Investing in Gold/Silver Coins

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RetiredRick
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Investing in Gold/Silver Coins

Post by RetiredRick » Sun May 11, 2014 9:06 am

Hello, I don't have any gold or silver in my portfolio. I'm thinking about buying some coins to keep in my home safe for emergencies/investment. Any thoughts on using gold/silver as a portion of your portfolio?

Thanks.

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Re: Investing in Gold/Silver Coins

Post by LadyGeek » Sun May 11, 2014 9:48 am

Welcome! Using a commodity (gold / silver) as an investment is a source of heated debate in this forum, in which no conclusive advice can be provided.

Consider that storing "investments" at home are subject to fire and theft loss, which is not a good situation.

If you like the idea of holding gold / silver coins, then keep it to no more than 5% of your total portfolio - the maximum amount that you can safely lose and not affect your retirement plans.

How's the rest of your portfolio? Is there anything we can help you with? If so, consider posting in this format: Asking Portfolio Questions
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RetiredRick
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Re: Investing in Gold/Silver Coins

Post by RetiredRick » Sun May 11, 2014 9:51 am

LadyGeek, Thanks for your thoughts.

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Re: Investing in Gold/Silver Coins

Post by hollowcave2 » Sun May 11, 2014 10:34 am

Adding some physical gold can help provide ballast for a portfolio and may be of some use in emergencies. I agree with the limit that LadyGeek suggested of no more than 5% of your portfolio.

Realize, however, that gold does not provide any interest, needs to be in a secure place, and as an investment is a bit uneven. We have seen the price of gold rise, but in jumps and volatile behavior. I think that will happen again, but it may takes years, and in the meantime, you'll probably not have much growth. But it can provide stability and can be useful in some situations.

I have some gold coins but that's because I enjoy collecting some coins. So I get some enjoyment out of holding them. I keep them in a safety deposit box for security, however. I am not particularly worried about a national emergency where I'll need them for spending money. In that scenario, I think we would have a lot of other problems to deal with. But look at what we've been through in the last 14 years, especially 9/11 and the economic crisis of 2008. We've survived those, and I didn't need to spend my gold. And the price of gold did not skyrocket during those times, even though it was volatile. Now, gold has stabilized at a new price level where I think it will remain for a little while.

If you do buy gold coins, you can't go wrong with the American Eagle bullion coins. Shop around on dealers. I know APMEX is a reputable online dealer for bullion.

Good luck.

Steve

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Re: Investing in Gold/Silver Coins

Post by chaz » Sun May 11, 2014 10:34 am

Use a fireproof safe.
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Re: Investing in Gold/Silver Coins

Post by dickenjb » Sun May 11, 2014 10:40 am

I have a strong opinion on the subject. One invests in things which over time have provided a positive real return. For instance, stocks and bonds. One may speculate in things which do not provide a positive real return over the long run but which are subject to large price swings in the short run (e.g. currencies and commodities). I personally do not speculate but you are welcome to do so, just don't call it investment.

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Re: Investing in Gold/Silver Coins

Post by chaz » Sun May 11, 2014 11:08 am

dickenjb wrote:I have a strong opinion on the subject. One invests in things which over time have provided a positive real return. For instance, stocks and bonds. One may speculate in things which do not provide a positive real return over the long run but which are subject to large price swings in the short run (e.g. currencies and commodities). I personally do not speculate but you are welcome to do so, just don't call it investment.
I have bought gold jewelry for DW, and that has provided a positive real return. :)
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Re: Investing in Gold/Silver Coins

Post by livesoft » Sun May 11, 2014 11:26 am

I would like to read of a golden instance where a person reports first-hand that they used gold or silver coins in an emergency. One person. First-hand. Please.

I think the only time I have heard of this is getting smuggled out of East Germany, but this was second-hand.
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Re: Investing in Gold/Silver Coins

Post by Norbert Schlenker » Sun May 11, 2014 11:37 am

Even with the size of the Boglehead community here, I'll be surprised if you get a "first hand" account.

My maternal grandfather bribed a Russian soldier to let his wife, two daughters (one of whom was my mother), and himself pass from the Russian zone into the British zone in Germany in 1945. He paid with a gold pocket watch, the only thing of any value they had retained while refugees. He told me that himself, so it's first hand to me.

