I'd like to invest in gold, the metal. Not gold mining companies,
but rather gold bullion, the metal.
I don't know much about buying gold bullion myself -- so I am wondering
-- are there mutual funds that very heavily hold gold bullion, so that
their price should track the price of gold fairly closely?
Any ideas anyone?
Thanks,
Fred
wrote:
> I'd like to invest in gold, the metal. Not gold mining companies,
> but rather gold bullion, the metal.
>
> I don't know much about buying gold bullion myself -- so I am wondering
> -- are there mutual funds that very heavily hold gold bullion, so that
> their price should track the price of gold fairly closely?
>
> Any ideas anyone?
>
> Thanks,
>
> Fred
>
The whole point of a mutual fund is to diversify over a range of
different investments to reduce the risk of any individual ones doing
badly or failing. So, managed mutual funds will typically hold shares in
50 to 100 different companies so that the risk and return are close to
those of the market as a whole. Index funds may hold either all the
shares in the S&P500, say, or a representative sample of them and their
risk is less than managed funds.
Sector funds that invest in a special area, like mining, still invest in
a range of companies to reduce the risk but will still have a greater
overall risk than an index fund because they are less diversified.
Investors in a sector fund hope for a greater return to compensate for
the extra risk. They have to get the timing right to achieve this, which
is not easy. Some would say it was impossible to do consistently.
Corporate bond funds invest in bonds from a range of companies to reduce
the risk if one or more companies should default on interest or capital
repayments.
Gold bullion is a commodity and in principle cannot be diversified, so
there cannot be a fund for it. If you buy it you get no dividends and
have to pay fees for storage and insurance. You rely entirely on any
capital appreciation for gains. The EMH says that the price of this
heavily traded commodity includes everything known and estimated about
its possible future value. For you to make money out of it you have to
outguess the world's gold traders. As you seem to be new to investing I
do not give much for your chances of doing this against professional
gold traders who have been doing it for a living for years.
Your best bet is to keep well away from commodities as they are high
risk and a quick way to lose a lot of money unless you know what you are
doing.
wrote:
> I'd like to invest in gold, the metal. Not gold mining companies,
> but rather gold bullion, the metal.
Loose On the Lead wrote:
> wrote:
>
>>I'd like to invest in gold, the metal. Not gold mining companies,
>>but rather gold bullion, the metal.
>
>
>
>
OK. It's an Exchange Traded Fund with each share representing 1/10th Oz
of gold. That is not a mutual fund. There is no diversification. It just
reflects the current price of gold. How do you know which way it will
move and how far?
Gold reached $850/Oz in January 1980 and is now around $450. Over 25
years its value has halved. After inflation it was much worse than that.
Of course, its value has fluctuated as well as fallen overall so if you
could have got the timing right you might have made money by trading it.
If you had bought a dollar's worth of gold in 1801 then its real value
after inflation in 2001 would have been $0.98. That's right, 98 cents!
In real terms you would have lost 2 cents in 200 years. Would it have
been worth the wait?
Invested in shares the $1 in 1801 would have increased in real terms to
$599,605.00 in 2001, a somewhat better return.
David Wilkinson wrote:
> Loose On the Lead wrote:
> >
> >
> OK. It's an Exchange Traded Fund with each share representing 1/10th Oz
> of gold. That is not a mutual fund.
Technically, it's an open-ended mutual fund, but I know what you mean.
> There is no diversification.
You buy this fund if you want a security that tracks the price of gold.
You don't necessarily want diversification within the fund.
> How do you know which way it will
> move and how far?
How do you know which way the stock market will move and how far?
There is no company-specific (bar-specific?) risk in gold bullion, so
I'm not clear on what sort of diversification you're looking for. If
you'd like a general precious-metals bullion fund, okay, but you can
understand why someone might want to stick with gold, since that metal
is the one that's most widely viewed as money.
> If you had bought a dollar's worth of gold in 1801 then its real value
> after inflation in 2001 would have been $0.98. That's right, 98 cents!
If instead you'd skipped the gold and bought one continental (the U.S.
currency at the time), it would now be worth zero. I'll take the 98
cents, thanks.
I don't think people expect gold bullion to be competitive with common
stocks in the long run. They buy it for diversification and for
timing.
Darin
"Loose On the Lead" <> wrote in message
news:
>
> David Wilkinson wrote:
> > Loose On the Lead wrote:
> > >
> > >
> > OK. It's an Exchange Traded Fund with each share representing 1/10th
> > Oz of gold. That is not a mutual fund.
>
> Technically, it's an open-ended mutual fund, but I know what you mean.
Technically, it's not a fund, open-ended or otherwise.
"SEC, IRS, and listing-exchange regulations require that a true
exchange-traded fund, which is a registered investment company [under the
1940 Investment Company Act that defines mutual funds], must hold mainly
securities, not actual commodities or commodity futures. As a result both
gold ETFs are structured as trusts that elect grantor trust tax treatment,
so that they can hold a nonsecurity asset, but must hold the physical
asset - gold bullion - in trust."
