it isn't because the government wants it that way - it's in spite of the government's wish that it were not so.
    Q: Are You Printing Money? Bernanke: Not Literally

    I knew it would happen.
  • meluaufeetmeluaufeet Posts: 746 ✭✭✭


    << <i>If your life savings are $10,000 and you put it into metals today >>




    43% have less than $10k for retirement


    I would like to think that there is a difference between 'life' and 'retirement' savings... In any case, its prudent to listen to both bulls and bears, and try to make the best decision you can live with. 'Sell in May and go away' has worked pretty well during 'even' (election) years recently... capturing some unrealized profits is something to think about.

    As they say... "do your own due diligence".


  • << <i>

    'Sell in May and go away' has worked pretty well during 'even' (election) years recently... capturing some unrealized profits is something to think about.

    As they say... "do your own due diligence". >>




    I've noticed that gold has either stayed flat or gone down in four of the last five April-August stretches.

  • RedTigerRedTiger Posts: 5,608


    << <i>

    << <i>

    The gold bull is 10 years old and prices have quadrupled. A lot of new money is coming in. It is important for newcomers to the market to realize that there is risk, no matter what the fundamentals look like. A 10% correction can happen at any time. A 30% to 50% bear market decline over a period of several years is a possibility. I'm not predicting these things, just pointing them out to those that think there is only upside. >>




    I am a newcomer and the 50 year chart shows me that gold lost 200 points at the most over that 50 year time period.
    That is good enough for me. Also, being that the USA and Germany own the most gold, and they are two big players in the
    world economy, couldn't one conclude that these two countries would do all they can to sustain a bullish gold market ? >>



    What kind of data are you looking at? A chart or table that only records the price once a year? Gold was over $800 spot, at the inflation adjusted peak, and fell below $300 some many years later, which is more than "200 points." More importantly, adjusted for inflation, the real decline in purchasing power was more like -85% depending on which inflation figures are used, and the exact prices for gold used. To believe that newcomers to gold buying today at $1180 are some how limited to a "200 point" downside is almost beyond description.

    Also keep in mind that other asset classes did very well during the gold bear market, so the relative underperformance was even worse than the -85% in purchasing power. While many average folks were quadrupling their money or better in real estate and stocks, the gold-only folks were losing. Of course, that all turned around during the most recent ten year period, as gold-only folks quadrupled their money and stock and real estate investors lost money overall. That's why I point out market cycles.

    Will the next ten years be like the last ten, when gold does much better than most everything else, or more like some other time periods when other assets did better? No one knows. Again, I'm not predicting anything, just pointing out some historical market cycles.
  • I was using the 50 year chart on kitco.com, and it looked like on that chart that gold never dropped from 800 to 300.
  • jmski52jmski52 Posts: 22,308 ✭✭✭✭✭
    Kitco chart, 1975 to present.

    Although Red Tiger's point is a good one and is valid, there are lots variables now that will produce scarier charts than any of the variables from 1975 to 1995.

    Yes, gold prices have quadrupled in the past 10 years. Try to keep in mind that it's not really about gold, it's about the dollar and what it can buy, or not buy. Something tells me that this isn't about market cycles or speculation. Just my opinion.
    Q: Are You Printing Money? Bernanke: Not Literally

    I knew it would happen.
  • gsa1fangsa1fan Posts: 5,566 ✭✭✭
    It's about news bits & bites. The cyber world so to speak. Every little tid bit of a happening and there is some reaction.

    I see a bunch of trumped up assets & scared $$. If they start cleaning up wall street the "To Big To Fail" bailout may come crashing down worse than if they would have let them fail in the first place.

    Main street is mad at wall street. How much more distrust before there is a run on 401K's?

    All I know is I can hold gold in my hand and it will be there. That makes me comfortableimage
    Avid collector of GSA's.
  • Hi!

    I'm a PM newbie and have only been collecting coins until now. I'm wondering what your thoughts are when deciding to purchase silver eagles vs. silver bars.
    I inderstand many people purchase eagles in bulk for investments as well as easy re-selling in smaller quantities.

    Theoretically, if I had $10,000-$20,000 paper money to exchange for silver, would I benefit more from acquiring bars or eagles/rounds (if given only 1 choice)? Premiums are typically less for bars than rounds but would rounds/eagles be a better idea should we ever start using PM in lieu of paper?

    Please forgive me if this seems like a ridiculous question. I love collecting coins because of their beauty and history but investing large quantities of money is new for me and quite intimidating.

    Mahalo!
    Melia
  • gsa1fangsa1fan Posts: 5,566 ✭✭✭
    80% gold 20% silver is my advice. AGE's-Buffs gold. ASE silver. JMOimage
    Avid collector of GSA's.
  • gecko109gecko109 Posts: 8,231


    << <i>Hi!

    I'm a PM newbie and have only been collecting coins until now. I'm wondering what your thoughts are when deciding to purchase silver eagles vs. silver bars.
    I inderstand many people purchase eagles in bulk for investments as well as easy re-selling in smaller quantities.

    Theoretically, if I had $10,000-$20,000 paper money to exchange for silver, would I benefit more from acquiring bars or eagles/rounds (if given only 1 choice)? Premiums are typically less for bars than rounds but would rounds/eagles be a better idea should we ever start using PM in lieu of paper?

    Please forgive me if this seems like a ridiculous question. I love collecting coins because of their beauty and history but investing large quantities of money is new for me and quite intimidating.

    Mahalo!
    Melia >>





    With premiums on eagles at around $2 over spot, and 10 oz bars at around $1 over spot, I would just go with a 500 coin "monster box" of eagles in your situation. That represents just an extra $500 premium on a $10,000 purchase, and by the tone of your post, Im sure you would be happier with the coins. If the difference in premiums was any greater, then you'd have to consider the bars, but $500 on 10k is nothing.....you will have long forgot about that extra premium while you enjoy owning those fantastic silver coins for years and maybe decades to come!
  • meluaufeetmeluaufeet Posts: 746 ✭✭✭
    The G-Man makes such a valid point... maybe a monster box in a previous year might even have a smaller premium than 2010... I bet he'd know...

    But you also stated that:

    << <i>should we ever start using PM in lieu of paper >>



    If that is your mind... maybe 'justacommeman' and others might suggest a $250/$500/$1000 face bag of 'junk silver' (90% circulated u.s. coins), which would address your concerns... although you did not state it as an option, it would be a strong choice (I would really think about a mix instead of one).

    Aloha

    image
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