Gold bars buying advise

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
sam123
Posts: 10
Joined: Sun Apr 26, 2015 7:59 pm

Gold bars buying advise

Post by sam123 »

This may be a off-topic but I just wanted to get some advise regarding gold buying as it falls under the umbrella of personal finance. I have heard from many people that one should invest 5-20% of their assets in precious metals for diversification and hence, I wanted to invest small quantity (<5%) in gold bars but was wondering where should I buy these bars as I have heard many horror stories regarding counterfeit bars. Can someone please suggest some reputable online places where one can buy gold bars without getting ripped off?

Thanks.
benne77
Posts: 48
Joined: Sun Apr 26, 2015 12:55 pm

Re: Gold bars buying advise

Post by benne77 »

I would recommend JMbullion or APMEX. They are both extremely reputable companies. Sometimes there are deals on Ebay from APMEX for gold and silver. Ebay is a good place to buy some, but I would recommend only buying from well known companies on there.

Hope that helps,
Matt
Sconie
Posts: 971
Joined: Sun Feb 07, 2010 9:23 am
Location: Arizona

Re: Gold bars buying advise

Post by Sconie »

Gold coins----while they have a slightly higher mark-up-----are typically much easier to both buy and, if need be, sell. Otherwise, about the only people advising to put 5-20% of your assets in gold are, in fact, those who stand to benefit from you making the purchase/sale. My advice to you relative to buying gold bars can be summed-up in one word: "Don't."
Last edited by Sconie on Sat May 09, 2015 3:23 pm, edited 1 time in total.
I know you think you understand what you thought I said but I'm not sure you realize that what you heard is not what I meant. - Alan Greenspan
User avatar
TomatoTomahto
Posts: 17158
Joined: Mon Apr 11, 2011 1:48 pm

Re: Gold bars buying advise

Post by TomatoTomahto »

Sconie wrote:Gold coins----while they have a slightly higher mark-up-----are typically much easier to both buy and, if need be, sell. Otherwise, about the only people advising to put 5-20% of your assets in gold are, in fact, those who stand to benefit from you making the sale. My advice to you relative to buying gold bars can be summed-up in one word: "Don't."
+1

I'm somewhat invested in nickel, at least until I take my spare change to the bank and run it through their machine. My investment in gold will stay on my ring finger.
I get the FI part but not the RE part of FIRE.
itstoomuch
Posts: 5343
Joined: Mon Dec 15, 2014 11:17 am
Location: midValley OR

Re: Gold bars buying advise

Post by itstoomuch »

We sold MIL/FIL's bars to help pay for their care. On recommendation from a our longtime retail jeweler (50 years +), we sold to the local precious metal refiner who custom blends gold for jewelers. I don't remember the markup/discount which was less of a concern as getting enough funds to provide for my inlaws care-which is to say, keeping our household solvent. Don't really know if the refiner sells bars.
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo
User avatar
BolderBoy
Posts: 6753
Joined: Wed Apr 07, 2010 12:16 pm
Location: Colorado

Re: Gold bars buying advise

Post by BolderBoy »

sam123 wrote:I have heard from many people that one should invest 5-20% of their assets in precious metals for diversification
Allow me to be among the MUCH larger cohort of "many people" who advise you to NOT do this.
normaldude
Posts: 803
Joined: Tue Jan 27, 2009 3:41 am

Re: Gold bars buying advise

Post by normaldude »

1) I would avoid gold bars, since they're more difficult to test. If you stick to 24k / 99.9% pure gold bullion coins (like the 1 oz Canadian Gold Maple or 1 oz Australian Gold Kangaroo Nugget), then you can quickly weigh & measure them with a simple device from goldcoinbalance.com or thefisch.com . I would avoid the 22k gold bullion coins (American Gold Eagle, South African Gold Krugerrand), since they're not pure gold, and the latest fakes beat the size & weight tests.

https://www.youtube.com/watch?v=2P1h6uXDACY

2) Compared to index funds, investing in physical gold adds some additional risks, like fraud, theft, violence. You should spend plenty of time researching and taking notes, before getting involved with physical gold. You should understand the pros & cons of different types of gold bullion coins, pros & cons of different storage options, different gold dealers and their retail price spreads, transportation, containers, the latest fake coins, how to detect the latest fakes, taxes, reporting issues, various gold scams & frauds & crimes, etc. You'll also want to educate yourself on the history of gold, and uses of gold. Many anti-gold bogleheads will bash gold as some worthless useless metal, so you better be prepared to refute their arguments. Make sure you understand what you're getting into, and why.