PLANSPONSOR Magazine, July 2005, p. 63.
This has tax implications that make this a distinction with a difference.
There's also IAU - the iShares version of a gold bullion fund.
--
Mark Freeland
Mark Freeland wrote:
> Technically, it's not a fund, open-ended or otherwise.
I stand corrected.
Darin
David Wilkinson wrote:
> If you had bought a dollar's worth of gold in 1801 then its real value
> after inflation in 2001 would have been $0.98.
The more I think about it, that's a pretty amazing testament to gold.
You buy it to maintain the real value of a dollar. After over two
centuries, the real value is almost exactly what it was to begin
with...and that's after a severe bear market.
Of course, holding GLD (the ETF) is not exactly the same as holding the
metal. If the U.S. financial system were to break down, your GLD
shares might not be worth what you expected. I'm not particularly
worried about this scenario myself, but it should be mentioned.
Darin
Loose On the Lead wrote:
> David Wilkinson wrote:
>
>>If you had bought a dollar's worth of gold in 1801 then its real value
>>after inflation in 2001 would have been $0.98.
>
>
> The more I think about it, that's a pretty amazing testament to gold.
> You buy it to maintain the real value of a dollar. After over two
> centuries, the real value is almost exactly what it was to begin
> with...and that's after a severe bear market.
>
> Of course, holding GLD (the ETF) is not exactly the same as holding the
> metal. If the U.S. financial system were to break down, your GLD
> shares might not be worth what you expected. I'm not particularly
> worried about this scenario myself, but it should be mentioned.
It's a moot point--because hyperinflation can lead to a breakdown in
civil order.
If the U.S. experiences ruinous hyperinflation comparable to the Chinese
Sung Dynasty or the German Weimar Republic, anyone who walks down a
public street ostentatiously flashing his gold bullion is liable to be
assassinated and the gold stolen.
If America experiences hyperinflation, guns may be as important to own
as gold.
--
Steven D. Litvintchouk
Email:
Remove the NOSPAM before replying to me.
Steven L. wrote:
> If the U.S. experiences ruinous hyperinflation comparable to the Chinese
> Sung Dynasty or the German Weimar Republic, anyone who walks down a
> public street ostentatiously flashing his gold bullion is liable to be
> assassinated and the gold stolen.
So don't walk down the street flashing. :-) Having some wealth would
be nice even if you couldn't use it as readily as you were able to use
money a few years earlier.
> If America experiences hyperinflation, guns may be as important to own
> as gold.
I'd rather have the gold. I can always buy a gun. Guns might be
useful in the situation you describe, but they wouldn't be especially
valuable relative to gold. They wouldn't become some sort of rare
commodity or anything.
Darin
"Loose On the Lead" <> wrote in message
news:
>
> Mark Freeland wrote:
> > Technically, it's not a fund, open-ended or otherwise.
>
> I stand corrected.
>
> Darin
A piece of paper backed by a fixed quantity of gold. Isn't that what money
used to be?
Has the OP considred just buying gold?
-herb
>
Loose On the Lead wrote:
> David Wilkinson wrote:
>
>>If you had bought a dollar's worth of gold in 1801 then its real value
>>after inflation in 2001 would have been $0.98.
>
>
> The more I think about it, that's a pretty amazing testament to gold.
> You buy it to maintain the real value of a dollar. After over two
> centuries, the real value is almost exactly what it was to begin
> with...and that's after a severe bear market.
>
You invest in gold for two centuries and make slightly less than nothing
in real terms and that's a good deal? Admittedly its better than holding
dollars stuffed under the mattress, one of which would only be worth a
real 7 cents at the end of the period.
However, over the same period all in real terms, a dollar in treasury
bills would have increased to $304, in bonds to $952 and in stocks to
$599,605. Hence the title of the book, "Stocks for the Long Run", Fig
1-4 of which gives this info.
What is gold for, again? Compared to an index fund it is a dead loss,
unless you have a working crystal ball or time machine and can predict
its future movements.
> Of course, holding GLD (the ETF) is not exactly the same as holding the
> metal. If the U.S. financial system were to break down, your GLD
> shares might not be worth what you expected. I'm not particularly
> worried about this scenario myself, but it should be mentioned.
>
> Darin
>
Loose On the Lead wrote:
> David Wilkinson wrote:
> > If you had bought a dollar's worth of gold in 1801 then its real value
> > after inflation in 2001 would have been $0.98.
>
> The more I think about it, that's a pretty amazing testament to gold.
> You buy it to maintain the real value of a dollar.
But holding costs could have killed you in that time: probably at least
1% pa?
After over two
> centuries, the real value is almost exactly what it was to begin
> with...and that's after a severe bear market.
It's traditional function has always been as a financial asset. Now
that there are no exchange controls and index linked government bonds,
in theory it should be less attractive, because you can hedge against
the loss of purchasing power in your own currency.