For the OP, my advice is to be judicious. There isn't much pleasure to be derived from coins, and they produce no income. The bulk of my "investments" in gold and silver are in my wife's jewellery, 22-23k bought in Bangkok and Jakarta when we travelled there, and silver flatware that we use only occasionally.
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Re: Investing in Gold/Silver Coins

Post by WHL » Sun May 11, 2014 11:40 am

I have physical silver. It's speculation, not investment in my case. I think over the long term stocks will vastly outperform metals.

If you want gold or silver, I'd suggest you stay away from numismatics, do your homework on all purchases, and use a website such as http://www.comparesilverprices.com to get a decent idea on the current market.

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Re: Investing in Gold/Silver Coins

Post by cfs » Sun May 11, 2014 11:47 am

My two centavos (silver).

Good conversation. I do not call my large amount of silver coins and my small amount of gold coins an investment, for me it is just a nice hobby and a nice collection. This collection is not part of my boring SWAN (sleep well at night) portfolio. Do I know anyone using gold or silver during an emergency? No, I don't. But I do know a couple of individuals that made some good dollars by selling gold jewelry during the gold fever a couple of years ago.

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Re: Investing in Gold/Silver Coins

Post by chaz » Sun May 11, 2014 11:56 am

Don't invest in bitcoins.
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Re: Investing in Gold/Silver Coins

Post by Phineas J. Whoopee » Sun May 11, 2014 12:07 pm

I agree with LadyGeek that it's unanswerable here. Someplace like http://www.kitco.com might provide encouragement.

My only practical advice is if you physically own precious metals don't tell anyone. Nobody has to guess your password to put a gun to your spouse's head and make you give it to them.

In what appears to be the traditional pro-gold-owning close, Good Luck!

PJW

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Re: Investing in Gold/Silver Coins

Post by Grt2bOutdoors » Sun May 11, 2014 12:18 pm

RetiredRick wrote:Hello, I don't have any gold or silver in my portfolio. I'm thinking about buying some coins to keep in my home safe for emergencies/investment. Any thoughts on using gold/silver as a portion of your portfolio?

Thanks.

Bad idea! House gets robbed, unless your safe is bolted to the ground, say goodbye to the coins. Coins earn no interest, but if sold will be taxed as a collectible, not the capital gains rate, but higher. An emergency crops up, the power goes out - ATM's don't work, what are you going to do? Hand over a 1 oz. gold Eagle to buy your groceries? What kind of emergency requires the use of shiny objects? BTW, I have a few silver coins but they are more of a keepsake item than an investment. And...I don't keep them in my house.

For emergencies, it's far better to stock batteries, water, food, a "go-bag", flashlights, glow sticks, fire starters, a change of clothes, a few hundred in small bills and legal tender coins (think half-dollars, quarters, nickels, dimes, pennies).
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Re: Investing in Gold/Silver Coins

Post by donaldfair71 » Sun May 11, 2014 12:49 pm

Apmex is good. JMBullion offers same service with better overall prices. I would also snoop around to see if you live in a state with low taxes on the purchase. If so, may be able to buy cheaper at a dealer.

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Re: Investing in Gold/Silver Coins

Post by ratesguy » Sun May 11, 2014 1:46 pm

I hate gold. 'Barbaric relic' as Keyne's said. I don't think it can be called an investment.

Still, I have always liked coins and could see the case for holding some metals, at slightly lower prices, as a bit of a tail hedge and maybe speculation on growth in places like India.

So I have a non-trivial amount of old silver coins (mainly considered 'junk' silver) and a handful of new gold Canadian maple leafs.

I have a good safe (for insurance policies, car titles, etc) but have decided to keep the metals in a safe deposit box.

I don't really even consider them part of my portfolio - no entry on the quicken balance sheet for example. In hindsight probably a waste but for a while it was a bit of an enjoyable hobby to find "deals" on the ok'd silver or buy the gold at discounted premiums on "dips" at APMEX.

If you are interested, treat it mainly as a hobby and keep it to a small fraction of your portfolio ,I don't think it's the worst thing. It's still a form of savings, and even if not "optimal", it's probably a better expenditure than some consumer junk that will definitely go down in value.

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Re: Investing in Gold/Silver Coins

Post by Jack FFR1846 » Sun May 11, 2014 2:07 pm

When I was in college, I cashed my silver coins in over time. I was paying my own way and a few coins at a time drew no attention and were easily sold.

