If i want to invest in gold (metal), what is the best way?

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math22
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If i want to invest in gold (metal), what is the best way?

Post by math22 » Tue Oct 04, 2016 2:27 pm

I dont want to buy shares from a specific miner. I am not sure if i want to buy a mutual fund, like FSAGX.
I was looking into this SPDR Gold Trust (ETF)(NYSEARCA:GLD)

What is this ETF gold trust? Do they hold stocks from miners? Or just pure gold?

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Re: If i want to invest in gold (metal), what is the best way?

Post by tludwig23 » Tue Oct 04, 2016 2:34 pm

GLD holds gold bullion. http://www.spdrgoldshares.com/media/GLD/file/ETF-GLD_20160630.pdf

I don't hold GLD, nor have any significant investment in precious metals. If I was going to own significant quantities of gold, I'd own physical bars of gold in a Swiss vault via Bullion Vault. https://www.bullionvault.com/
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Re: If i want to invest in gold (metal), what is the best way?

Post by LAlearning » Tue Oct 04, 2016 2:40 pm

But why?
I know nothing!

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Re: If i want to invest in gold (metal), what is the best way?

Post by Dulocracy » Tue Oct 04, 2016 3:05 pm

The snarky answer is "with a pickaxe." :twisted:

The real answer is that whatever method you choose, you want to consider that one of these "gold holding" establishments/vaults got cleaned out a few years back, leaving people with nothing. If you do have to have gold, I would recommend a safe deposit box at your bank. They are even free with certain banks if you have certain accounts with them (like a mortgage or top checking account).
I'm not a financial professional. Post is info only & not legal advice. No attorney-client relationship exists with reader. Scrutinize my ideas as if you spoke with a guy at a bar. I may be wrong.

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Re: If i want to invest in gold (metal), what is the best way?

Post by tludwig23 » Tue Oct 04, 2016 3:09 pm

Dulocracy wrote:

The real answer is that whatever method you choose, you want to consider that one of these "gold holding" establishments/vaults got cleaned out a few years back, leaving people with nothing. If you do have to have gold, I would recommend a safe deposit box at your bank. They are even free with certain banks if you have certain accounts with them (like a mortgage or top checking account).


Are you referring to Northwest Territorial Mint? Or was there another? AFAIK, people who had paid for gold to be delivered lost money because NWTM declared bankruptcy before delivering, but they did not serve any sort of vault function and no one lost money in that way. Unless you are referring to something else???
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Re: If i want to invest in gold (metal), what is the best way?

Post by reriodan » Tue Oct 04, 2016 3:16 pm

Gold is not an investment, so you can't. You could buy gold if you wanted.

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Re: If i want to invest in gold (metal), what is the best way?

Post by young-ish » Tue Oct 04, 2016 3:19 pm

First you need to decide if you want to hold physical gold bullion or invest in companies that mine for gold. Of course you could put money in both but that dilutes the reward if one or the other rises dramatically.

Second, decide how much precious metals you want to hold as a percentage of your total assets.

Third, decide if you want that percentage to be fixed for life or if you plan to time the market for gold or mining companies.

Fourth, write it down! Metals (and all commodities) are extremely volatile. You can lose money for decades. Read "The Longest Discipline" by Bill Bernstein... http://www.efficientfrontier.com/ef/adhoc/gold.htm

After you research the above items then you can decide how to actually implement your plans.

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Re: If i want to invest in gold (metal), what is the best way?

Post by Raymond » Tue Oct 04, 2016 3:35 pm

tludwig23 wrote:Are you referring to Northwest Territorial Mint? Or was there another?...


Search for "Bullion Direct" in Austin, TX.
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Re: If i want to invest in gold (metal), what is the best way?

Post by azanon » Tue Oct 04, 2016 3:41 pm

math22 wrote:I dont want to buy shares from a specific miner. I am not sure if i want to buy a mutual fund, like FSAGX.
I was looking into this SPDR Gold Trust (ETF)(NYSEARCA:GLD)

What is this ETF gold trust? Do they hold stocks from miners? Or just pure gold?


I used IAU. 0.25% ER, they buy/hold gold bullion.

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Re: If i want to invest in gold (metal), what is the best way?

Post by BogleMelon » Tue Oct 04, 2016 3:48 pm

My 2 cents (and I could be wrong).
Precious metal isn't investing in the first place. Investing is when you own a business, metal is not a business. Metal has some value based on the demand, and based on the currency value, but no true value in it. Also gold can never pay dividends. That said, buying and holding precious metal, in order to sell it at some point at a higher price, is some kind of speculations and not investing.
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Re: If i want to invest in gold (metal), what is the best way?

Post by Dulocracy » Tue Oct 04, 2016 4:01 pm

tludwig23 wrote:
Dulocracy wrote:

The real answer is that whatever method you choose, you want to consider that one of these "gold holding" establishments/vaults got cleaned out a few years back, leaving people with nothing. If you do have to have gold, I would recommend a safe deposit box at your bank. They are even free with certain banks if you have certain accounts with them (like a mortgage or top checking account).