It's other value is as a diversifier since it has AFAIK a relatively
low correlation with stocks, bonds etc. whereas gold mining cos have a
much higher correlation.
My hedge against hyperinflation is the right to live and work in more
than one country, and career skills which are (somewhat) geographically
portable.
>
> Of course, holding GLD (the ETF) is not exactly the same as holding the
> metal. If the U.S. financial system were to break down, your GLD
> shares might not be worth what you expected. I'm not particularly
> worried about this scenario myself, but it should be mentioned.
>
> Darin
David Wilkinson wrote:
> Loose On the Lead wrote:
>
>> David Wilkinson wrote:
>>
>>> If you had bought a dollar's worth of gold in 1801 then its real value
>>> after inflation in 2001 would have been $0.98.
>>
>>
>>
>> The more I think about it, that's a pretty amazing testament to gold.
>> You buy it to maintain the real value of a dollar. After over two
>> centuries, the real value is almost exactly what it was to begin
>> with...and that's after a severe bear market.
>>
> You invest in gold for two centuries and make slightly less than nothing
> in real terms and that's a good deal?
You keep trying to compare gold to investments.
Gold is MONEY. That's what gold has been used for throughout recorded
history. And therefore, it competes not against stocks or bonds but to
other forms of MONEY.
So the only question for the long term is how gold has done against
various paper currencies and silver, all of which are also used as MONEY.
In the short term, you can speculate on the gold price.
In the long term, gold is a hedge against the possible worthlessness of
other forms of MONEY.
--
Steven D. Litvintchouk
Email:
Remove the NOSPAM before replying to me.
David Wilkinson wrote:
> You invest in gold for two centuries and make slightly less than nothing
> in real terms and that's a good deal?
Absolutely. Gold is not supposed to be an appreciating (in real terms)
asset in the long run. It's supposed to be a store of value, and it
obviously has done a good job of what it's supposed to have done.
> Admittedly its better than holding
> dollars stuffed under the mattress, one of which would only be worth a
> real 7 cents at the end of the period.
No, that's not right. There were no dollars in 1801. There were
continentals, which are now worth zero (except as collector's items).
> What is gold for, again? Compared to an index fund it is a dead loss,
> unless you have a working crystal ball or time machine and can predict
> its future movements.
I'm not sure the exact opposite isn't the case. There were no index
funds in 1801, so that wasn't an option. We read about how much stocks
have returned in the last two centuries, but let's make this more like
real science. Those stock returns are mythical--no one on the planet
has achieved them. I wonder if any of the shares that were available
in 1801 are still worth anything. Probably not. Again, gold has done
a great job of maintaining its real value--possibly better than any
security that was available in 1801. That's what it was aupposed to
do, and that's what it's done.
Darin
darkness39 wrote:
> > The more I think about it, that's a pretty amazing testament to gold.
> > You buy it to maintain the real value of a dollar.
>
> But holding costs could have killed you in that time: probably at least
> 1% pa?
That's if you hold it in someone else's vault, which to me would seem
to defeat part of the purpose of holding gold in the first place. If
you're a speculator or an MPTer, you let someone else house your gold.
Otherwise, keep it somewhere else. Bury it in some remote location.
Whatever.
> It's other value is as a diversifier since it has AFAIK a relatively
> low correlation with stocks, bonds etc. whereas gold mining cos have a
> much higher correlation.
In the long run, the fortunes of gold mining companies will track the
performance of gold if that performance is extreme in one direction or
another, and they'll do so in a leveraged fashion. If gold goes
through the roof, gold stocks exit the stratosphere. If gold falls
through the floor, gold stocks will sink to the Earth's core. :-) For
this reason, I think gold stocks are better than gold in the typical
portfolio because you get more bang for you buck if something big
happens. Even if nothing big happens, you still probably come out
ahead because even though the correlation of the metal with stocks and
bonds is lower than that of mining stocks, the return of mining stocks
should be higher than that of the metal. I mean, which would you
prefer, an asset with a zero correlation with the rest of your
portfolio and an annual real return of zero, or an asset with a .4
correlation (R^2 = .2) and a real return of 4% annualized? At the very
least, the former is not a clear-cut winner.
> My hedge against hyperinflation is the right to live and work in more
> than one country, and career skills which are (somewhat) geographically
> portable.
I would probably just starve. :-)
Darin
darkness39 wrote:
> It's traditional function has always been as a financial asset. Now
> that there are no exchange controls and index linked government bonds,
> in theory it should be less attractive, because you can hedge against
> the loss of purchasing power in your own currency.
But hedging with foreign currencies is not a game for the novice, such
as the original poster.
First, you need to find a currency of a foreign nation whose inflation
rate is essentially zero, so the currency remains stable for a long
period. (And what is your measure of inflation--consumer prices,
producer prices, money supply?) Second, you have to keep your eye on
that nation, because governments and their central banks engage in all
kinds of trickery to manipulate exchange rates from time to time.
Third, there is always political risk--new international agreements on
exchange rates, war, etc.
