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I know nothing about buying gold or in any way holding it in a portfolio. TV is full of ads to buy gold coins. If you buy them, how do you sell them and to who?
Anyone have any words of wisdom about buying gold in any form?
Is gold a viable investment for most people?
Posted this a few days after Adam Grossman’s article and I don’t think many saw it. Anyway, I think it applies to the question of whether gold is a viable investment. It has been for me over the past 20 years.
Reading a lot of knee-jerk reactions and not much thought in the responses to Adam’s article. It’s clear by their thumbs up/down reactions that a majority of HD readers won’t consider gold.
It seems there are generally two trains of thought when it comes to gold. First, those who believe in the USD (or other fiat currencies) and that generating income on that is the source of wealth and income. Second, those who don’t trust fiat currencies and wish to hold other stores of value such as gold. Over history, the value of fiat currencies trends toward zero in all cases. So that implies an investor must keep the currency working to offset inflation (or currency valuation loss).
There’s no doubt that most times stocks do a good job of that. But there are times such as the Great Depression and 1970s when they don’t do well, and real assets have their day. That said, I have come to the conclusion (beginning in 2006) that an allocation to gold (and other real assets) is preferable. I’m a hedger by nature and I can see the scenarios (such as this year) when gold has its day while equities may struggle. Building that allocation when gold is relatively high is difficult and probably not advisable. But when gold is relatively low is when many dis it and wouldn’t consider buying.
Here is one statistical analysis of how much gold is appropriate in an allocation: https://www.incrementum.li/en/journal/the-optimal-gold-allocation-how-much-gold-does-your-portfolio-need/
I’m sure that’s too much for this readership but something folks might consider.
Even if gold itself went up in value, which is not assured, the real killer for these coins is transaction costs, especially on the sell side. When you have them and want to sell them, you will have poor bargaining position, and a buyer will offer a price that will likely skim off most of any gains you have, if not a lot more. Gold funds might afford you a better deal if you don’t compete with thousands of other fund owners and try to sell in a big downturn. And funds obviate the need for storage, security and insurance. But you should not expect coin will ever beat all other available long term investments.
A friend of mine—who knows nothing about investing—told me they just bought a bunch of gold coins. With more people asking about gold lately, and gold ads flooding the airwaves, it got me thinking: maybe it’s time to sell anything gold-related. 😄 Or maybe not…
Having inherited and sold gold coins and bought Sprott Physical Gold (PHYS) for my mother-in-law, I would recommend the latter for investing.
If it is for the zombie apocalypse, then I think guns, booz, and chickens are better investments. Can pass it on to heirs w/o the gov knowing about (big whoop). Have to store it, a real pain to worry about (and if you kick off, someone needs to know how/where to find it. Like crypto and individual stocks, something to play with on the side.
Talked to a prepper once who advised me that the things to hoard would be coffee, cigarettes, alcohol and sugar, because addictions don’t disappear. He also told me that although I don’t have a gun and don’t plan to buy one, to store .22 caliber bullets (hope I have that right) to use for trading.
Frank Vasquez and his Risk Parity Radio are a good source of information on gold ETFs.
Gold, do not buy actual coins, unless they are like for numismatics purposes, but not for investment. Sure in the last two years Gold has skyrocketed, gold stocks, gold mining, etc, but so has Crypto. Most people lost money on these investments. Over the long run, just park your money in the S&P, and watch them grow.
It’s pretty, and in small quantities, physical gold is a security blanket against ‘zombie apocalypse” type situations. I’ve never considered selling any that I’ve bought, instead looking on the coins as welcome bonuses for the survivors when I check out.
One question I have not investigated is whether bullion coins or common-date US Saints and Liberties are a better value over time.
The current moment is a good example: In the past 2-3 years, have the common date numismatics risen in proportion to the bullion? I suspect the answer is “no,” but I’m not investigating because I don’t plan on doing anything about it either way.
