Friday, May 30, 2008

Buy Gold Online

With gold prices skyrocketing, some serious investors are interested in owning large quantities of gold, and understandably don't feel secure hoarding that gold in their homes. Sure, having a few gold coins hidden in your house is pretty standard, but holding several thousand dollars or tens of thousands of dollars worth of gold in your home is not a wise idea. Theft or disaster could rob you of your gold, and the very security your gold is meant to bring you.

Buy gold bullion online coins, the best way to invest in gold
The traditional answer to hoarding is to keep your gold in safe and secured storage. These days there are simple methods that can even be carried out online. Depository receipts for gold are traded on the New York Stock Exchange, using the symbol GLD. Depository receipts are the documents that state your ownership of the gold. So when you buy depository receipts, you are buying the gold but the gold is kept in the same vault as before. You own the gold without possessing it.

Buy coin gold online at wholesale gold prices

Since depository receipts are traded on the NYSE, you can use an online brokerage like E-trade or Ameritrade to purchase gold just like a stock. This allows you to invest in gold and benefit from the longterm security it provides, and allows you to avoid keeping physical gold in your home and risking theft or loss during a disaster.

The downside is that you do not physically possess the gold in your hands, so you can't enjoy it for its aesthetic value, and in case of severe emergency you will not be able to use the gold as a medium of exchange because you won't physically possess it. You would have to sell the depository receipts, then wire the money from your brokerage to your bank account, withdraw the cash, and then spend it. This may not be your best option if your currency is rapidly hyperinflating and your bank doesn't have enough cash to fund all withdrawals.

Perhaps the best way to invest in gold is to possess some small quantity of physical gold in your home, in the form of coins or small bars, and for larger amounts to invest in gold online through depository receipts. The real benefit of this is that you can buy and sell actual gold right from your computer desk without ever having to transport it. And who knows how high gold prices will go, but if they ever reach a point when you are determined to sell immediately, fearing that it's a bubble about to burst, you can sell quickly from the comfort of your own home, just like a stock. That incredible 21st century convenience makes this a nice option to have.

How do I buy scrap gold or silver online with low gold scrap prices per gram?

Another benefit is that you will not have to pay all the transaction fees you have to pay when buying physical bars of gold bullion. Gold bullion coin prices as well as gold bullion bar prices often have a significant markup, but when buying through an online brokerage you simply have to pay your transation fee. For no-frills online brokerages such fees can be as low as $4.95 per transaction with TradeKing. Not only is it convenient to invest in gold online, but in practical terms it also gives you the best gold prices.

Tuesday, May 27, 2008

Collect and Invest in Gold Coins

With the security that precious metals provide from the recent economic and political instability, most investors understand that it is a wise idea to invest in gold or silver. But many can't decide what the best way to invest in gold or silver is. The way you choose depends on your reasons for investing in gold, and how much you are looking to spend.

One of the best way for the average person to invest in gold is with gold coins. Gold coins have several benefits over large gold bars. With the exception of the smaller gold bars (say, an ounce or less), gold bars come in large denominations that are somewhat illiquid. For example, if you have a 10 ounce gold bar and you want to sell a half-ounce of it, you can't slice off a piece of the bar. You have to sell the whole thing. On the other hand, if you have 20 half-ounce coins (or small bars, which are available), you can sell just one coin and keep the rest of your investment intact. This liquidity would also be useful in times of severe crisis. Imagine a time of total war and hyper-inflation. Let's say you wanted to exchange some gold for an escape option, or for some necessities such as food or clothing. Smaller denominations would be more useful for buying such necessities. Otherwise you could easily be exploited by people who demanded the entire gold bar. Like being stuck with taxi driver who pretends he doesn't have change for a twenty, you could get taken.

Gold coins are durable and last hundreds of years. Alloys (gold with another metal added) can last for thousands of years. They don't tarnish and don't scratch easily. They're also easily stored because of their small size. Many investors prefer to store their gold coins in their homes, stashed in some secret place, unlikely to ever be found because of their small size. Large gold bullion bars require professional storage and security services, which costs you money. And obviously the reputability of the storage provider needs to be confirmed.

Coins and small bars are also easy to buy, with reputable vendors existing in basically every major city and also online. So how do you choose which gold coins to invest in? There are two things to keep in mind:

1) Some gold coins are pure (999/1000 is considered pure gold, also known as 24 carat gold), but others are only 917/1000 parts gold (aka 22 carat gold). Both are reasonable investments, and as long as the real weight of gold contained is printed on the coin then two one-ounce gold coins will contain the same amount of gold. But pure gold does have slightly higher prestige and may be more easily sellable because they can be melted down easily. In a time of crisis that ability to be melted down may be worth something to someone. I personally prefer the purest gold I can find because I just find it aesthetically more pleasing, and more impressive to imagine its contents. And if you are going to invest in gold coins you should enjoy it!