I think that's why citizens of a nation experiencing major inflation or
other types of instability still turn to gold even now. It's just
easier for the non-expert. That's why I did it.
--
Steven D. Litvintchouk
Email:
Remove the NOSPAM before replying to me.
Loose On the Lead wrote:
> In the long run, the fortunes of gold mining companies will track the
> performance of gold if that performance is extreme in one direction or
> another, and they'll do so in a leveraged fashion.
In the long run (30+ years), the performance of gold isn't extreme--in
fact it is theoretically ZERO.
So in the LONG run, the fortunes of gold mining companies are just like
any other companies--dependent on their technology, business plan,
assets, costs, profits, etc.
The smaller ("junior") gold mining companies are notorious for going
bankrupt, after their hoped-for mines turn out to not have as much gold
ore as they thought they would. Just like "dot.com" companies.
--
Steven D. Litvintchouk
Email:
Remove the NOSPAM before replying to me.
"Loose On the Lead" <> wrote
> Absolutely. Gold is not supposed to be an appreciating (in real terms)
> asset in the long run. It's supposed to be a store of value, and it
> obviously has done a good job of what it's supposed to have done.
Depends what you paid for it. At least we agree that it's not an investment.
Steven L. wrote:
> David Wilkinson wrote:
>
>> Loose On the Lead wrote:
>>
>>> David Wilkinson wrote:
>>>
>>>> If you had bought a dollar's worth of gold in 1801 then its real value
>>>> after inflation in 2001 would have been $0.98.
>>>
>>>
>>>
>>>
>>> The more I think about it, that's a pretty amazing testament to gold.
>>> You buy it to maintain the real value of a dollar. After over two
>>> centuries, the real value is almost exactly what it was to begin
>>> with...and that's after a severe bear market.
>>>
>> You invest in gold for two centuries and make slightly less than
>> nothing in real terms and that's a good deal?
>
>
> You keep trying to compare gold to investments.
>
> Gold is MONEY. That's what gold has been used for throughout recorded
> history. And therefore, it competes not against stocks or bonds but to
> other forms of MONEY.
>
Nope. I don't think so. The UK abandoned the gold standard on Sep. 20
1931 and the USA abandoned it eighteen months later on Apr. 19 1933.
Since then neither Pounds nor dollars have been backed by gold. Gold is
not money any more. Money is that papery stuff with £ or $ signs printed
on it next to pictures of famous people, issued by governments.
People who want gold, for whatever reason, will buy gold off you with
money. They will also buy silver, platinum, diamonds, antiques or old
master paintings or even your old car, but none of these is money
either. Gold is a commodity, quite useful for wedding rings etc. but
certainly not money.
> So the only question for the long term is how gold has done against
> various paper currencies and silver, all of which are also used as MONEY.
>
> In the short term, you can speculate on the gold price.
> In the long term, gold is a hedge against the possible worthlessness of
> other forms of MONEY.
>
>
So, in some apocalyptic, "Mad Max" world of the future where
civilization has collapsed and money has no value you think gold will
come into its own again? I don't think it got a mention in the film but
I saw it some time ago. They seemed more interested in petrol than
anything else. I don't foresee any collapse in the the world's major
currencies, but I have been wrong before, occasionally :-)
The only point in the individual holding gold bullion is because he
thinks its price might go up and in this he is competing with the
world's gold dealers most, if not all, of whom are probably better at
trading the stuff than he is. However, as a cautionary tale the UK
Chancellor of the Exchequer, in charge of the nation's finances, decided
to sell off some of the Bank of England's gold reserve a few years ago.
He sold quite a lot at about $350, depressing the market slightly by
doing so, and it has never been as low since then so he made a
considerable loss by selling it. But who's counting! It's only taxpayers
money. If the money men of the Bank of England can't get it right what
chance does the individual investor or trader have.
Ed wrote:
> "Loose On the Lead" <> wrote
>
> > Absolutely. Gold is not supposed to be an appreciating (in real terms)
> > asset in the long run. It's supposed to be a store of value, and it
> > obviously has done a good job of what it's supposed to have done.
>
> Depends what you paid for it.
We're saying we paid $1.00 in 1801 for gold that's now worth $0.98.
> At least we agree that it's not an investment.
Probably...but I'd rather say that gold is not usually a good purchase
for a small investor. The wealthier you are, the more it makes sense,
because you have less of a need for growth and more of a need for
capital preservation.
Thus, I I personally do not own any of the metal. :-)
Darin
"Steven L." <> wrote
> Gold is MONEY.
Gold is a tooth filling, a ring, a necklace. I have never seen anyone use
gold at the grocery store, the bank, department stores, anywhere, ever to
purchase something.
Gold is just a metal. Old baseball cards are money as much as gold is.
Gold hit $850 on Jan 21, 1980. Adjusded for inflation it should be $2,006
now. This would give you a real pre-tax return of 0%.