You should buy gold coins or bullion to preserve your wealth. Having some American Eagles put away (which you’ll never sell unless a personal or national catastrophe occurs) will give you peace of mind and help you sleep at night. If you want to invest in gold, buy gold stocks, such as NEM.
For some reason the commercials for gold and silver seem like the ads for life insurance. I stay away from them and stick with stocks, bonds and cash. That has worked out extremely well over the long term.
I can recall the Radio show from the 80s-90s, Bob Brinker’s “Money Talk” – he would recommend gold mining stocks, if you were inclined to go that direction. Produces a dividend (typically) and is easy to buy and sell. I wound up buying a copper mining stock in the early 2000s that has done quite well and produced a lot of dividends over the years.
I recommend APMEX; I have bought and sold gold bullion coins through them many times over the years and have never had a problem. You do need to send the coins through the mail, but the procedures are simple and safe (they keep video records of packing and unpacking in case of a dispute). Their mark-ups (fees) are reasonable. I recommend sticking with bullion coins such as American Eagles and generally avoiding numismatic collectible coins, which can have mark-ups as high as 35%. That said, personally I love giving Australian Lunar bullion gold coins to commemorate special occasions such as graduations………Gold coins are considered collectibles so any longterm gains are taxed at 28%, though dealers are not required to issue a Form 1099 for some categories of bullion…….I think Costco also sells gold at a reasonable mark-up.
Thank you Sabine. Very interesting.
Is gold a good investment? When we went off the gold standard, gold was redeemable for $35 per ounce. On the 1 June, gold was trading for $3,290 an ounce. Annualized, that’s a return of 8.8%. Not bad. What’s more interesting is the breakdown in the correlation between gold and the inverse of real interest rates (10 yr rate – inflation rate). In 2022, that relationship broke down and it seems people and countries around the world, and central banks, want to hold gold regardless of real interest rates. I believe it’s a reflection of the fact that we must continue to debase our currency to pay our debts and gold provides a means of retaining value. Gold is a neutral reserve, bearer asset that cannot be debased. Personally, I own some gold and silver coins, mostly for the sheer beauty of them, and also because I went crazy buying them. I plan on passing them down to my kids, who currently could not care less about them. When they inherit them I’ll bet they’ll say, “Holy Moly, these are worth a lot of money!!”
I’ve sold gold coins and a gold tooth (from my late grandfather) by going to a store that buys gold. They weigh it and give you cash for a little less than the current market price. I have never bought gold except as jewelry, and then only small pieces that probably have minimal or no resale value.
Somebody posted on Humbledollar about buying mining stocks. For pure gold plays, ETFs such as IAU and IAUM are probably as safe and effective as anything out there.
“Krugerrands for Christmas”.
Back in 2000 or so, while dining with G’s parents with her family for some reason the subject of our investments came up. At the time one of G’s siblings was attempting to make a living as a “day trader”. He was always interested in assisting us to to make more money through investments. We never used his services.
G was skeptical and at times cynical about the merits of owning stocks, and when someone asked what she would really like for Christmas I quipped that she would love to own “Krugerrands”. I really struck a nerve and she laughed and became very excited by the prospect.
I never bought her physical gold, other than some modest jewelry but in 2010 I did buy some GLD (SPDR Gold Shares). After 10 years it had appreciated 44%. In July 2020 I replaced it with a precious metals mutual fund because it held miners, paid dividends and had a growth tilt. Since 2023 there has been renewed interest in GLD and that is reflected in the recent share price. GLD share prices spike in 2010, fell back, spiked again in 2020. They fell back in 2022, but have had an upward trajectory since September 2023. So, I view it as somewhat volatile and unpredictable.
I have on occasion made it a point to purchase some special jewelry for G. These mark an occasion and/or a special trip. There are wonderful memories for us every time she wears the jewelry and those are far more precious than the gold.
Hint: There is some wonderful jewelry at the Tucson Gem Shows, and on the last day some vendors drop their prices by 50%.
Warning: Recency bias is showing!