Today, I have some coins inherited from my dad and have bought some junk silver. Just bought a quarter oz gold panda pendant for the wife. Better value than the mall jewlry store offers
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Re: Investing in Gold/Silver Coins

Post by Quasimodo » Sun May 11, 2014 2:11 pm

livesoft wrote:I would like to read of a golden instance where a person reports first-hand that they used gold or silver coins in an emergency. One person. First-hand. Please.

I think the only time I have heard of this is getting smuggled out of East Germany, but this was second-hand.
My only golden instance was creating an emergency in order to save ten cents. Once as a teenager I jumped a subway turnstile just to avoid paying one silver dime, which was the fare at the time (1954). A policeman chased me down the stairs and I ran into a tunnel, walking through it to the next station, coming out covered with soot from a passing train.

As foolish as it was, it does suggest how seriously some people can take silver.

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Re: Investing in Gold/Silver Coins

Post by HIinvestor » Sun May 11, 2014 2:21 pm

I have been gifted gold and silver jewelry, most of which we keep in a safety deposit box. Silver and gold coins have to be kept protected from all elements to retain value as collectibles, or they can lose value rather quickly--HI is not kind to metals, especially with the acidic emissions from the volcanoes.

Have never tried nor used precious metals in any emergency, nor am I aware of anyone who has, first hand.

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Re: Investing in Gold/Silver Coins

Post by Professor Emeritus » Sun May 11, 2014 3:25 pm

chaz wrote:
dickenjb wrote:I have a strong opinion on the subject. One invests in things which over time have provided a positive real return. For instance, stocks and bonds. One may speculate in things which do not provide a positive real return over the long run but which are subject to large price swings in the short run (e.g. currencies and commodities). I personally do not speculate but you are welcome to do so, just don't call it investment.
I have bought gold jewelry for DW, and that has provided a positive real return. :)
of course you have to re-balance with one earring in each ear
DW suggests that shepherd's hooks or closed clasp hangers minimize the possibility of loss compared to pins and retainers

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Re: Investing in Gold/Silver Coins

Post by mickeyd » Sun May 11, 2014 3:41 pm

What is the annual dividend rate that physical gold and silver are paying these days?
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Re: Investing in Gold/Silver Coins

Post by ASUGrad » Sun May 11, 2014 4:08 pm

What is the difference between stocks, bonds, REITs, partnerships & gold, diamonds, bitcoins, & tulips?

With stocks, bonds, REITs, & partnerships you own something that that either pays you to own it(income) or you own a piece of the companies' revenues(partial ownership). If its the later the company likely reinvests any profits so the expectation is that the revenues will increase over time becoming more valuable. Now sometimes companies fail, but as long as they are generating revenues and likely to continue doing so someone will be willing to buy that future income/revenue stream.

With gold, diamonds, bitcoins, and tulips you own something that is only worth what someone else it willing to pay for it. There is no income/revenue stream. We can synthetically create diamonds. These aren't fake. The factories create the same conditions under which diamonds naturally form and speed up the process. It is really expensive to make a diamond to the same quality used in jewelry so there isn't a huge impact on the price as a result. Bitcoins are also created on computers... what would happen if a hacker found a way to create infinite bitcoins? Now what if that happened with gold? Gold is created by the fusion reactions in stars. Ok... what if fusion energy really takes off, and as a bi product the reactors start dumping out gold? What would happen to the price? Thats a far fetched example, but you get the idea. It is a commodity, priced solely on supply & demand. If the supply rises dramatically the price tanks. If demand dries up(1980) the price drops. The past few years gold's value hasn't been based on supply and demand for use in jewelry & manufacturing but as a hedge against the dollar... a hedge against fear. Remove fear(demand), what happens to the price? Well what is gold really worth in jewelry? Its not an investment... its a metal.

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Re: Investing in Gold/Silver Coins

Post by Atilla » Sun May 11, 2014 4:08 pm

I prefer a 3-fund approach for a true emergency fund. Liquor, ammo and paper currency. In a real actual crisis of the first two will go up in value while the third would go down (gouging/inflation).