"Loose On the Lead" <> wrote
> We're saying we paid $1.00 in 1801 for gold that's now worth $0.98.
That's ok, but I'd like to meet this guy. People that are living today
aren't paying $1.
I might even buy some if it were only $1.
David Wilkinson wrote:
> Steven L. wrote:
>
>> David Wilkinson wrote:
>>
>>> Loose On the Lead wrote:
>>>
>>>> David Wilkinson wrote:
>>>>
>>>>> If you had bought a dollar's worth of gold in 1801 then its real value
>>>>> after inflation in 2001 would have been $0.98.
>>>>
>>>>
>>>>
>>>>
>>>>
>>>> The more I think about it, that's a pretty amazing testament to gold.
>>>> You buy it to maintain the real value of a dollar. After over two
>>>> centuries, the real value is almost exactly what it was to begin
>>>> with...and that's after a severe bear market.
>>>>
>>> You invest in gold for two centuries and make slightly less than
>>> nothing in real terms and that's a good deal?
>>
>>
>>
>> You keep trying to compare gold to investments.
>>
>> Gold is MONEY. That's what gold has been used for throughout recorded
>> history. And therefore, it competes not against stocks or bonds but
>> to other forms of MONEY.
>>
> Nope. I don't think so. The UK abandoned the gold standard on Sep. 20
> 1931 and the USA abandoned it eighteen months later on Apr. 19 1933.
> Since then neither Pounds nor dollars have been backed by gold. Gold is
> not money any more. Money is that papery stuff with £ or $ signs printed
> on it next to pictures of famous people, issued by governments.
>
> People who want gold, for whatever reason, will buy gold off you with
> money. They will also buy silver, platinum, diamonds, antiques or old
> master paintings or even your old car, but none of these is money
> either. Gold is a commodity, quite useful for wedding rings etc. but
> certainly not money.
>
>> So the only question for the long term is how gold has done against
>> various paper currencies and silver, all of which are also used as MONEY.
>>
>> In the short term, you can speculate on the gold price.
>> In the long term, gold is a hedge against the possible worthlessness
>> of other forms of MONEY.
>>
>>
> So, in some apocalyptic, "Mad Max" world of the future where
> civilization has collapsed and money has no value you think gold will
> come into its own again? I don't think it got a mention in the film but
> I saw it some time ago. They seemed more interested in petrol than
> anything else. I don't foresee any collapse in the the world's major
> currencies, but I have been wrong before, occasionally :-)
>
> The only point in the individual holding gold bullion is because he
> thinks its price might go up and in this he is competing with the
> world's gold dealers most, if not all, of whom are probably better at
> trading the stuff than he is. However, as a cautionary tale the UK
> Chancellor of the Exchequer, in charge of the nation's finances, decided
> to sell off some of the Bank of England's gold reserve a few years ago.
> He sold quite a lot at about $350, depressing the market slightly by
> doing so, and it has never been as low since then so he made a
> considerable loss by selling it. But who's counting! It's only taxpayers
> money. If the money men of the Bank of England can't get it right what
> chance does the individual investor or trader have.
>
Actually the abandoning of gold as money is a bit more complicated than
that. See pages 183 onwards of Siegel's book for the saga. I think
foreigners could still get gold for their dollars at $35/oz until Nixon
put the boot in on Aug.15 1971 when the link of gold to money was
permanently broken.
"David Wilkinson" <> wrote in message
news:ddfnle$365$
> Steven L. wrote:
> > David Wilkinson wrote:
> >
> >> Loose On the Lead wrote:
> >>
> >>> David Wilkinson wrote:
> >>>
> >>>> If you had bought a dollar's worth of gold in 1801 then its real
value
> >>>> after inflation in 2001 would have been $0.98.
> >>>
> >>>
> >>>
> >>>
> >>> The more I think about it, that's a pretty amazing testament to gold.
> >>> You buy it to maintain the real value of a dollar. After over two
> >>> centuries, the real value is almost exactly what it was to begin
> >>> with...and that's after a severe bear market.
> >>>
> >> You invest in gold for two centuries and make slightly less than
> >> nothing in real terms and that's a good deal?
> >
> >
> > You keep trying to compare gold to investments.
> >
> > Gold is MONEY. That's what gold has been used for throughout recorded
> > history. And therefore, it competes not against stocks or bonds but to
> > other forms of MONEY.
> >
> Nope. I don't think so. The UK abandoned the gold standard on Sep. 20
> 1931 and the USA abandoned it eighteen months later on Apr. 19 1933.
> Since then neither Pounds nor dollars have been backed by gold. Gold is
> not money any more. Money is that papery stuff with £ or $ signs printed
You are confusing money with currency. Most money, today, is simply
magnetic charge on some storage medium. In its strictest sense, money is
that which can be spent today, now. Gold is not money but it is pretty
close in that it can readily be converted into money today.
> on it next to pictures of famous people, issued by governments.