Are you referring to Northwest Territorial Mint? Or was there another? AFAIK, people who had paid for gold to be delivered lost money because NWTM declared bankruptcy before delivering, but they did not serve any sort of vault function and no one lost money in that way. Unless you are referring to something else???


It has been a year or two, but I read about it on this site. Unfortunately, "gold stolen," "gold vault," and "physical gold" searches result in so many returns that I will not be able to find it. My understanding was that it was a vault, but I could be wrong. I am certain that there are sites for gold investing that would have more detail on that. After a year or two, the reporting of a news story and the speculation may have run together. Nonetheless, if I had gold, I would rather have it in a safe deposit box.
I'm not a financial professional. Post is info only & not legal advice. No attorney-client relationship exists with reader. Scrutinize my ideas as if you spoke with a guy at a bar. I may be wrong.

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Re: If i want to invest in gold (metal), what is the best way?

Post by gerntz » Tue Oct 04, 2016 4:33 pm

We have close to 10% of our assets in GLD and/or PHYS.

I see gold as a currency that can't be inflated by governments, not as a commodity. Commodities are consumed & very little gold is.

True that gold is only worth what someone is willing to pay for it. What tangible asset isn't that way? People are willing to pay 35x+ for gold today than 45 years ago when it was $35/oz. Who's right?

Happy hunting & good luck. Don't forget to trust your government with your money.

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Re: If i want to invest in gold (metal), what is the best way?

Post by Jack FFR1846 » Tue Oct 04, 2016 4:42 pm

If I wanted to buy gold, I'd get random year 1 oz Canadian Maple Leafs from Apmex. I've thought about it but never done it. I figure that if I buy gold, it'll drop to $500 and ounce and stay there for 100 years.
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Re: If i want to invest in gold (metal), what is the best way?

Post by Rob5TCP » Tue Oct 04, 2016 5:27 pm

When I was just out of college (early 80's) my cousin worked for a place (sales) that was like a gold vault. She even pushed it on some of the relatives. Turns out the guy had painted gold bars that were essentially worthless. He did got caught, don't remember the name of the company. I did have it out with my cousin and told her she would have made a more honest living as a hooker. At least you know what your getting. That didn't go over well and we really haven't spoken since.

Below is a partial list of these type of companies that have gone bankrupt. I would be ULTRA careful with the vault companies.

http://about.ag/GoldSilverFraud.htm

I buy gold from Apmex (on sale) periodically on Ebay. They occasionally have $20-$40 over spot on Ebay.

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Re: If i want to invest in gold (metal), what is the best way?

Post by RyeWhiskey » Tue Oct 04, 2016 5:52 pm

math22 wrote:I dont want to buy shares from a specific miner. I am not sure if i want to buy a mutual fund, like FSAGX.
I was looking into this SPDR Gold Trust (ETF)(NYSEARCA:GLD)

What is this ETF gold trust? Do they hold stocks from miners? Or just pure gold?


Good rule of thumb: if you don't understand the investment product, don't purchase it. I would encourage you to brush up on the holdings of different major gold ETFs, the tax code regarding owning gold as an 'investment,' the differences between owning a gold ETF and owning gold directly, and the arguments for and against such a decision. :beer
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Re: If i want to invest in gold (metal), what is the best way?

Post by nisiprius » Tue Oct 04, 2016 6:01 pm

According to World Trust Gold Services, LLC, the GLD exchanged-traded-something does in fact invest in physical gold. Among other things, the prospectus says
As at December 31, 2015, the Custodian held 20,691,044 ounces of gold on behalf of the Trust in its vault, 100% of which is allocated gold in the form of London Good Delivery gold bars with a market value of $21,979,061,920 (cost $25,333,180,858) based on the LBMA Gold Price AM on December 31, 2015.
So, it does represent an investment in physical gold and does track the price of gold closely.

Quick reality check: according to Morningstar, GLD had a price of $44.56/share on 11/19/2004, and $125.64 on 9/30/2016. According to Kitco, the price of gold was $451.70 on 11/22/2004 and $1315.80 on 9/30/2016. So, GLD gained 182% and the price of gold itself gained 192%. (Since I couldn't match the dates exactly I wouldn't take the difference too seriously).

However, the product with the ticker symbol GLD is
not an ETF.
This is a detail that usually seems to be overlooked.

The prospectus for this product notes--my underlining:
Shareholders do not have the protections associated with ownership of shares in an investment company registered under the Investment Company Act of 1940 or the protections afforded by the CEA.