All three will be useful. Two are commodities with especially useful characteristics. Don't know what the hell I would do with a stack of gold coins in a real crisis.
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Re: Investing in Gold/Silver Coins

Post by zaboomafoozarg » Sun May 11, 2014 4:38 pm

I only buy ancient bronze/silver/gold coins. It costs extra because they are ancient, but I love owning really old stuff.

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Re: Investing in Gold/Silver Coins

Post by LadyGeek » Sun May 11, 2014 5:13 pm

For those who want to pursue the purchase of cold (not as an investing topic), go no farther than the Personal Consumer Issues forum.

Here are a few examples: Got my first gold bullion coin! and Purchasing physical gold??
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Re: Investing in Gold/Silver Coins

Post by ryk1861 » Sun May 11, 2014 5:24 pm

I am a coin collector, as a hobby, as I enjoy the history and the art. I do not view coins as an investment, though I have done reasonably well buying and selling coins, mostly into an up market. In general, they are for most collectors, at best, a store of value.

There is an academic argument for investing coins that some bogleheads might enjoy reading:

http://www.onefpa.org/journal/Pages/Rar ... Class.aspx

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Re: Investing in Gold/Silver Coins

Post by oldzey » Sun May 11, 2014 9:51 pm

I just bought some 1oz Silver American Eagles from APMEX. They arrived in 2 days, were nicely packaged and exactly as described.
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Re: Investing in Gold/Silver Coins

Post by linenfort » Sun May 11, 2014 10:59 pm

Rick, I would do some research to decide whether to invest in bullion or coins with numismatic value, as those are two very different things.
Everything else..like LadyGeek said, would have to be asked & answered in the Consumer section.
Is it too early for an all-bond-portfolio thread?

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Re: Investing in Gold/Silver Coins

Post by LH » Sun May 11, 2014 11:14 pm

dickenjb wrote:I have a strong opinion on the subject. One invests in things which over time have provided a positive real return. For instance, stocks and bonds. One may speculate in things which do not provide a positive real return over the long run but which are subject to large price swings in the short run (e.g. currencies and commodities). I personally do not speculate but you are welcome to do so, just don't call it investment.
http://en.wikipedia.org/wiki/Investment
In finance, investment is putting money into an asset with the expectation of capital appreciation, dividends, and/or interest earnings. This may or may not be backed by research and analysis. Most or all forms of investment involve some form of risk, such as investment in equities, property, and even fixed interest securities which are subject, among other things, to inflation risk. It is indispensable for project investors to identify and manage the risks related to the investment.
Well, clearly you do not believe in capital appreciation of gold. Fair enough, will cede for discussion capital appreciation of gold in isolation is zero, if you like.

How about this though:

Portfolio A: 95 stocks, 5 percent gold

Portfolio B: 100 stocks

Do you still feel so strong that the portfolio performance of A rebalanced, would not beat that performance of B "rebalanced"?

What about the concept of volatility smoothing, does that have no place in "investment"?

Also, of all the fiat currencies ever extant, what percentage still function as money?

Would you feel the same about gold investment, if you were in say, Argentina? Or would you just be happy in pesos, waiting for the next Corralito? Its best to hold USD, foreign cars, gold, and whatever will hold its wealth. Now, one cannot hold USD to hedge USD, here though.

How about india? http://www.aafmindia.co.in/downloadImg/ ... Report.pdf

Speculation is an interesting thing. How many stock markets are extant over the past 100 years, how many have disappeared, then reappeared? The US, which avoided systematic government change in great depression I, and then won the last big war to boot, is a stock market outlier.

How many governments are still extant in present form over the past 100 years? I think the number maybe 5.......... yeah. Speculation......

For people who hold gold long term, its certainly not about speculation, its about the opposite.

Its an investment portfolio return that matters, return can be a positive or negative number, the higher the better. And sometimes the best investment return available, is simply return of capital, and not on capital historically.

To me, a wise investor would consider that point of view. Sometimes, starting with 100 capital units, and making it out with 50 capital units, is a very relatively good real world investment outcome.

Things can get really brutally bad investment wise. There is a gradient from boom times, to normal times, to severe economic collapse, to war. To speak generally: Some people want to just gloss over the gradient, have "normalcy bias" where things go as planned versus a "mad max" state, then they make fun of the mad max state, classic straw man. They attempt to discount the much more significant, much more common, in between states, that do not make good fiction movies.

