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Gold in what form?

Posted: Tue Jul 29, 2008 9:41 am
by Tramper Al
I am beginning to be swayed toward an inclination to consider a possible position in gold. I consider this a cash substitute, and am influenced by things like the Harry Browne portfolio (25%) to think about a permanent allocation (more like 3-5%).

The older I get, the more I tend toward defensive and wealth-preserving impulses, though I am still relatively young and have children to get through college in the 2020s. It is not a substitute for stocks, so please don't send me a chart of the DJIA vs. gold. Taxes on nominal gains on gold are not particularly friendly.

I strongly suspect this is a bad time to begin holding gold, as it is has become quite pricey and popular, while the US dollar has not. I am not planning any substantial allocation anytime soon, but just exploring choices.

I have in fact never had a cash allocation. I have held gold mining stocks for the last 15 or so years. Also in the real category, I have held REITs in various forms for roughly 15 years also. I have been using broad CCFs for only the last 3 years or so. Have some TIPS.

I am not a doomsdayer at all, so please do not suggest canned food and a tin hat instead. I think the chance of a crippled US dollar and financial markets in my lifetime is low, but not zero.

In addition to the inevitable onslaught of "never hold gold" replies, I wonder if those of you who have looked into this or actually do hold gold can give me some insight into the various methods.

As I understand it, they are (with my uninformed comments):

Bullion coins: Mark-up, commissions, fees for storage/insurance. If at bank deposit box, would worry that it became "unclaimed" due to my inattention or death, coupled with what I consider aggressive practices by banks and others. If buried in the woods, I would not want to make this widely known, even by leaving a map with my lawyer, so good chance it becomes a lost treasure to be found in 200 years. That would make someone's day, yes?

Bullion ETFs: Fees, still dependent on banks, brokers, etc. to back up promises.

Perth Mint: Unallocated seems similar to ETFs, and with commissions, certificate fees, etc. Allocated seems not too much better.

Gold CCFs: Rolling futures, paper assets I suppose. Fees.

The paper asset / counter-party risk thing probably does not bother me all that much, as again I am not proposing to stock up for the end of the world. If significant, I would divide it up among various agents and vehicles anyway. On the other hand, I'd hate to have a gold-based allocation for all those years only to find that it was not there when called upon.

On the other hand, it seems that if you want to hold purchasing power for hundreds of years by holding money in this form, you'd have to do so without ANY ongoing annual expenses.

Thoughts?

Thanks in advance . . .

Posted: Tue Jul 29, 2008 10:23 am
by magellan
Personally, I subscribe to your logic almost exactly. I've owned both gold (mostly GLD) and CCFs in a couple of forms for several years and they certainly have helped buffer me from the storm over the past few years. I may be the only one here who admits to owning GLD, so that may give you pause :( I do think a good collateralized futures approach to holding gold would probably be the best bet overall, if the right instrument were introduced.

For me, the key thing to accept is that holding gold is likely to reduce your portfolio's expected return (at the 50% probability level). In exchange, you should get an increase in your portfolio's likely return at the 80-90% confidence interval.

That's the deal I've accepted in this allocation choice. Admittedly, it's not all that scientific and the research on this is weak. But as someone very comfortable "running the numbers" I'm humble enough to know that financial theory is not all that robust at the margins, and the margins are what I fear.

I suppose my thinking on this is similar to the famous Pascal's Wager where the philosopher Blaise Pascal posits that believing in God is smarter than not believing because it's not that "costly" to believe, and the cost of guessing wrong is quite high (eternal damnation).

Jim

no gold for me

Posted: Tue Jul 29, 2008 10:30 am
by Vig Oren
Sorry but not for me. I held Gold bullion in 1972 in a bank in Switzerland when Pres. Nixon imposed exchange control and in later years I lost $500 $ per oz plus paying the storage fees.

If any thing then only Vanguard PM fund.

Posted: Tue Jul 29, 2008 10:57 am
by Tramper Al
magellan wrote:I suppose my thinking on this is similar to the famous Pascal's Wager where the philosopher Blaise Pascal posits that believing in God is smarter than not believing because it's not that "costly" to believe, and the cost of guessing wrong is quite high (eternal damnation).
I like that analogy. Portfolio insurance for the soul.