>
> People who want gold, for whatever reason, will buy gold off you with
> money. They will also buy silver, platinum, diamonds, antiques or old
> master paintings or even your old car, but none of these is money
> either. Gold is a commodity, quite useful for wedding rings etc. but
> certainly not money.
>
> > So the only question for the long term is how gold has done against
> > various paper currencies and silver, all of which are also used as
MONEY.
> >
> > In the short term, you can speculate on the gold price.
> > In the long term, gold is a hedge against the possible worthlessness of
> > other forms of MONEY.
> >
> >
> So, in some apocalyptic, "Mad Max" world of the future where
> civilization has collapsed and money has no value you think gold will
> come into its own again? I don't think it got a mention in the film but
> I saw it some time ago. They seemed more interested in petrol than
> anything else. I don't foresee any collapse in the the world's major
> currencies, but I have been wrong before, occasionally :-)
I don't know about Mad Max but what about George Soros? If he attacks your
local currency you would do well to be in gold.
>
> The only point in the individual holding gold bullion is because he
> thinks its price might go up and in this he is competing with the
> world's gold dealers most, if not all, of whom are probably better at
> trading the stuff than he is. However, as a cautionary tale the UK
> Chancellor of the Exchequer, in charge of the nation's finances, decided
> to sell off some of the Bank of England's gold reserve a few years ago.
> He sold quite a lot at about $350, depressing the market slightly by
> doing so, and it has never been as low since then so he made a
> considerable loss by selling it. But who's counting! It's only taxpayers
> money. If the money men of the Bank of England can't get it right what
> chance does the individual investor or trader have.
Under classical economic theory, the value of gold was considered fixed. It
is everything else whose values fluctuate in terms of gold. In a
complicated world, you need a yardstick and how much gold your currency will
buy isn't a bad one.
Gold is not just for speculation but could (dare I say should) be a small
part of any diversified portfolio.
-herb
"Herb" <> wrote
> Gold is not money but it is pretty
> close in that it can readily be converted into money today.
You can do the same with stocks, bonds, baseball cards, stuff at a yard
sale, almost anything.
Steven L. wrote:
> Loose On the Lead wrote:
>
> > In the long run, the fortunes of gold mining companies will track the
> > performance of gold if that performance is extreme in one direction or
> > another, and they'll do so in a leveraged fashion.
>
> In the long run (30+ years), the performance of gold isn't extreme--in
> fact it is theoretically ZERO.
>
> So in the LONG run, the fortunes of gold mining companies are just like
> any other companies--dependent on their technology, business plan,
> assets, costs, profits, etc.
You're right. I should be more consistent about distinguishing between
the long run and the LONG run. :-) In fact, I probably should have
said the medium run.
What I meant was that in the short term, gold can go one way while gold
stocks go another. Over time, though, the stocks will tend to track
the metal, and this becomes more pronounced the more strongly the metal
moves.
Darin
Gold is the ultimate hedge against stock market collapse. Buy, oh I
dunno, 5% of your portfolio in gold (or do Precious Metal stocks), and
then go with ALL stocks with the rest of your money. No need for bonds
(unless you want to try and predict interest rates). Think of it as
portfolio insurance. If stocks somehow collapse, gold will go up. You
own it, others don't, you will be ok, they won't. Anyway, that is ONE
strategy. Owning the bullion and keeping it close to home is even more
intense strategy of the same ilk. Of course, like all insurance, it is
expensive, and if all goes well not needed. But if it allows you to
psychologically go with riskier, higher reward portfolio, it might be
worth it. Gold stocks, BTW, tend to outperform the metal itself as the
companies do make money even if the metal doesn't go up in value much.
Gold is used in jewelry and industrial stuff, even drugs. So it's not
just a super money type asset.
Doug wrote:
> Gold is the ultimate hedge against stock market collapse. Buy, oh I
> dunno, 5% of your portfolio in gold (or do Precious Metal stocks), and
> then go with ALL stocks with the rest of your money. No need for bonds
> (unless you want to try and predict interest rates). Think of it as
> portfolio insurance. If stocks somehow collapse, gold will go up. You
> own it, others don't, you will be ok, they won't. Anyway, that is ONE
> strategy. Owning the bullion and keeping it close to home is even more
> intense strategy of the same ilk. Of course, like all insurance, it is
> expensive, and if all goes well not needed. But if it allows you to
> psychologically go with riskier, higher reward portfolio, it might be
> worth it. Gold stocks, BTW, tend to outperform the metal itself as the
> companies do make money even if the metal doesn't go up in value much.
> Gold is used in jewelry and industrial stuff, even drugs. So it's not
> just a super money type asset.
>
Just as a matter of interest I wondered what a notional $10,000 of gold
bullion would look like. How much would you get?
At the current $440/oz, roughly, $10,000 would buy 22.7 oz or about 1.4
lb. Obviously gold is very dense, 19 gm/cm^3, so this would not be a
very big lump. With 28.6 gm/oz you would get 650 gm with a volume of 34
cm^3. This would be a cube of side 3.2 cm or 1.28 inches.