3) Try to only deal with the most reputable firms. But even then, don't assume they are infallible. Even among the bigger gold dealers, most will not have the track record & size of a Vanguard. For many years, tons of people were recommending "Tulving" as a reputable national dealer. On March 1st, 2014, one boglehead recommended "Tulving" and "Gainesville Coins". I had to point out that "Tulving" imploded under a wave of fraud, and that the Yaffe family behind "Gainesville Coins" has a very shady past related to gold company fraud.

viewtopic.php?f=11&t=134105#p1977960

viewtopic.php?f=11&t=134105#p1991475

Choosing a "reputable" dealer is one layer of protection. Weighing / measuring each gold bullion coin is a second layer of protection.

I posted more info here: viewtopic.php?p=2398418#p2398418
amitb00
Posts: 530
Joined: Sun Jan 01, 2012 8:04 am

Re: Gold bars buying advise

Post by amitb00 »

Another way to own metals is via ETFs like GLD, IAU,SLV etc
User avatar
Steelersfan
Posts: 4129
Joined: Thu Jun 19, 2008 8:47 pm

Re: Gold bars buying advise

Post by Steelersfan »

Oh my goodness.

"many people" have also been predicting hyperinflation for many years, only to be proven wrong. There's material overlap between the two.

Buy some gold if it makes you feel good, but don't expect it to be a good investment.
rakaye47
Posts: 77
Joined: Fri Nov 21, 2014 6:35 am

Re: Gold bars buying advise

Post by rakaye47 »

BolderBoy wrote:
sam123 wrote:I have heard from many people that one should invest 5-20% of their assets in precious metals for diversification
Allow me to be among the MUCH larger cohort of "many people" who advise you to NOT do this.
If you had 20% metal in 2011, you would be crying right now.
dbltrbl
Posts: 900
Joined: Thu Mar 01, 2007 10:52 am

Re: Gold bars buying advise

Post by dbltrbl »

Buy it at Colorado Gold. Reputable company and coins or bars any size.
greenfire
Posts: 108
Joined: Tue Aug 26, 2014 10:05 am

Re: Gold bars buying advise

Post by greenfire »

I agree that 20% is excessive, but I can see the point in having a small amount of precious metals for a variety of reasons. Coins are beautiful to look at and hold. If you have them, you aren't likely to spend them - you are likely to hold them for a long time. They generally keep pace with inflation. They are tangible - real. The world is an uncertain place and anything could happen to anyone at any time. Historically, those with gold fared better in times of crisis (although my ex-husband told the story of his great grandfather who was the mayor of a small town in Poland - who said when people were using wheelbarrows of currency to buy bread that you can't eat gold.) Precious metals are a store of wealth, not an investment. Stock markets can crash, banks can have holidays, and confiscate accounts (precious metals too can be confiscated.) I think that precious metals can be a good diversifier of a portfolio, but I personally have only about 2.5% and am comfortable with that. Silver is another story - It is historically priced low compared to gold, and there is less above ground silver now than there was 50 years ago - and it is being used up in industrial uses and isn't being mined sufficiently to keep up with demand. Silver is more speculative, but an interesting story to follow. Investment Rarities is a good company to do business with.
normaldude
Posts: 803
Joined: Tue Jan 27, 2009 3:41 am

Re: Gold bars buying advise

Post by normaldude »

dbltrbl wrote:Buy it at Colorado Gold. Reputable company and coins or bars any size.
Very unusual firm. I clicked on their "About" and "Contact" pages, and there currently is no phone number, mailing address, or email address listed. It's apparently three people working from their respective homes, and when they're available to talk, their phone numbers will appear on the website (and they "do not appreciate calls after or before hours").