The Trust is not registered as an investment company under the Investment Company Act of 1940 and is not required to register under such act. Consequently, Shareholders do not have the regulatory protections provided to investors in registered investment companies. The Trust will not hold or trade in commodity futures contracts regulated by the CEA, as administered by the CFTC. Furthermore, the Trust is not a commodity pool for purposes of the CEA, and none of the Sponsor, the Trustee, or the Marketing Agent is subject to regulation by the CFTC as a commodity pool operator or a commodity trading advisor in connection with the Shares. Consequently, Shareholders do not have the regulatory protections provided to investors in CEA-regulated instruments or commodity pools.
What does this mean? I'm not sure. It's something you would need to perform due diligence on. If everything is OK, if it really does hold the gold it says it holds and so forth, there's no problem. If, however, there were any kind of serious problem, then I think the fact that is not a registered investment company, not a commodities pool, and that shareholders do not have the regulatory protections they have in ordinary ETFs, could become a problem.
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Re: If i want to invest in gold (metal), what is the best way?

Post by Rob5TCP » Tue Oct 04, 2016 8:13 pm

Thank you nisiprius, I was under the impression that GLD/SLV/PPLT were all ETF's. Though in hindsight, I should have realized that would be unlikely. I may convert PPLT and GLD via purchases of metal. Silver is just to much of a hassle to keep.

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Re: If i want to invest in gold (metal), what is the best way?

Post by Bogle_Feet » Tue Oct 04, 2016 9:18 pm

When you buy physical gold (example: 1 ounce gold Eagle bullion coins) you typically pay a premium of about 6% over spot price. The most reputable dealers charge no markup when you sell. With physical gold you have to find a safe place to store, such as in a bank safe deposit box. When you buy and sell it then you are taking a risk when you travel to and from the store with that gold. Don't get robbed!

GLD has an expense ratio of only .4% per year, and you don't have to worry about storing it.

For me GLD makes the most sense. I like to be able to trade on a moment's notice without the hassle and risk of driving down to my local gold dealer.

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Re: If i want to invest in gold (metal), what is the best way?

Post by Watty » Tue Oct 04, 2016 9:49 pm

You also need to understand the special collectibles tax on physical gold and some gold funds and be prepared to keep good records. If you don't know what that is then you need to do a lot more research first.

If you want to buy gold then you should do two things;

1) Write down a list of why you want to own gold and what you want it to protect you from.

2) For each of the items on the first list then research what the best way to accomplish each of the goals is. There are likely better alternatives for some of the items on your list.

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Re: If i want to invest in gold (metal), what is the best way?

Post by Watty » Tue Oct 04, 2016 9:51 pm

You also need to understand the special collectibles tax on physical gold and some gold funds and be prepared to keep good records. If you don't know what that is then you need to do a lot more research first.

If you want to buy gold then you should do two things;

1) Write down a list of why you want to own gold and what you want it to protect you from.

2) For each of the items on the first list then research what the best way to accomplish each of the goals is. There are likely better alternatives for some of the items on your list.

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Re: If i want to invest in gold (metal), what is the best way?

Post by rattlenap » Tue Oct 04, 2016 11:08 pm

math22 wrote:I dont want to buy shares from a specific miner. I am not sure if i want to buy a mutual fund, like FSAGX.
I was looking into this SPDR Gold Trust (ETF)(NYSEARCA:GLD)

What is this ETF gold trust? Do they hold stocks from miners? Or just pure gold?

As someone who actually invested into Gold at one time. I will tell you to stay out of it until the spot price goes below $500 an ounce (give it 10 years). That is the real value of it. I bought all of mine back in 2001 when the spot price was just below $275 per ounce and later sold when it reached $800. If I get back into it again, I won't buy until it gets down to at least $350 and even then I will never buy more than a pound of it. I will then wait for the next crisis to happen and sell it. Cheers!

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Re: If i want to invest in gold (metal), what is the best way?

Post by targ » Wed Oct 05, 2016 5:42 am

One other thing often overlooked with buying physical gold - sales tax. Depending on where you live, you may have to pay sales tax on the initial purchase. That essentially adds one more expense that you have to make up for when you sell.
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Re: If i want to invest in gold (metal), what is the best way?

Post by nisiprius » Wed Oct 05, 2016 6:32 am

Bogle_Feet wrote:...reputable dealers...
That's another problem. Not just with gold, of course. "Reputable" is an almost useless word; it is a question masquerading as an answer. Obviously, it is possible to know that a business is disreputable, if there are actual complaints and legal actions and such. But it is hard to determine objectively if a business is "reputable," and, furthermore, reputable business can and have become disreputable with surprising speed.

It's a circular definition. Reputable firms never have problems, but that's only because firms that do have problems are, by definition, disreputable. Or to put it another way... riffing on a familiar disclaimer... past reputation is no guarantee of future reputation. A firm that's in financial trouble and knows that it can't meet all of its commitments will still try to maintain a façade of normality up to the last minute... to preserve its reputation.

There was a note in this forum about a popular online gold dealer that had been reliable, and suddenly started to have serious problems. Which was it? Yes...
Image

Just to emphasize that the problem is with "reputable," not with "gold," Reserve Primary money market fund would be another case in point--literally the oldest money market fund, the one created by the Bruce Bent and his colleagues, who invented the idea. What could possibly be more "reputable?" In fact, no more than a year or so before it collapsed, in 2007, Bent was issuing public warnings about unsafe things that he said too many other money market funds were doing ("SIVs," something related to subprime).