For those who spent Friday evenings in the 1990s watching, “Wall $treet Week” with Louis Rukeyser, you may remember what he had to say about gold, week-after-week, the same thing – gold just didn’t produce.
While Humble Dollar articles have covered gold a number of times including Adam’s recent article, HD is probably not the best source to answer this query.
First, it depends upon your intent for and management of the gold.
If strictly as a financial investment, buy the gold ETF’s GLD or IAU, but own them within tax deferred accounts for the best tax treatment. I’ve owned GLD for about a decade and recently sold a bit for the first time.
If just for family fun, buy some gold jewelry by weight (easier on your overseas trips) and give it to your favorite family members to treasure for life. Many Asian and Arabic families store some of their wealth this way.
If you just want to own, possess and hold a bit of real gold for fun; you can buy this from your local gold shop or mail order from shops on line. The buy\sell premiums will be extremely high and vary widely, so you have to shop. US walking liberty 1 oz gold coins are beautiful and you can buy a coin of the birth year for each of your grandchildren (the US restarted minting gold coins in 1986). You can also buy fractional ounce coins if you don’t have $3500 each.
Alternatively, you can also buy beautiful US historical 20 dollar gold eagle coins (1840’s to 1930’s) which contain 0.97 ounces of gold and trade with essentially a minimal numismatic premium of maybe $100 for common date mintages. Certified coins (come in a case and rated by one of the agencies) cost almost no premium and makes them easier to buy and sell.
For physical gold (jewelry, coins or bullion), I’d recommend a holding period of forever as the selling fees and collectible taxes are too high to trade.
If you want to hold significant gold coins or bullion for the zombie apocalypse, this presents a huge matter of risk, storage, insurance, what to buy, how to hold and manage, etc. I’m in Jonathan’s camp that this approach is worthless as we need water, food, seeds, ammo and toilet paper in the event of a true apocalypse. Anyone can query prepper websites, but owning GLD is much easier.
Gold is a known zombie repellent 😂
You could consider buying Newmont Corp., (NEM) a gold mining company.—it pays a dividend and tends to move in step with the price of gold. I’m not sure it’s exactly apples to apples, but the correlation seems pretty close.
NEM — for those who don’t know all ticker symbols by heart, which includes me — is Newmont Corp., a gold mining company. A request: Never refer to a stock or fund just by its ticker symbol and, indeed, please steer clear of initialisms.
https://humbledollar.com/2023/09/going-for-the-gold/
I don’t. I hated dealing with the distributions from the ETFs come tax time when I did have some, and I don’t know what I’d do with actual bullion, so I just don’t get involved. Now if I were looking to buy gold for a return, I would be buying when everyone is happy and the economic outlook never looked better, but isn’t that what everyone says?
I don’t generally experience a lot of advertisements during a normal day, but I have noticed an abundance of gold bullion ads in the few places I do see them, namely ad reads on YouTube.
There are numerous ads for buying silver on the TVs at my club when I’m working out in the late mornings. I think they’re trying to bait old retired folk like me. I don’t bite.
David, years ago while channel surfing on my car radio during a road trip, I came across a left wing talk radio show. When it came time for commercials, there were ads for buying gold, and also for lawyers promising to end your tax problems with the IRS. Later on in my trip I came across a right wing radio show, and guess what, same advertisers. It seemed to me like their target market was gullible consumers. I don’t bite either.
I believe Jonathan would agree with this statement. You make a good point, but please avoid writing inflammatory terms like “left or right wing”. Simply writing, “talk shows” or “political talk shows on both sides of the aisle” would still suffice in getting your point across.
In general, we try to avoid the toxic political rhetoric that has permeated the Internet. But in the case of the post regarding radio talk shows, I think this is fair and balanced (which is the point of the post) and calling them what they are is important to make the point.
I just figure that any investment requiring that much advertising is a really good idea for the promoter and a really bad idea for everybody else.
😊 I agree with you.
Agreed. Anything I see advertised on YouTube, for example, goes immediately on my never purchase list.