As I mentioned above, many of these gold dealers are small businesses, and very different than mega-firms like Vanguard.
Topic Author
sam123
Posts: 10
Joined: Sun Apr 26, 2015 7:59 pm

Re: Gold bars buying advise

Post by sam123 »

Thanks all for your reply. I agree that gold may not be the best investment in the long run. However, I will still plan to buy ~1% of my portfolio in gold (for the sake of any unusual events). I also agree that the chances of getting duped in gold buying is another area of concern other than the performance of it in the long run. Can you please advise if anyone of you had any experience dealing with APMEX? It appears that they are one of the largest online retailer.

Thanks again for your useful advise.

Sam
User avatar
happyisland
Posts: 915
Joined: Thu Oct 03, 2013 1:36 pm
Location: nos baranca tan stima

Re: Gold bars buying advise

Post by happyisland »

sam123 wrote:Thanks all for your reply. I agree that gold may not be the best investment in the long run. However, I will still plan to buy ~1% of my portfolio in gold (for the sake of any unusual events). I also agree that the chances of getting duped in gold buying is another area of concern other than the performance of it in the long run. Can you please advise if anyone of you had any experience dealing with APMEX? It appears that they are one of the largest online retailer.

Thanks again for your useful advise.

Sam
Hi Sam,
what kinds of 'unusual events' do you have in mind where owning physical gold would be useful? I ask because I am having a hard time imagining a scenario where a 1% gold allocation would help.
Cheers!
benne77
Posts: 48
Joined: Sun Apr 26, 2015 12:55 pm

Re: Gold bars buying advise

Post by benne77 »

sam123 wrote:Thanks all for your reply. I agree that gold may not be the best investment in the long run. However, I will still plan to buy ~1% of my portfolio in gold (for the sake of any unusual events). I also agree that the chances of getting duped in gold buying is another area of concern other than the performance of it in the long run. Can you please advise if anyone of you had any experience dealing with APMEX? It appears that they are one of the largest online retailer.

Thanks again for your useful advise.

Sam
I bought from APMEX in January. No problems. They are a good company to do business with. Not sure if you already know this but don't pay with a credit card. Either do a bank transfer or mail them a check (I mailed a check) to avoid the CC costs.
normaldude
Posts: 803
Joined: Tue Jan 27, 2009 3:41 am

Re: Gold bars buying advise

Post by normaldude »

happyisland wrote:Hi Sam,
what kinds of 'unusual events' do you have in mind where owning physical gold would be useful? I ask because I am having a hard time imagining a scenario where a 1% gold allocation would help.
Cheers!
Considering that gold is one of the few negative beta asset classes out there, I don't think it takes much imagination to see how gold can have portfolio diversification benefits.

And I would love to provide examples & scenarios of how an allocation to physical gold would be useful, but I would end up getting flagged & censored by boglehead moderators like admin LadyGeek.

http://www.bogleheads.org/forum/viewtop ... 2#p2397082

http://www.bogleheads.org/forum/viewtop ... 2#p2397122

http://www.bogleheads.org/forum/viewtop ... 3#p2398873

The frustrating thing about gold threads on bogleheads.org is that anti-gold posters always say gold is useless, and when I try to provide a counter-argument, I get flagged & censored by boglehead moderators, and then the anti-gold posters claim victory since there was no rebuttal.
User avatar
watchnerd
Posts: 13614
Joined: Sat Mar 03, 2007 10:18 am
Location: Gig Harbor, WA, USA

Re: Gold bars buying advise

Post by watchnerd »

BolderBoy wrote:
sam123 wrote:I have heard from many people that one should invest 5-20% of their assets in precious metals for diversification
Allow me to be among the MUCH larger cohort of "many people" who advise you to NOT do this.
Ditto. 20% in gold, which doesn't pay interest, is just nutty.
Global stocks, IG/HY bonds, gold & digital assets at market weights 75% / 19% / 6% || LMP: TIPS ladder
mortal
Posts: 497
Joined: Mon Sep 15, 2008 11:15 pm

Re: Gold bars buying advise

Post by mortal »

happyisland wrote:
sam123 wrote:Thanks all for your reply. I agree that gold may not be the best investment in the long run. However, I will still plan to buy ~1% of my portfolio in gold (for the sake of any unusual events). I also agree that the chances of getting duped in gold buying is another area of concern other than the performance of it in the long run. Can you please advise if anyone of you had any experience dealing with APMEX? It appears that they are one of the largest online retailer.

Thanks again for your useful advise.