All the states in the gradient, can be experienced. In a lot of these, gold is the best investment. It can have capital appreciation, where stocks fail. Indian perspective is not irrational, they simply have not been in an outlier country, they lack our particular home country bias. "barberous relic" and such. The current school of thought, is not the only one, and reading history, I really really really really doubt, that suddenly, in this particular time slice we happen to live in and call "modern" that we have figured out the systems. We will almost certainly be looked on as primitive morons in classrooms in 2040, 2080, or whatever.
Last edited by LH on Sun May 11, 2014 11:36 pm, edited 2 times in total.

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Re: Investing in Gold/Silver Coins

Post by MnD » Sun May 11, 2014 11:32 pm

Six old high grade silver dollar coins were my first investment at age 12 when my grandma passed away and left me $600.
I still have them and my silver dollar collection has grown quite a bit over the decades to around 100 coins.
I check the value every 10 years or so and last I checked my collection has about a 2%/yr return.
I really enjoy them and it seems to function as a store of value but not as an appreciating investment.

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Re: Investing in Gold/Silver Coins

Post by LH » Mon May 12, 2014 12:02 am

livesoft wrote:I would like to read of a golden instance where a person reports first-hand that they used gold or silver coins in an emergency. One person. First-hand. Please.

I think the only time I have heard of this is getting smuggled out of East Germany, but this was second-hand.
http://ferfal.blogspot.com/2012/09/gold ... ntina.html


when USD became tight/hard to get, Argentinians turned to gold.

To sell a house in Argentinian, they do not like to use pesos, they much prefer USD.

One of the "downsides" to living(as I suppose you do) in the country which won the world war, has the reserve currency (for now), and the biggest economy, has near zero perceived threat of invasion, etc. etc. is that you are not likely to get any first hand accounts of gold being used for emergencies, because we haven't had much recently. The closest we came in my life that I recollect was 2008, when there was talk of ATMs and banks having no money possibly. Now how close that was, I dunno.

So there you go, a lot of people turned to gold, such that it was banned, or attempted to be banned at least. Ditto india, those guys were smuggling the heck out of it recently, plane flights full of gold coins being carried in. If you want first hand reports, just go to India or Argentina, you will likely be able to find your first hand report. Maybe cyprus as well, when the banks, shut, then limited atm use, which I think still goes on. I bet some people, have used gold coins there, to buy cars or something, get euros, etc.

Also, I recall Anne Frank father used gold coins in his two year emergency until turned in.

Also, I recall in death of money, the Wiemar book, that someone used gold links off a necklace, to buy food with. also that they referred to gold silver coins being used transactionally in weimar(pretty certain).

http://www.cronista.com/finanzasmercado ... -0050.html
google translation below:
The impact on the implementation of the FX market continues to claim victims . A considerable volume decline in the buying and selling of foreign currency exchange houses and financial institutions now also seem to have resigned the equally profitable business ? Timely and in rise ? of buying and selling gold . For that reason they are already assessing export surplus that can no longer sell .


Financial institutions and exchange houses used to have a stock that on average was about 20 kilos a month , mostly bars 50 and 100 grams in a unit value of u $ s 2.615 for the first and $ 5,230 for second s .


With the advent of successive regulations finished further restrictions on access to foreign exchange , buying the metal ( with the exception of selling City Bank is imported ) was between the protected system validation AFIP assets BCRA and to which access is impossible . As a result subsequently added that they could only be sold currency for sightseeing, and even these should be the currency of the destination country , the gold went to full ostracism.


? The gold is considered by the AFIP and the Central Bank as a currency, but it's actually not legal tender in any country of the world and does not belong to any particular nation , so there is no demand for the metal that is they supported ? they said in the city .


According to reports, several banks and exchange offices are analyzing export the metal stock they keep in their coffers. In fact, the sale abroad should be made directly to those foreign financial institutions where local exchange houses have a registered account , mostly located in Switzerland and the U.S., which is where gold was being sold in the country are imported and generally meets the highest quality 999.9
So there you have it. Argentina banned/limited USD use, and then, for the same reasons...... had to ban gold use, calling it a currency... Just kinda follows as a matter of course. Iran, deprived of dollars relatively.... used gold for its emergency, to transact with turkey for gold for oil withing the past year or so, they may still be doing it now actually. There is another example, not of a person, but of a country.