The point is that ideally you really do want something more than "reputability" backing any important purchase.

I don't think investors adequately appreciate the Investment Company Act of 1940. Mutual funds (and true ETFs) aren't perfect, but the regulations do put mutual funds into a completely different, and more suitable category of investments than hedge funds or individual securities or direct holdings of "alternatives." And, the constant pushing, pushing, pushing by mutual funds and ETFs--using derivatives and leverage to move farther and farther away from traditional mutual fund territory, and become more and more like hedge funds--is a source of concern.
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Re: If i want to invest in gold (metal), what is the best way?

Post by rgs92 » Wed Oct 05, 2016 11:14 pm

I remember in the 1990s the conventional wisdom was to have 5 to 10% of your portfolio in precious metals. What happened to that advice?

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Re: If i want to invest in gold (metal), what is the best way?

Post by SurferD » Thu Oct 06, 2016 12:09 am

I would add from personal experience (and loss) that the saying "if you don't hold it (as physical) you don't own it"..holds very true..Gold unfortunately attracts many shady characters who get greedy and in time that greed turns to theft and loss..so beware :!:
SurferD

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Re: If i want to invest in gold (metal), what is the best way?

Post by Valuethinker » Thu Oct 06, 2016 3:35 am

SurferD wrote:I would add from personal experience (and loss) that the saying "if you don't hold it (as physical) you don't own it"..holds very true..Gold unfortunately attracts many shady characters who get greedy and in time that greed turns to theft and loss..so beware :!:
SurferD


There's at least one O Henry story on this theme, I am sure.

Gold, Frankincense, Myrrh. And 3 Persian Kings. Stable stores of value :-).

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Re: If i want to invest in gold (metal), what is the best way?

Post by Valuethinker » Thu Oct 06, 2016 3:36 am

rgs92 wrote:I remember in the 1990s the conventional wisdom was to have 5 to 10% of your portfolio in precious metals. What happened to that advice?


Do keep up... it's Bitcoin now ;-).

If gold doubles from here, the discussions will rage here, for sure ;-).

It's just that gold ain't done so well of late ...

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Re: If i want to invest in gold (metal), what is the best way?

Post by cinghiale » Thu Oct 06, 2016 3:54 am

I agonize over gold.

I have 5% of my portfolio in Central Fund of Canada (CEF), a closed-end fund that holds 60% gold and 40% silver bullion. It has been around since 1961, holds 97% bullion (rather than certificates), and is an international border away from potential confiscation.

Like many posters so far, I'm not sure that gold is an "investment." At best, it is a hybrid: a cross between investment and insurance. I think of it more like a hedge against the unforeseen.

OK, "unforeseen" sounds too vague. How about this? How about 19.6 trillion dollars in aggregate federal debt, with best estimates calling for trillion-a-year additions for the next four years, at least. How about state, municipal, corporate, and personal debt adding how many tens of trillions more? How about Deutsche Bank and its derivatives?

I'm not a gloom and doomer. But I cannot but wonder how the current mountain of debt will be solved, resolved, or even confronted.

As a good Popperian, I look for ways to falsify my "theory" of why gold matters. Mining stocks and commodities funds hold no attraction. But there's something about the metals themselves as a store of value and a hedge against a Big Black Swan Event that keeps me with the CEF holding.
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Re: If i want to invest in gold (metal), what is the best way?

Post by halfnine » Thu Oct 06, 2016 5:29 am

cinghiale wrote:I agonize over gold.

I have 5% of my portfolio in Central Fund of Canada (CEF), a closed-end fund that holds 60% gold and 40% silver bullion. It has been around since 1961, holds 97% bullion (rather than certificates), and is an international border away from potential confiscation.

Like many posters so far, I'm not sure that gold is an "investment." At best, it is a hybrid: a cross between investment and insurance. I think of it more like a hedge against the unforeseen.

OK, "unforeseen" sounds too vague. How about this? How about 19.6 trillion dollars in aggregate federal debt, with best estimates calling for trillion-a-year additions for the next four years, at least. How about state, municipal, corporate, and personal debt adding how many tens of trillions more? How about Deutsche Bank and its derivatives?

I'm not a gloom and doomer. But I cannot but wonder how the current mountain of debt will be solved, resolved, or even confronted.

As a good Popperian, I look for ways to falsify my "theory" of why gold matters. Mining stocks and commodities funds hold no attraction. But there's something about the metals themselves as a store of value and a hedge against a Big Black Swan Event that keeps me with the CEF holding.


This.

I do not know how this grand experiment of debt and derivatives is going to end either. And while Bogleheads and especially those from America are generally adverse to gold there is probably still at least another 70% of the world who place some value in gold.

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Re: If i want to invest in gold (metal), what is the best way?

Post by nisiprius » Thu Oct 06, 2016 6:03 am

rgs92 wrote:I remember in the 1990s the conventional wisdom was to have 5 to 10% of your portfolio in precious metals. What happened to that advice?
I don't think it was the conventional wisdom. As they say at Wikipedia, "citation needed." I am sure that people selling gold said that it was the conventional wisdom, but was it?
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Re: If i want to invest in gold (metal), what is the best way?