Sam
Hi Sam,
what kinds of 'unusual events' do you have in mind where owning physical gold would be useful? I ask because I am having a hard time imagining a scenario where a 1% gold allocation would help.
Cheers!
In my mind, gold is not an investment. It's not even that good a hedge against inflation. The *only* value that I think gold would have is in escaping a 'failed state', or one that is going 'crazy'. This assumes we haven't gone 'Mad Max' and there is still some place to escape to. Examples?

The Western Roman Empire
The Eastern / Byzantine Empire
Pretty much any civil war.
France during the Napoleonic era
Russia / China / South Vietnam / Eastern Europe during their fall to communism
Europe during WWI
" WWII
Any ascent to power of an autocratic government

I've read enough history to realize that loving one's geographic spot on the map can get you killed.

Gold isn't the best investment one could make for such a calamity. Your education is. I seriously doubt a skilled mason had issue moving where ever the heck he pleased in pre-modern history. These days i'd bet on a medical / stem degree. As others have said, it is the one thing they cannot take from you, even in the most dire of circumstances.

Having said all that, if you still insist on buying gold, forget gold bars or gold coins. When TSHTF, nobody you'll want to give it to will have a means of confirming it's purity. Pretty much everything will be valued at the price of 'junk gold'.
normaldude
Posts: 803
Joined: Tue Jan 27, 2009 3:41 am

Re: Gold bars buying advise

Post by normaldude »

mortal wrote:Having said all that, if you still insist on buying gold, forget gold bars or gold coins. When TSHTF, nobody you'll want to give it to will have a means of confirming it's purity.
Because gold is incredibly dense, there has never been a confirmed case of a fake 24k / 99.9% gold bullion coin beating the size & weight tests. The only fake gold bullion coins that beat the size & weight tests are the 22k ones (American Gold Eagle, South African Gold Krugerrand), which is why I would avoid those coins.

And you do not need electricity to measure a gold bullion coin for size & weight. These types of devices have been used for hundreds of years, all over the world.

Image

Image

Image

Image

Either way, if a jewish person escaped 1930s Nazi Germany with some gold coins, I'm fairly certain that people in New York City would have been able to measure & confirm the gold value of the coins.
BeneIRA
Posts: 879
Joined: Sat Nov 29, 2014 7:43 pm

Re: Gold bars buying advise

Post by BeneIRA »

Hey Sam, Apmex is great. I have bought from them many times and I've always been happy. One time they sent me a coin that was in bad condition and they priority shipped me a replacement and let me keep the damaged one. I, too, would recommend against gold bars. American Eagles are far better if you're investing in them. If you're thinking you need to be careful buying a gold bar from some place, imagine how someone is going to feel buying that from you. I would recommend American Eagles since those are much more known and there is intrinsic trust there. Additionally, I would say buy the smallest quantities possible. For instance, if you are buying gold, I would buy 1/10 ounce coins as opposed to the bigger 1 ounce coins since the latter are much harder to unload. Sure, you are paying a premium for the 1/10 ounce, but it's worth it.

I'm a collector, so I have a bit of experience in this field. As far as investing in this category goes, I don't think 1% is going to break you since the value of precious metals is never going to be zero, and if you really want to buy some, who are we to judge? It's your money at the end of the day.
mortal
Posts: 497
Joined: Mon Sep 15, 2008 11:15 pm

Re: Gold bars buying advise

Post by mortal »

Either way, if a jewish person escaped 1930s Nazi Germany with some gold coins, I'm fairly certain that people in New York City would have been able to measure & confirm the gold value of the coins.
Sure! But by that time, they're in a safe country, and they're alive. It's not the coin dealer I'd worry about, it'd be the SS guard demanding papers at the border.
User avatar
EyeYield
Posts: 658
Joined: Tue Sep 18, 2012 6:43 pm
Location: Extremistan

Re: Gold bars buying advise

Post by EyeYield »

Gold sure does look appetizing - it's purdy, but it's not very nutritious.
Image
The other side of the gold coin is that a Texas Senator has offered a bill that would allow Texans to pay with gold and silver pieces as legal tender.
When the checker at Trader Joe's quotes my bill in grams of precious metals, I suppose I'll have to whittle off a few scrapes with me Bowie knife onto the scale.
Full disclosure: I bought silver bullion in the early 90's that's just sits there, doing nothing.
I'm glad to get the info on where to buy though.Thanks.
A few gold coins look attractive to me, so I may buy some soon, but just because I'm easily attracted to shiny things.
"The stock market is a giant distraction from the business of investing." - Jack Bogle
normaldude
Posts: 803
Joined: Tue Jan 27, 2009 3:41 am