Some popular coins of 917/1000 purity are:

The US American Eagle
US American Eagle Gold Coins: popular and safe gold coins to invest in.
The South African Krugerand
Invest in gold or silver with South African Krugerands.
British Sovereigns
Invest in British Sovereign gold coins. Own not only gold but a piece of history.

Some popular coins of 999/1000 purity are:

Canadian Maple Leaf coins
Canadian Maple Leaf gold coins: perhaps the best way to invest in gold. With the official gold prices high and ready to head higher, buy the best of the best.
Australian Kangaroos
Australian Kangaroo gold coins: with official gold spot prices skyrocketing, you'll want to get your hands on these.
The Chinese Panda
How to invest in gold and silver: Chinese Panda coins

(Nice stereotypical names, I know!)

2) Some coins, particularly older coins and rare coins, have "numismatic value", or additional value due to collector's prestige. While these can be just as good investments as any because their prestige is unlikely to decrease, their value doesn't depend only upon the official gold spot prices. If your motivation for buying gold is not as a hobbyist but rather as an investor, it may make more sense to buy a common coin whose value is based strictly on the official gold spot prices (plus a markup/commission, generally ranging from 1% to 5%).

One downside to buying coins or small gold bars rather than large denomination gold bars is that the markup on gold is often higher the smaller the amount you buy. Buying one ounce of gold may cost you 5% more per ounce than buying 5 ounces of gold. With the current gold prices per ounce hovering around $900, that means you could pay $45 extra if you only buy a single one ounce coin. Also remember that, as with large denomination gold bars, there is a bid/ask spread. That means that the price you buy the gold at will be different from the price you can sell the gold back at on any given day. The buy price is typically 3% higher than the sell price. So you can see that buying and selling coins quickly to make quick profits is not a very enticing option. It's a much wiser idea to buy gold with the intention of holding it for security, wealth preservation, longterm investment, and enjoyment. And with such reasonable goals in mind, gold coins are one of the best way to invest in gold.

Monday, May 26, 2008

Why Buy Gold?

Being not only an admirer of gold but also a gold investor, acquaintances often ask me for me advice. They often tell themselves "I want to invest in gold and silver" but have fear because they don't know much about gold as an investment. It's wise to be cautious, and to carefully research the pros and cons of buying gold before rushing out to find some gold coins to invest in. So why buy gold?

silver gold historical prices

First of all, if we look at gold prices history, we can clearly see that gold acts as a wealth preserver. Gold is money. Paper money used to be simply a representation of an amount of gold stored somewhere on your behalf, but in this day and age paper money (or fiat currency) functions separately from gold and it is susceptible to inflation and currency devaluation. Especially if you live here in the United States, the government is constantly spending money it doesn't have, and the banks are lending out money they don't have, devaluating our currency so that our buying power is steadily eroding. If you buy gold, however, you will maintain your buying power longterm because gold's value doesn't deflate. It's price fluctuates with supply and demand, but it's core value remains constant.

Official gold market prices tend to increase along with high inflation, and when the stock market drops. They also tend to increase in times of great instability such as wars, when hyper-inflation is a threat. (This is true of commodities in general, but precious metals can obviously hold their value better than a bundle of wheat or a cow that might up and die on you.)

Precious metals are real assets, unlike stocks and bonds, and they react differently to changing economic conditions. Commodities prices tend to increase with inflation. Stocks and bonds on the other hand, tend to perform better when the rate of inflation is stable or slowing. Since 1990, commodity prices have been negatively correlated with the S&P 500. Since commodities are not positively correlated with stocks and bonds, they diversify your portfolio and help reduce risk and increase returns over time.

Precious metals and other commodities are not only a hedge against inflation, but also a hedge against destabilizing events or catastrophes. Commodity prices rise during times of crisis such as wars and stock market crashes. After the Iraqi invasion of Kuwait, stocks dropped while commodities performed well. And during the stock market crash of 1987, stocks dropped by 30% while commodities held steady. There are people out there who horde gold as a way to preserve wealth in some coming cataclysmic event. I would never want to invest in only gold, but these people are right that in the event of catastrophe commodities like gold will be far more useful than stocks or cash (which will likely become unbelievably devalued if there’s a catastrophe of huge proportions). That’s not to say that precious metals are free of volatility. They are equally or slightly more volatile than the stock market, but they rarely drop at the same time as the stock market. In these volatile times with stocks continuing to drop or stagnate, gold is an essential investment. And longterm, with all the government stupidity promoting the devaluation of the dollar, gold will continue to function as a wealth-preserver for the wise.

And despite gold prices skyrocketing, if we adjust for inflation, the prices now are still nowhere near as high as during their peak in 1980. There's still a lot of room for the price to climb higher.