Post by Index Fan » Thu Oct 06, 2016 7:37 am

Worth repeating-

gerntz wrote:We have close to 10% of our assets in GLD and/or PHYS.

I see gold as a currency that can't be inflated by governments, not as a commodity. Commodities are consumed & very little gold is.

True that gold is only worth what someone is willing to pay for it. What tangible asset isn't that way? People are willing to pay 35x+ for gold today than 45 years ago when it was $35/oz. Who's right?

Happy hunting & good luck. Don't forget to trust your government with your money.
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Re: If i want to invest in gold (metal), what is the best way?

Post by j0nnyg1984 » Thu Oct 06, 2016 8:00 am

Physical gold? https://comparegoldprices.com

Electronic gold? GLD

Physical silver? https://comparesilverprices.com

Electronic silver? SLV

I always pay the extra premium to buy my physical metals with a credit card, btw. The rewards I earn take care of most of the extra fees, and the rest I'm okay with as peace of mind.

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Re: If i want to invest in gold (metal), what is the best way?

Post by Valuethinker » Thu Oct 06, 2016 8:10 am

cinghiale wrote:I agonize over gold.

I have 5% of my portfolio in Central Fund of Canada (CEF), a closed-end fund that holds 60% gold and 40% silver bullion. It has been around since 1961, holds 97% bullion (rather than certificates), and is an international border away from potential confiscation.

Like many posters so far, I'm not sure that gold is an "investment." At best, it is a hybrid: a cross between investment and insurance. I think of it more like a hedge against the unforeseen.


That's consistent with William Bernstein's excellent article on the subject, title something like "the most patient asset".


OK, "unforeseen" sounds too vague. How about this? How about 19.6 trillion dollars in aggregate federal debt, with best estimates calling for trillion-a-year additions for the next four years, at least. How about state, municipal, corporate, and personal debt adding how many tens of trillions more? How about Deutsche Bank and its derivatives?


Like the French generals in 1940 you may well be fighting the last war.

Federal Debt has to be compared to GDP and things don't look horrible there. Also to US taxing ability, and again US govt has lowest govt spending/ GDP ratio in developed world other than Japan. So yes, you too could have a VAT tax (like the rest of us).

What you do want to look at is what the market thinks about this. And the answer is that the US government had the lowest borrowing rate in the 250ish years of the Republic (for this long a period).

So the interest burden on the debt is not onerous. The real interest rate is not higher than the long run GDP growth rate.

Confusing public debt, particularly Federal public debt, with private debt really just muddies the picture. What makes private debt tricky is the possibility of default and *that* means you can have banking crises and crises of confidence aka recessions and depressions. See Hyman Minsky (or summaries thereof as he is apparently very turgid to read).

(My own thought is we are experiencing a renaissance of James Tobin, ie a modified Keynesian view. The enemy is secular stagnation and the remedies are in part more of what government does, not less; irony intended, what we really need right now is a nice good war, suck up surplus labour, manufacture and expend huge amounts of ammunition, turbocharge R&D. Say another Korea ;-) or thinking more positively (Cold War) a Sputnik).

Note though that the US has significantly deleveraged (privately) since 2008 relative to GDP. The economy has recovered, but debt accumulation has not (there are some troubling signs of trouble in specific areas, eg sub prime car loans). People are exploiting low interest rates to pay down debt.

Derivatives? Remember a swap is an exchange of payments. So the gross number nets out to zero-- one party has losses equal to the other's profits. Now, if a Lehman Brothers goes broke, then you get real losses because of default of counterparty (this is why they bailed AIG, the leading writer of Credit Default Swap protection on CDOs-- see Selena Gomez & Richard Thaler in the casino in The Big Short). Since 2008 significant measures have increased the capital of financial intermediaries (not enough, but still big rises) and the visibility of the trades (via Clearing Houses).

DB probably gets bailed at some point. But no one is going to let it create another Lehman (things like the change in MMF are firebreaks being put in place before the fire breaks out again).

The thing about debt is that it's a transfer from future consumption to current consumption. As long as your next generation is bigger and more productive than the current one, then the debt gets paid (as long as it is issued by a national government like the US). The US is not Greece. Nor is it Enron.

I'm not a gloom and doomer. But I cannot but wonder how the current mountain of debt will be solved, resolved, or even confronted.


As it was after WW2. And WW1. Or as it is now. Since it's basically just money sloshing around the system (A owes B owes C borrows money from A), the real issue is if one of the intermediary parties defaults. Hence the Non Performing Loan problem in the Chinese banking system (*there* I *do* worry, the Chinese shadow banking system has financed a real mess of overbuilding).

As a good Popperian, I look for ways to falsify my "theory" of why gold matters. Mining stocks and commodities funds hold no attraction. But there's something about the metals themselves as a store of value and a hedge against a Big Black Swan Event that keeps me with the CEF holding.