Re: Gold bars buying advise

Post by normaldude »

mortal wrote:
Either way, if a jewish person escaped 1930s Nazi Germany with some gold coins, I'm fairly certain that people in New York City would have been able to measure & confirm the gold value of the coins.
Sure! But by that time, they're in a safe country, and they're alive. It's not the coin dealer I'd worry about, it'd be the SS guard demanding papers at the border.
For global account diversification purposes, you can always store some physical gold overseas. If you have your assets stored on multiple continents, then it's far less likely that one huge disaster will wipe you out (WWII, civil war, US power grid goes down, etc).

http://dassafe.com/price_list.html

http://www.goldmoney.com/buy/fees

viewtopic.php?p=2397424#p2397424
goaties
Posts: 542
Joined: Fri Jan 29, 2010 3:15 pm

Re: Gold bars buying advise

Post by goaties »

delete
Last edited by goaties on Sat Nov 19, 2022 10:47 pm, edited 1 time in total.
RVD
Posts: 112
Joined: Mon Oct 20, 2014 6:11 pm

Re: Gold bars buying advise

Post by RVD »

i have purchased gold bars and coins from apmex and they are fine. i don't buy much but just dabble a little bit.

i mostly buy american eagle coins because i like the US based coins but maybe i'll look at more 24k stuff as well.

i also buy some silver coins as well. all through apmex.
SuperGrafx
Posts: 269
Joined: Sat Apr 05, 2014 11:36 pm

Re: Gold bars buying advise

Post by SuperGrafx »

normaldude wrote:If you stick to 24k / 99.9% pure gold bullion coins (like the 1 oz Canadian Gold Maple or 1 oz Australian Gold Kangaroo Nugget), then you can quickly weigh & measure them with a simple device from goldcoinbalance.com or thefisch.com . I would avoid the 22k gold bullion coins (American Gold Eagle, South African Gold Krugerrand), since they're not pure gold, and the latest fakes beat the size & weight tests.
Don't forget that the US mint produces a 24K bullion coin (in addition to the 22K American Gold Eagles)....the 1 ounce Gold Buffalo coins are 24k (.9999 gold) and feature the same design as the old Buffalo nickels.

Image
User avatar
BolderBoy
Posts: 6753
Joined: Wed Apr 07, 2010 12:16 pm
Location: Colorado

Re: Gold bars buying advise

Post by BolderBoy »

rakaye47 wrote:
BolderBoy wrote:
sam123 wrote:I have heard from many people that one should invest 5-20% of their assets in precious metals for diversification
Allow me to be among the MUCH larger cohort of "many people" who advise you to NOT do this.
If you had 20% metal in 2011, you would be crying right now.
You are advocating for market timing in the buying of gold, is that right?

Image
User avatar
David Jay
Posts: 14586
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: Gold bars buying advise

Post by David Jay »

What are "bills"?
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
dbr
Posts: 46181
Joined: Sun Mar 04, 2007 8:50 am

Re: Gold bars buying advise

Post by dbr »

User avatar
happyisland
Posts: 915
Joined: Thu Oct 03, 2013 1:36 pm
Location: nos baranca tan stima

Re: Gold bars buying advise

Post by happyisland »

For all the gold-owners out there who think of their gold as a part of their portfolios, I've got a question: what is your estimate of the annual ER of owning the gold? Is there a front load (I'm thinking maybe the difference between the spot price and the retail price)? A back load (do you pay the dealer a non-trivial spread)? It seems like it might get pretty expensive when compared to the normal things in a Boglehead's portfolio, like VTI and BND.
donaldfair71
Posts: 1241
Joined: Wed Mar 06, 2013 3:15 pm

Re: Gold bars buying advise

Post by donaldfair71 »

happyisland wrote:For all the gold-owners out there who think of their gold as a part of their portfolios, I've got a question: what is your estimate of the annual ER of owning the gold? Is there a front load (I'm thinking maybe the difference between the spot price and the retail price)? A back load (do you pay the dealer a non-trivial spread)? It seems like it might get pretty expensive when compared to the normal things in a Boglehead's portfolio, like VTI and BND.
I pay either a 3.9% or 4.9% markup from spot at purchase (depending on whether I want a Krugerrand or Eagle). When I sell, I get spot back from the Krugerrand, and spot +$20 for the Eagle.
surfstar
Posts: 2853
Joined: Fri Sep 13, 2013 12:17 pm
Location: Santa Barbara, CA

Re: Gold bars buying advise

Post by surfstar »

You guys gotta use your imagination!