Posted: Tue Jul 29, 2008 11:16 am
by mudfud

Posted: Tue Jul 29, 2008 4:29 pm
by Tramper Al
Yikes, my gold question thread is pretty quiet, though of course I realize that this is the gold bug forum.

It's "money" that does not lose its purchasing power. It is a low/negatively correlated asset within a portfolio of stocks and bonds - if that sounds familiar. It can even be used in CCF collateral total return form. It's just one more step into the dark side, perhaps.

Unlike cash currency earning interest, it doesn't have to be taxed or take up tax-deferred space in order to hold its real value. The CG tax situation isn't pretty, but like my stocks maybe 'til death do us part.

Posted: Tue Jul 29, 2008 4:41 pm
by billern
maybe it is time to get your grillz on? http://images.google.com/images?hl=en&s ... a=N&tab=wi.

Posted: Tue Jul 29, 2008 4:45 pm
by stratton
Jewelry? It's wearable for conspicuous consumption purposes. :wink:

Paul

Posted: Tue Jul 29, 2008 4:56 pm
by luckyjimi
HERE'S YOUR BEST IDEA

HAVE ALL YOUR TEETH made of gold like that 007 movie :lol: :lol: :lol:

PRPFX

Posted: Tue Jul 29, 2008 5:32 pm
by epictetus
It might of interest to you to investigate the Permanent Portfolio fund (PRPFX) if you are not familiar with it. Has 20% gold and 5% silver. Is based on H. Browne's ideas. Does well in taxable account also.

Just something to consider as you are looking at options.
Kelly

Posted: Tue Jul 29, 2008 6:55 pm
by Tall Grass
luckyjimi wrote:HERE'S YOUR BEST IDEA

HAVE ALL YOUR TEETH made of gold like that 007 movie :lol: :lol: :lol:
I've often wondered whether or not the funeral home digs those puppies out of your mouth as a little "bonus" for their services. And what happens to gold teeth when a cremation is chosen?

Posted: Wed Jul 30, 2008 6:34 am
by chicagobear
I own lots of gold (bought at much lower prices- I am not buying now since I am full up). For a relatively small amount your best bet is physical bullion coins. The best deal I've found is with www.tulving.com. You can buy krugerrands for close to spot and there's free shipping. He has a good reputation and I've never had a problem. Keep the coins in a safe deposit box (which you may already have for other items) and there's no or little yearly expense. The ETFs are ok but cost .4% per year in embedded carrying costs and you would have to pay the collectibles capital gains tax in order to get your money out whereas there's no reporting for coins disposed of in a private sale. There's also the Central Fund of Canada (CEF) closed end fund which is a little more expensive and has some messy tax implications for Americans. It's probably safer than the ETFs. You can buy certificates or open an account at the Perth Mint in Australia. I chose to open an account (minimum account size is $50,000). There's no yearly fee with an unallocated account. Some people are nervous about the credit risk of the Perth Mint but there is a full guarantee from the state of Western Australia. I personally think it is worth the risk to have gold in a stable foreign country. An advantage of the Perth Mint is that you can go and physically collect your gold in person or have it shipped somewhere else while that is not really possible with the ETFs (unless you have millions in the ETF. Then I think you can get the bullion). You have to report an account at the Perth Mint to the IRS each year while the certificates are non-reportable at the current time.

Posted: Wed Jul 30, 2008 8:21 am
by danwalk
Just this morning an article came out in Seeking Alpha that speaks to many of this issues in this thread.

"5 Best Ways to Get into Gold", from Money Morning, discusses equity plays, ETFs, and bullion accounts from places like the Perth Mint, Kitko, Monex, and EverBank's Select Metals Account. For direct holding, they recommend EverBank because,
First off, EverBank’s minimum deposit is 98% lower than its competitors, and its commission costs are up to 86% lower than other metals brokers and bullion banks.

Second, it offers two types of gold accounts:

* Unallocated: Your purchased gold is pooled with that of other investors, eliminating storage and maintenance costs. The minimum deposit amount for unallocated accounts is a scant $5,000.

* Allocated: You directly own the gold you purchase, held in your own private account. The minimum deposit for allocated accounts is $7,500.
Although I don't plan in investing in gold personally, I have found this thread to be quite interesting. I hope this helps.