Commercial RE has a theoretically higher correlation with inflation. Unfortunately it also has a strong correlation with nominal and real GDP, so in a slump...

That's the same argument with commodities. Unless you get 1970s style stagflation (the 1970s is really the only instance of that in the economic history, other than during wartime).

I agree gold & silver have a degree of hedge against (some) Black Swans, and that's no bad reason to own it.

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Re: If i want to invest in gold (metal), what is the best way?

Post by rbaldini » Thu Oct 06, 2016 8:13 am

lagflag wrote:Precious metal isn't investing in the first place. Investing is when you own a business, metal is not a business.

A number of people have said something like this. I don't get it. By that definition, one cannot invest in bonds or real estate, either, because that is not "owning a business."
Wiki says "To invest is to allocate money (or sometimes another resource, such as time) in the expectation of some benefit in the future." Buying gold in the expectation that it will provide more money or stability in the future would satisfy that definition, no?

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Re: If i want to invest in gold (metal), what is the best way?

Post by BogleMelon » Thu Oct 06, 2016 8:44 am

rbaldini wrote:By that definition, one cannot invest in bonds or real estate, either, because that is not "owning a business."
Wiki says "To invest is to allocate money (or sometimes another resource, such as time) in the expectation of some benefit in the future." Buying gold

in Buying bonds is investing because you lend a business (or government) at a promise of getting your money back + interest. Real estate is a business. You can rent it out and expect rental income, and you can use the rental income to buy more real estate.

rbaldini wrote:will provide more money or stability in the future

What makes you think so? Now this is not owning a business, no interest rate to get back, no expected income (cash flow) from buying and holding the gold so you can reinvest it. This is just speculation. You wish/expect it could provide more money in the future when you sell it. But that doesn't mean it necessary will.
Let me explain it another way, gold can not be used to heal sick people, or feed people. Gold can not be used instead of phones so people can communicate. Gold can't provide a shelter, or warm a cold person instead of clothing. Gold is only something people put on as a fashion (fashion is temporary anyways), and sometimes they buy because they think "will provide more money or stability in the future". But what else gold can do for humanity so that we can consider it an investing?
Excuse my English, it is my second language! | | "One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather

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Re: If i want to invest in gold (metal), what is the best way?

Post by Valuethinker » Thu Oct 06, 2016 9:05 am

nisiprius wrote:
rgs92 wrote:I remember in the 1990s the conventional wisdom was to have 5 to 10% of your portfolio in precious metals. What happened to that advice?
I don't think it was the conventional wisdom. As they say at Wikipedia, "citation needed." I am sure that people selling gold said that it was the conventional wisdom, but was it?


In fact in 1998 we all thought gold was a dead asset. Out of date.

The Bank of England sold half of its gold reserves (approximately the world's 2nd largest at the time).

Why hold an asset which paid no interest and had lost 70% of its value since 1981, when you could buy German government bonds paying 6%? So went the logic

In retrospect this was what marked the turn. But that was also the year when oil fell to $10, and The Economist had a cover article asking if it could go to $5. And oil, unlike gold, is consumed, so in some sense low prices are self rectifying (despite things like fracking, there are not vast reserves of new oil to be found with production costs below $10/bl, although there are probably significant such reserves awaiting exploitation in Iraq, Iran etc.).

Gold is neither created nor destroyed-- attrition on the world stockpile is small. Most of the gold ever mined is sitting in someone's vault or as jewelry, right now. Conversely world gold production has probably been falling. The South African mines are in decline, and refining gold is an environmental disaster zone, so it's been hard to open up new reserves in exotic places.

Much depends on what the Chinese and Indians are up to. To the extent that those countries have excess savings, not legally or at least easily diversifiable into say foreign stocks & property, then gold is appealing as an investment and store of value.

But let me tell you about Bitcoins ;-).

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Re: If i want to invest in gold (metal), what is the best way?

Post by Watty » Thu Oct 06, 2016 10:04 am

One thing that has not been mentioned is that if you buy physical gold then then you need to be concerned about counterfeit gold coins.

If you google this you will see lots of information like this.

http://www.cbsnews.com/news/chinas-late ... old-coins/

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Re: If i want to invest in gold (metal), what is the best way?

Post by rbaldini » Thu Oct 06, 2016 10:25 am

lagflag wrote:
rbaldini wrote:will provide more money or stability in the future

What makes you think so? Now this is not owning a business, no interest rate to get back, no expected income (cash flow) from buying and holding the gold so you can reinvest it. This is just speculation. You wish/expect it could provide more money in the future when you sell it. But that doesn't mean it necessary will.

I don't invest in gold. But some do, and for whatever reason they expect it will provide future value. That makes it an investment, by definition - or at least by the definition I provided from wikipedia. If you want to provide another definition, feel free - but "owning a business" is too strict a definition, IMO. Again, buying bonds or buying real estate does not give you business ownership (giving a loan to a business does not make you a business owner; owning the building in which a business operates does not make you a business owner), but people still talk about these as investments.

lagflag wrote:You wish/expect it could provide more money in the future when you sell it. But that doesn't mean it necessary will.