A gold bar is far more lethal for a squirrel than throwing some coins at it. When __it hits the fan, you can still roast up some squirrel if you only have some gold bars! Oh, I guess you might want some dollar bills for the fire fuel too.

:oops:
User avatar
happyisland
Posts: 915
Joined: Thu Oct 03, 2013 1:36 pm
Location: nos baranca tan stima

Re: Gold bars buying advise

Post by happyisland »

donaldfair71 wrote: I pay either a 3.9% or 4.9% markup from spot at purchase (depending on whether I want a Krugerrand or Eagle). When I sell, I get spot back from the Krugerrand, and spot +$20 for the Eagle.
Thanks for the quick reply! So the "front load" is roughly 4-5%. Any rough estimate on what the annual expense ratio would be? I guess there would be costs related to storage, right?
normaldude
Posts: 803
Joined: Tue Jan 27, 2009 3:41 am

Re: Gold bars buying advise

Post by normaldude »

happyisland wrote:For all the gold-owners out there who think of their gold as a part of their portfolios, I've got a question: what is your estimate of the annual ER of owning the gold? Is there a front load (I'm thinking maybe the difference between the spot price and the retail price)? A back load (do you pay the dealer a non-trivial spread)?
For an allocated gold account, I'll use Goldmoney.com as an example (audited by Deloitte & Touche, insured by Lloyds of London, allocated physical gold held in a Via Mat vault in Switzerland).

- Buying Cost / Load: 2.19% ($10,000 - $100,000), or 1.39% ($100,000+)

- Selling Cost / Load: 0%

- Annual Expense Ratio: 0.12%

http://www.goldmoney.com/buy/fees


For physical gold bullion purchased directly, it varies greatly by country / territory.

Hong Kong has the narrowest retail price spreads (about 1%). So that's probably equivalent to a 0.5% front load, and 0.5% back load.

https://www.bochk.com/m/en/investment/rates/metal.html

In the US, with the online dealers (TexMetals.com, Apmex.com, GoldDealer.com, etc), you can get the retail price spread down to about 3% if you shop around.

In the US, if you purchase from a brick & mortar gold dealer in person, the retail price spread might be up to 8% (equivalent to maybe a 6% front load, and 2% back load).
Last edited by normaldude on Mon May 11, 2015 4:32 pm, edited 2 times in total.
User avatar
happyisland
Posts: 915
Joined: Thu Oct 03, 2013 1:36 pm
Location: nos baranca tan stima

Re: Gold bars buying advise

Post by happyisland »

Thanks for the info!
rakaye47
Posts: 77
Joined: Fri Nov 21, 2014 6:35 am

Re: Gold bars buying advise

Post by rakaye47 »

BolderBoy wrote:
rakaye47 wrote:
BolderBoy wrote:
sam123 wrote:I have heard from many people that one should invest 5-20% of their assets in precious metals for diversification
Allow me to be among the MUCH larger cohort of "many people" who advise you to NOT do this.
If you had 20% metal in 2011, you would be crying right now.
You are advocating for market timing in the buying of gold, is that right?

Image
No way this can be true. How much was gold back then?
User avatar
Epsilon Delta
Posts: 8090
Joined: Thu Apr 28, 2011 7:00 pm

Re: Gold bars buying advise

Post by Epsilon Delta »

rakaye47 wrote:
BolderBoy wrote:
Image
No way this can be true. How much was gold back then?
Not exactly sure what you're questioning, but between 1792 and 1834 $19.39 was one oz. of gold. In 2013 gold closed at $1204 per oz.