I really hope you do not get any first hand accounts here in US livesoft, fiat currency, if managed well, is very nice, not so nice in Argentina corralito.

Have a nice day,

LH

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Re: Investing in Gold/Silver Coins

Post by livesoft » Mon May 12, 2014 4:07 am

It seems like you might be arguing for a piece of land with an orchard on it and several other natural food plants on it as well. It should also have a stream-fed unpolluted lake or pond with edible fish.

Of course, you need relatives that live in completely different countries for full diversification, too.

Then it gets complicated because you need transportation to any and all of these places, just in case. I suppose at that point having some gold would be helpful, but first things first.
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Re: Investing in Gold/Silver Coins

Post by SGM » Mon May 12, 2014 5:02 am

If you help a friend on Saturdays who owns a coin store and you buy gold and silver coins at or near bullion value that would be alright. If you picked up coins at bullion value and they had greater numismatic value that would be terrific. You can do that if you have specific knowledge, talent and can strike bargains and have the time and interest.

If you are a typical buyer you pay a premium for your Krugerrands when you buy or sell. That seems like a loser's game to me. Others mentioned security issues.

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Re: Investing in Gold/Silver Coins

Post by BigTom » Mon May 12, 2014 6:04 am

chaz wrote:Use a fireproof safe.
I looked into gold/silver I decided it's not the best investment after so e research . I was thinking of getting a few American eagles just cause they look cool .

But the number 1 thing I have learned in my research is to not have the gold/silver at you home . Theft seems to be a big issue ,and another reason I have been deterred from buying . Seems if you get it delivered to you that also puts a target on you back . If your PM get melted they will still have the same value just In a different state , unless they were collector items .

If you look into it everyone will recommend to keep your PM outside your home , unless they are domesday peepers which a lot of them are , they will recommend a safety deposit box for storage .

It doesn't matter the quality of the safe either . You could have it bolted down an bought a $5k safe , they still get in . Dummy safes piss the robbers off . Plus do you really want a target on your home for robbers .

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Re: Investing in Gold/Silver Coins

Post by linenfort » Mon May 12, 2014 9:27 am

BigTom wrote:[If you look into it everyone will recommend to keep your PM outside your home , unless they are domesday peepers which a lot of them are ,
I'm a Domesday peeper and I can tell you, while that is a fascinating book my Latin just isn't what it used to be.
Is it too early for an all-bond-portfolio thread?

Quickfoot
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Re: Investing in Gold/Silver Coins

Post by Quickfoot » Mon May 12, 2014 9:39 am

For emergencies, it's far better to stock batteries, water, food, a "go-bag", flashlights, glow sticks, fire starters, a change of clothes, a few hundred in small bills and legal tender coins (think half-dollars, quarters, nickels, dimes, pennies).
This, gold, silver are not good hedges or protection against any type of collapse. In the event the S&P 500 or total stock index actually collapses gold and silver will have no value either. The type of incident that would be required to cause the collapse and the fallout from the collapse would be world economic collapse. In this type of situation food, water, water filter, and other survival supplies and skills are far more valuable. Even if you maintained millions in gold and silver and the gold and silver held its value it would do you little good because the world emphasis would be on core goods (water, food, shelter) and survival.

That said if holding a small amount of gold makes you feel better and more likely to stick with a reasonable well diversified asset allocation then go for it, but realize it's the asset allocation and diversification that will protect you, not the gold.

Faith20879
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Re: Investing in Gold/Silver Coins

Post by Faith20879 » Mon May 12, 2014 2:16 pm

Okay I know my story is second-hand but I am dead serious it is true.

During the Japanese occupation of China in the 1940’s, my mother (a young lady then) had to travel from village to village to search for food. The inflation was so bad that the KMT Government would alter the old paper bills’ denomination daily to a point that nobody would accept as the legal tender. My mother survived on the 2 gold coins that my grandmother had sewn into her front shirt flap. Gold and silver was the only thing that farmers would recognize and was willing to trade with.

I sure hope we don't come to that. I am nowhere near as strong as my mother.


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Re: Investing in Gold/Silver Coins

Post by LadyGeek » Mon May 12, 2014 7:22 pm

This thread has run its course and is locked, as we're now discussing economic policy and getting nowhere fast. See: Forum Policy
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OP, I believe you have your answer. If not, PM me and we can discuss.
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