The same is true of stocks. Does this mean stocks are not an investment?

lagflag wrote:Let me explain it another way, gold can not be used to heal sick people, or feed people. Gold can not be used instead of phones so people can communicate. Gold can't provide a shelter, or warm a cold person instead of clothing. Gold is only something people put on as a fashion (fashion is temporary anyways), and sometimes they buy because they think "will provide more money or stability in the future". But what else gold can do for humanity so that we can consider it an investing?

Stocks also cannot heal or feed people, or do any of the things you mention. Does this mean stocks are not an investment?

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Re: If i want to invest in gold (metal), what is the best way?

Post by njboater74 » Thu Oct 06, 2016 10:27 am

Watty wrote:One thing that has not been mentioned is that if you buy physical gold then then you need to be concerned about counterfeit gold coins.

If you google this you will see lots of information like this.

http://www.cbsnews.com/news/chinas-late ... old-coins/

Can't you just bite the coin to tell if it's real gold?
When the mob and the press and the whole world tell you to move, your job is to plant yourself like a tree beside the river of truth and tell the whole world - 'No, YOU move'--Captain America, Boglehead

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Re: If i want to invest in gold (metal), what is the best way?

Post by BogleMelon » Thu Oct 06, 2016 11:14 am

rbaldini wrote:I don't invest in gold. But some do,

They speculate on gold, not invest. (It is valuable basically only because everyone else thinks it is valuable)
rbaldini wrote:and for whatever reason they expect it will provide future value. That makes it an investment, by definition - or at least by the definition I provided from wikipedia.

Have you checked Wikipedia definition for speculation? According to Wikipedia, Speculation is the purchase of a good with the hope that it will become more valuable at a future date. This to me applies to people who buy gold hoping to have a more value in the future.
https://en.wikipedia.org/wiki/Speculation

rbaldini wrote: If you want to provide another definition, feel free - but "owning a business" is too strict a definition

You are right. Allow me to tweak the definition a little bit, "owning a business or be a part of it"
rbaldini wrote:
lagflag wrote:You wish/expect it could provide more money in the future when you sell it. But that doesn't mean it necessary will.

The same is true of stocks. Does this mean stocks are not an investment?

I agree, buying stocks involve some speculations, but stocks generate dividends, gold is not, if the company is profitable enough and decided not to distribute dividends, the value of stocks will increase because the company makes profit (theoretically of course, other events could affect short term performance). But remember, gold price increase for only one reason: demand, which makes it pure speculation IMHO.
rbaldini wrote:
lagflag wrote:Let me explain it another way, gold can not be used to heal sick people, or feed people. Gold can not be used instead of phones so people can communicate. Gold can't provide a shelter, or warm a cold person instead of clothing. Gold is only something people put on as a fashion (fashion is temporary anyways), and sometimes they buy because they think "will provide more money or stability in the future". But what else gold can do for humanity so that we can consider it an investing?

Stocks also cannot heal or feed people, or do any of the things you mention. Does this mean stocks are not an investment?
Stocks is a part of the real company. If it is a pharmaceutical company, and you own its stocks, then you own the company that heal people. The more people the company heal, the more valuable your investment is. Stocks is the way to claim that you own that business which feed, heal, the people.

A question, since there is difference between pure speculation and investing, if buying gold (hoping it goes up later) is not pure speculation, then can you give me other examples where we can name it pure speculations?
Excuse my English, it is my second language! | | "One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather

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Re: If i want to invest in gold (metal), what is the best way?

Post by rbaldini » Thu Oct 06, 2016 12:12 pm

lagflag wrote:A question, since there is difference between pure speculation and investing, if buying gold (hoping it goes up later) is not pure speculation, then can you give me other examples where we can name it pure speculations?

I'd argue that speculation is a subset of investing. Investing is putting money into some venture in the hope that you get money in return in the future. When you speculate, this is exactly what you are doing; the form of return is the sale of the goods which has (hopefully) increased in price, as opposed to interest, dividends, whatever. Of course, it may not work, but that is true of any investment.

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Re: If i want to invest in gold (metal), what is the best way?

Post by rbaldini » Thu Oct 06, 2016 12:14 pm

lagflag wrote:It is valuable basically only because everyone else thinks it is valuable

Of course, the same is true of cash and credit, but I still really like having both.

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Re: If i want to invest in gold (metal), what is the best way?

Post by miles monroe » Thu Oct 06, 2016 12:23 pm

if ya want gold to speculate - gold is not an investment - mutual fund or etf.

if ya want gold as a store of value in an armageddon scenario then coins hidden somewhere in your house. not in a safe deposit box as the banks will be closed.

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Re: If i want to invest in gold (metal), what is the best way?