Correcting for inflation and the increased real price of gold we get 19.39 (1802$/oz) * 3.21 /(.052(1802$/2013$)) = 1197 (2013$/oz) which is close enough to $1204 given the numbers are only to two or three decimals.
normaldude
Posts: 803
Joined: Tue Jan 27, 2009 3:41 am

Re: Gold bars buying advise

Post by normaldude »

BolderBoy wrote: You are advocating for market timing in the buying of gold, is that right?

Image
There's a few things misleading about this chart.


Inflation / Dollar: The Federal Reserve System wasn't created until 1913.

http://en.wikipedia.org/wiki/Federal_Reserve_System

And on BolderBoy's chart, you can see that's when inflation really picked up. The long-term average inflation rate under the Federal Reserve System 1913-2015 is closer to 3.2% than 1.4%.

=(239.7/9.9)^(1/102)

https://www.minneapolisfed.org/communit ... rates-1913

Additionally, BolderBoy's chart conveniently starts at 1802. If you went back a few more decades, you would have captured the Continental dollars which were printed into worthlessness by 1781. If you included that time period, long-run real return for dollar would have been -100%/yr, since the Continental dollars were printed into worthlessness.

http://en.wikipedia.org/wiki/Early_American_currency

So dollar real return if you drew the chart back to..

1913: -3.2%
1802: -1.4%
1776: -100.0%

We have operated under the Federal Reserve System from 1913-2015, so I think it's more accurate to represent the long-run average inflation rate as 3.2%.


Bonds: Bond returns largely depend on the interest rates at the time, and we are currently in a low interest environment (where 3 month t-bills currently yield 0.00%). Bond returns from past decades have no actual relavence on expected future bond returns.

To get expected future bond returns, you should look at a bond fund's SEC yield. And the Vanguard Total Bond Market currently has a SEC yield of 1.94%. (Note: SEC Yield assumes 0% chance than any underlying bonds will default, so the true expected return is actually a little bit lower than 1.94%).

https://personal.vanguard.com/us/funds/ ... IntExt=INT


Gold: Over the long-run, gold performs as a negative beta asset, and does maintain its purchasing power (roughly tracks inflation). Under the Federal Reserve System time period (1913-2015), gold has averaged around +4%/yr, which is around the +3.2% inflation rate

=(1183.4/20.64)^(1/102)


So current expected returns are more like..

Stocks: 7-10%/yr
Bonds: 1.94%/yr
Gold: 3-4%/yr
Inflation: 3.2%/yr

Lots of Bogleheads hold portfolios like "70% stocks, 30% bonds". With bond funds having SEC yield of 1.94%, why do Bogleheads hold bonds? For diversification purposes. After all, stocks are extremely volatile (US stock market fell 90% between 1929-1932).

So if someone switched from "70% stocks, 30% bonds", to "70% stocks, 20% bonds, 10% physical gold", they aren't really giving up any expected return. And they are adding portfolio diversification, by adding a negative beta asset.

Looking at the CAPM model, if you consider the "risk free rate" (3 month t-bills) is now 0.00%, a negative beta asset like gold is a very good diversifying tool (well above the security market line).

Physical gold also adds tangibility diversification, in a situation where paper & digital assets become worthless, like in my WWII example below..

http://www.bogleheads.org/forum/viewtop ... 2#p2397122
fidobogo
Posts: 154
Joined: Thu Mar 19, 2015 8:23 pm

Re: Gold bars buying advise

Post by fidobogo »

If you don't already know the answers to these questions, I think you really don't want to gold you hold in your hand. There are several ways you can lose money on that kind of gold. If you get physical gold through an ETF, however, then there's only a few ways you can lose your money.
aaaaaaabbbbbbbbbb
Posts: 133
Joined: Sat Apr 11, 2015 12:34 am

Re: Gold bars buying advise

Post by aaaaaaabbbbbbbbbb »

Scenario: your country collapses, property rights go out of style, you lose your investments.
Safeguard: hold a global stock/bond portfolio, and have partial custodianship with an overseas firm. Also, if the collapse is not instantaneous, transfer custodianship of your assets to overseas firm before it's too late.