So, you get a little cube about 1 1/4 inches on the side for your
$10,000. Hmmm...
Of course real gold bullion comes in standard size ingots, as in the
James Bond film "Goldfinger" and they are not going to cut a bit off one
end and send it to you. Like all trading in commodities you would just
be shuffling bits of paper and the real gold would remain sitting in a
safe in a bank somewhere throughout, if it existed at all.
In the hypothetical collapse of the major currencies and of civilisation
as we know it, banks and companies would go bust, your bits of paper
identifying your ownership would be worthless and you would never get to
see your physical lump of gold or even know where it was supposed to
have been kept. It would be no safer than an Enron share has proved to
be in a general financial collapse.
You can buy one ounce gold coins. There is a USA minted one as well as
Krugerands.
Thanks for the tip on GLD, btw., whoever it was.
Well, let me ask, I don't know what kind of 'break down' would lead to
GLD losing it's value terribly against gold. The underlying entity of
which GLD represents a share (I say entity because whatever else I call
it, I will be corrected. :) is committed to delivering real gold for
shares (admittedly only in large baskets of course). But as long as
trading is reasonably possible, I don't think the price should shift
too much from the price of gold.
Any thoughts?
jonny wrote:
> Thanks for the tip on GLD, btw., whoever it was.
>
> Well, let me ask, I don't know what kind of 'break down' would lead to
> GLD losing it's value terribly against gold. The underlying entity of
> which GLD represents a share (I say entity because whatever else I call
> it, I will be corrected. :) is committed to delivering real gold for
> shares (admittedly only in large baskets of course). But as long as
> trading is reasonably possible, I don't think the price should shift
> too much from the price of gold.
>
> Any thoughts?
What exactly do you have against buying and owning actual gold bullion?
All I did was call Fidelity Brokerage (where I have an account) and
instructed them to purchase X dollars worth of gold bullion. This they
did and they store the bullion for a very slight fee. If I ever want to
take possession of the gold, I can do that too.
--
Steven D. Litvintchouk
Email:
Remove the NOSPAM before replying to me.
Steven L. wrote:
> jonny wrote:
>
>> Thanks for the tip on GLD, btw., whoever it was.
>>
>> Well, let me ask, I don't know what kind of 'break down' would lead to
>> GLD losing it's value terribly against gold. The underlying entity of
>> which GLD represents a share (I say entity because whatever else I call
>> it, I will be corrected. :) is committed to delivering real gold for
>> shares (admittedly only in large baskets of course). But as long as
>> trading is reasonably possible, I don't think the price should shift
>> too much from the price of gold.
>>
>> Any thoughts?
>
>
> What exactly do you have against buying and owning actual gold bullion?
>
> All I did was call Fidelity Brokerage (where I have an account) and
> instructed them to purchase X dollars worth of gold bullion. This they
> did and they store the bullion for a very slight fee. If I ever want to
> take possession of the gold, I can do that too.
>
>
>
I am still puzzled by this idea of actually taking possession of the
gold. If it was jewelery type gold then fine, it comes in any amount
however small, but I always visualise gold bullion as gold bars or
ingots with official stamps on them. As a very rough estimate from
seeing the film Goldfinger again recently I would guess an ingot could
be about 6 inches by 2 1/2 by 1 1/4, very roughly. Since I worked out
earlier that a 1 1/4 inch cube would be worth about $10,000 there would
be about 10 cubes of that size in an ingot so it would be worth about $1m.
Now, while I can't be sure that $1m does not represent the presumably
small part of your portfolio invested in gold, it is a significant
amount by most people's standards, so let's assume for the sake of
argument that you have less than this invested in gold bullion. If you
want to take possession of less than an ingot's worth of gold bullion,
what form does it take? Do you get US gold coins or Kruger rands or
something like that or do they chop up an ingot?
I still have the feeling that it is all notional and that a piece of
paper, or even an e-mail, saying you own $X of gold bullion is like a
share certificate. You can't actually physically have the billionth, or
whatever, of GM that a GM share represents but you can trade the share.
"David Wilkinson" <> wrote
> I am still puzzled by this idea of actually taking possession of the gold.
> If it was jewelery type gold then fine, it comes in any amount however
> small, but I always visualise gold bullion as gold bars or ingots with
> official stamps on them. As a very rough estimate from seeing the film
> Goldfinger again recently I would guess an ingot could be about 6 inches
> by 2 1/2 by 1 1/4, very roughly. Since I worked out earlier that a 1 1/4
> inch cube would be worth about $10,000 there would be about 10 cubes of
> that size in an ingot so it would be worth about $1m.
From
'400' oz ('12.5' kg) bar
There are only 55 active manufacturers worldwide whose '400 oz' ('12.5 kg')
bars are accepted internationally as London Good Delivery.
'400 oz' London Good Delivery bars are permitted to weigh between 350 oz and
430 oz. Minimum gold purity: 99.5%. Around 150,000 are made each year.