Post by topper1296 » Thu Oct 06, 2016 12:33 pm

I thought about putting up to 5% in SGOL (physical Swiss gold ETF) for "portfolio insurance" , but the exp ration is 0.39% and it has no earnings, no interest or pay a dividend. I don't know if I want a 0.39% drag on part of my portfolio. Thought about buying physical coins to put in a safety deposit box, but then you have pay above spot price and how much as of hassle is it to sell and what type of commission do you have to pay? Do you need special insurance for physical ownership and how much would that be?

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Re: If i want to invest in gold (metal), what is the best way?

Post by alfaspider » Thu Oct 06, 2016 12:41 pm

Valuethinker wrote:
Gold is neither created nor destroyed-- attrition on the world stockpile is small. Most of the gold ever mined is sitting in someone's vault or as jewelry, right now. Conversely world gold production has probably been falling. The South African mines are in decline, and refining gold is an environmental disaster zone, so it's been hard to open up new reserves in exotic places.


I think this is technically true, but misleading. While gold is not being physically destroyed, when gold is used in industrial products (such as wiring terminals) or made into jewelry, it is "destroyed" in the sense that it is removed from the marketplace. The portion that is going to be recycled and turned back into "investable" coins or bars is likely fairly small. Gold is "created" in the sense that it can still be mined. If production has been falling, it's only because there is not sufficient demand for gold to drive up prices to the point mining is profitable- but if there was ever significant demand for gold, that would change.

I don't really see the argument for holding 5 or 10% of your portfolio in Gold for "insurance." If there were a true collapse and my financial asset portfolio declined by 50%, I'm not sure that the 5% in gold would be a very effective balm. Assuming gold doubles, I lose 40% instead of 50% of my portfolio, then if things recover, my gold will likely underperform on the upside. Big whoop. If the apocalypse were upon us and all financial market investments were worthless, I'm not sure why anybody would want a shiny yellow metal with limited practical uses. Better to hoard useful things if you are a doomsday prepper.

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Re: If i want to invest in gold (metal), what is the best way?

Post by nisiprius » Thu Oct 06, 2016 2:16 pm

topper1296 wrote:I thought about putting up to 5% in SGOL (physical Swiss gold ETF) for "portfolio insurance" , but the exp ration is 0.39% and it has no earnings, no interest or pay a dividend. I don't know if I want a 0.39% drag on part of my portfolio. Thought about buying physical coins to put in a safety deposit box, but then you have pay above spot price and how much as of hassle is it to sell and what type of commission do you have to pay? Do you need special insurance for physical ownership and how much would that be?
In many parts of the world where people do not trust their home currency, U. S. $100 bills are used as a store of value and a medium of exchange. In fact it is estimated that 2/3 of all $100 bills are held outside the U.S.

I think there are a certain number of plausible scenarios here in the U.S. in which $100 bills would work better than gold coins, which, among other things, are worth too much. I can't honestly imagine buying anything at the supermarket in exchange for a gold coin. What is the manager going to do, bite it to see if it is real? But they already have means for verifying $100 bills.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Re: If i want to invest in gold (metal), what is the best way?

Post by BogleMelon » Thu Oct 06, 2016 2:39 pm

rbaldini wrote:
lagflag wrote:It is valuable basically only because everyone else thinks it is valuable

Of course, the same is true of cash and credit, but I still really like having both.

Nothing wrong with like to have cash, credit, gold or anything. "Like to have" is something and investing is another thing. You have cash, but can you really say (I am investing in cash)?
And speaking about cash, it is prohibited by law (as far as I know) for a vendor or service provider to turn you down because you have cash and not gold, but almost every vendor I have heard of (Except gold traders) doesn't accept gold as a method of payment.
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Re: If i want to invest in gold (metal), what is the best way?

Post by nisiprius » Thu Oct 06, 2016 2:40 pm

Valuethinker wrote:...That's consistent with William Bernstein's excellent article on the subject, title something like "the most patient asset"...
The Longest Discipline, maybe? But that article is referring to precious metals equity, not physical gold.

However, he has another article, Wild About Harry, giving a mixed but generally positive evaluation of the Harry Browne Permanent Portfolio and the PRPFX mutual fund. (I have to manually tell Safari to view the page using ISO Latin-1 encoding to see it displayed properly). An interesting aspect of the Permanent Portfolio is that according to Bernstein, "If this seems a bit extreme today, realize that by the late 1970s, Harry was looking for a method of diversifying away from an all-precious-metals portfolio."
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Re: If i want to invest in gold (metal), what is the best way?

Post by halfnine » Thu Oct 06, 2016 2:58 pm

nisiprius wrote:.....In many parts of the world where people do not trust their home currency, U. S. $100 bills are used as a store of value and a medium of exchange.......


Do you have a source for this statement? While I have no doubt that $100 bills are abroad I question whether the common population is using it as a store of value or a medium of exchange. My experience abroad is that in most of world if I wanted to exchange USD it would need to be in 20s or less, crisp, and issued recently within the last few years. This makes the use of physical cash problematic and certainly more so over time. My experience is also when it comes to exchanging cash the USD doesn't have a monopoly as the Euro has become quite useful as well.

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