IMO this is a far better solution than holding gold. If there is a collapse, good luck avoiding gold confiscation/robbery. Digital custodianship of stocks/bonds overseas seems way safer to me. Now, if there is a global collapse, then my solution may not be too effective, but gold bars won't help you either in the event of the apocalypse.
donaldfair71
Posts: 1241
Joined: Wed Mar 06, 2013 3:15 pm

Re: Gold bars buying advise

Post by donaldfair71 »

happyisland wrote:
donaldfair71 wrote: I pay either a 3.9% or 4.9% markup from spot at purchase (depending on whether I want a Krugerrand or Eagle). When I sell, I get spot back from the Krugerrand, and spot +$20 for the Eagle.
Thanks for the quick reply! So the "front load" is roughly 4-5%. Any rough estimate on what the annual expense ratio would be? I guess there would be costs related to storage, right?
I have a safe and a safety deposit box for other things like tax returns, heirlooms, etc. that I use for the gold anyway, so no continuing costs at all. A significant amount of value can be had in gold that takes up relatively little space. A couple hundred thousand in gold can take up less than a shoebox size.
User avatar
tludwig23
Posts: 1665
Joined: Thu Dec 30, 2010 2:27 pm
Location: 48deg46"23"N 122deg28'21"W

Re: Gold bars buying advise

Post by tludwig23 »

happyisland wrote: Thanks for the quick reply! So the "front load" is roughly 4-5%. Any rough estimate on what the annual expense ratio would be? I guess there would be costs related to storage, right?
If you are interested in owning physical gold, but not storing it yourself, look at bullionvault.com. They manage 2B$ of gold, mostly in vaults in Switzerland. Insurance and storage is 0.12% per annum, and the buy-sell spread is 0.50% (less for very large orders). You can buy or sell in USD, pounds sterling, Euros or Yen.
That's what I do: I drink, and I know things. --Tyrion Lannister
User avatar
BolderBoy
Posts: 6753
Joined: Wed Apr 07, 2010 12:16 pm
Location: Colorado

Re: Gold bars buying advise

Post by BolderBoy »

normaldude wrote:There's a few things misleading about this chart.

Inflation / Dollar: The Federal Reserve System wasn't created until 1913.

http://en.wikipedia.org/wiki/Federal_Reserve_System

And on BolderBoy's chart, you can see that's when inflation really picked up. The long-term average inflation rate under the Federal Reserve System 1913-2015 is closer to 3.2% than 1.4%.
I don't see where you are plucking the 1.4% inflation rate from the chart, but I agree (from other sources) that the 1900-present inflation rate has been 3.x% - ish.

And I would disagree with you about when inflation "picked up" and suggest as demonstrated by the chart, it was when the dollar was no longer pegged to gold, which was in the 1930s. You can see the disconnect between the two shown clearly on the chart.
Additionally, BolderBoy's chart conveniently starts at 1802. If you went back a few more decades, you would have captured the Continental dollars which were printed into worthlessness by 1781. If you included that time period, long-run real return for dollar would have been -100%/yr, since the Continental dollars were printed into worthlessness.
Right, that is the failure of all charts.
So dollar real return if you drew the chart back to..

1913: -3.2%
1802: -1.4%
1776: -100.0%
... which is of course nonsensical, isn't it?
We have operated under the Federal Reserve System from 1913-2015, so I think it's more accurate to represent the long-run average inflation rate as 3.2%.
Yes, but that isn't the subject of this topic, is it?
Gold: Over the long-run, gold performs as a negative beta asset, and does maintain its purchasing power (roughly tracks inflation). Under the Federal Reserve System time period (1913-2015), gold has averaged around +4%/yr, which is around the +3.2% inflation rate

=(1183.4/20.64)^(1/102)

So current expected returns are more like..

Stocks: 7-10%/yr
Bonds: 1.94%/yr
Gold: 3-4%/yr
Inflation: 3.2%/yr
Which has nothing to do with OP's stated intention (unless I misread it) which is to "make money on gold". No one "makes money" by matching ongoing inflation.
why do Bogleheads hold bonds? For diversification purposes.
I disagree with this. The purpose of bonds is to mitigate volatility. Diversification is something else. One diversifies one's stock holdings and diversifies one's bond holdings (to the degree desired.) Diversifying stocks with bonds is like, er, mixing metaphors.

But the bottom line is that if someone wants gold in their portfolio for whatever reason, s/he needs to accept it for what it is and not expect it to do something which it can't.
Post Reply