Central banks normally hold gold in the form of these bars and are believed
to hold 2.5 million of them.
Gold closed ar $447.25 on Friday. That would put these bars at $156,537.50 -
$192,317.50 each. I bet Steven L has a couple of dozen of these. My thought
has always been that while someone is holding his gold, if chaos was the
rule his gold would be gone when he went to pick it up.
"Ed" <> wrote in message
news:
>
> Gold closed ar $447.25 on Friday. That would put these bars at
> $156,537.50 - $192,317.50 each. I bet Steven L has a couple of dozen of
> these. My thought has always been that while someone is holding his gold,
> if chaos was the rule his gold would be gone when he went to pick it up.
>
Would need big balls and a strong back, to lift those 25 lb. bricks TOO!
"Gary C" <> wrote
> "Ed" <> wrote
>> Gold closed ar $447.25 on Friday. That would put these bars at
>> $156,537.50 - $192,317.50 each. I bet Steven L has a couple of dozen of
>> these. My thought has always been that while someone is holding his gold,
>> if chaos was the rule his gold would be gone when he went to pick it up.
>>
>
> Would need big balls and a strong back, to lift those 25 lb. bricks TOO!
Gold is for timers that are students of the metal. I'm no technician but
looking at the 6 month chart my guess is the next move is lower.
This fund has had a nice run since May.
"David Wilkinson" <> wrote in message
news:ddmmlr$q13$
[snip]
> I am still puzzled by this idea of actually taking possession of the
> gold. If it was jewelery type gold then fine, it comes in any amount
> however small, but I always visualise gold bullion as gold bars or
> ingots with official stamps on them. As a very rough estimate from
> seeing the film Goldfinger again recently I would guess an ingot could
> be about 6 inches by 2 1/2 by 1 1/4, very roughly. Since I worked out
> earlier that a 1 1/4 inch cube would be worth about $10,000 there would
> be about 10 cubes of that size in an ingot so it would be worth about $1m.
>
> Now, while I can't be sure that $1m does not represent the presumably
> small part of your portfolio invested in gold, it is a significant
> amount by most people's standards, so let's assume for the sake of
> argument that you have less than this invested in gold bullion. If you
> want to take possession of less than an ingot's worth of gold bullion,
> what form does it take? Do you get US gold coins or Kruger rands or
> something like that or do they chop up an ingot?
[snip]
David:
Gold ingots come in many sizes down to an ounce. In the 80s people were
wearing them around their necks like jewelry.
-herb
Herb wrote:
> "David Wilkinson" <> wrote in message
> news:ddmmlr$q13$
>
> [snip]
>
>
>>I am still puzzled by this idea of actually taking possession of the
>>gold. If it was jewelery type gold then fine, it comes in any amount
>>however small, but I always visualise gold bullion as gold bars or
>>ingots with official stamps on them. As a very rough estimate from
>>seeing the film Goldfinger again recently I would guess an ingot could
>>be about 6 inches by 2 1/2 by 1 1/4, very roughly. Since I worked out
>>earlier that a 1 1/4 inch cube would be worth about $10,000 there would
>>be about 10 cubes of that size in an ingot so it would be worth about $1m.
>>
>>Now, while I can't be sure that $1m does not represent the presumably
>>small part of your portfolio invested in gold, it is a significant
>>amount by most people's standards, so let's assume for the sake of
>>argument that you have less than this invested in gold bullion. If you
>>want to take possession of less than an ingot's worth of gold bullion,
>>what form does it take? Do you get US gold coins or Kruger rands or
>>something like that or do they chop up an ingot?
>
>
> [snip]
>
> David:
>
> Gold ingots come in many sizes down to an ounce. In the 80s people were
> wearing them around their necks like jewelry.
>
> -herb
>
>
Herb
Yes, I looked it up on Google. There seem to be dealers selling and
buying what they call gold bullion ingots of any size from 1 gram (about
1/30 Oz) upwards to a kilo (2.24 lb). And they sell gold coins called a
variety of names including, I think, American Double Eagle or Eagle,
Krugerrands, Australian Kangaroos and even Isle of Man cats. It's a
whole new world I did not know existed!
What I did not pick up was the spread between buying and selling prices.
In the jewelery trade there are big mark-ups when they sell you
something and much lower offers when, and if, they buy it back. Does
calling it bullion reduce the costs of buying and selling gold to
something like a percent or so as with shares and mutual funds?
David
"David Wilkinson" <> wrote
> What I did not pick up was the spread between buying and selling prices.
It depends on the dealer.
Here's one that lists their buy sell prices.
Try the ETF: GLD.
In article <>,
wrote:
> I'd like to invest in gold, the metal. Not gold mining companies,
> but rather gold bullion, the metal.
>
> I don't know much about buying gold bullion myself -- so I am wondering
> -- are there mutual funds that very heavily hold gold bullion, so that
> their price should track the price of gold fairly closely?
>
> Any ideas anyone?
>
> Thanks,
>
> Fred
>