Dan

Posted: Wed Jul 30, 2008 9:29 am
by Tramper Al
Interesting, thank you.

Chicago Bear - With regard to the Perth Mint, when you say "certificate", is that what they call unallocated? The web site indicates that you do get a certificate, and they point you to a dealer in Maryland for purchase. Commissions or other fees are quite unclear to me, after looking over the Perth and Dealer websites. The Seekingalpha feature suggests Perth commission is 3%, but I'm not sure if that is for unallocated or allocated, or both. And are you using Perth "account" as synonymous with the allocated version? Thanks.

Danwalk - Thanks, that feature is somewhat helpful, though still a bit sketchy. The Everbank site is not very forthcoming about fees either. On the allocated side, I dug and found storage fees of 1.5%, per year, payable in advance with no rebate for partial year. There is also an unspecified fabrication fee, a necessary step in going from paper account to physical delivery. The unallocated side is also a bit unclear to me. They indicate buy transactions "within" 1% of the public London Fixing Price, so I am taking that to mean a 1% commission, though I don't know what other fees might apply.

Perth also have the same sort of fees for conversion from unallocated paper account to physical delivery, though I can't seem to quantify them.

The bullion coins themselves can be bought locally of course, but there are substantial costs too. My local small bank actually stocks US Eagles for sale. They look up a price, which was $960 range Monday morning when I think the London spot price was more like $929. Of course each country's coin does have a built-in premium, varying a bit from one to another. But then the bank adds a 4% fee. So even if the price were decent, that's 10 years of a 0.40% ER ETF. Then you have your deposit box fees.

All in all, it seems a fairly expensive, fee-laden, pay-the-middleman set of investment vehicles and holding methods. Much like buying oil, I suppose.

Posted: Wed Jul 30, 2008 2:54 pm
by chicagobear
Tramper Al wrote: Chicago Bear - With regard to the Perth Mint, when you say "certificate", is that what they call unallocated? The web site indicates that you do get a certificate, and they point you to a dealer in Maryland for purchase. Commissions or other fees are quite unclear to me, after looking over the Perth and Dealer websites. The Seekingalpha feature suggests Perth commission is 3%, but I'm not sure if that is for unallocated or allocated, or both. And are you using Perth "account" as synonymous with the allocated version? Thanks.
No. You can buy certificates through a broker (with commission) with the underlying metal held on an allocated or unallocated basis at the Mint. You can also open an account directly at the Mint with no need for a broker, which would also be held on an allocated or unallocated basis. In both cases, there is a fee for allocated storage and none for unallocated. I have read that the most people choose the free unallocated storeage due to the guarantee from the state of Western Australia.

Posted: Wed Jul 30, 2008 3:08 pm
by mudfud
chicagobear wrote: The best deal I've found is with www.tulving.com. You can buy krugerrands for close to spot and there's free shipping.

Chicagobear,

Thanks for the link. They certainly have great prices. Have you bought from them lately? Did you wire your cash?

Thanks again,
Mud

Posted: Wed Jul 30, 2008 3:23 pm
by chicagobear
mudfud wrote:
chicagobear wrote: The best deal I've found is with www.tulving.com. You can buy krugerrands for close to spot and there's free shipping.

Chicagobear,

Thanks for the link. They certainly have great prices. Have you bought from them lately? Did you wire your cash?

Thanks again,
Mud
No, I haven't bought anything for several years. I would pay with a personal check which he would put a hold on. People on two other boards I read (Prudent Bear and Daily Reckoning) say they currently buy from him without problem.

Posted: Wed Jul 30, 2008 4:59 pm
by mephistophles
mudfud wrote:
chicagobear wrote: The best deal I've found is with www.tulving.com. You can buy krugerrands for close to spot and there's free shipping.

Chicagobear,

Thanks for the link. They certainly have great prices. Have you bought from them lately? Did you wire your cash?

Thanks again,
Mud
I just own some gold bullion which I keep in my safe deposit box.

Posted: Wed Jul 30, 2008 10:01 pm
by dave.d
I've sold bullion coins and found the fees utterly ridiculous, in fact prohibitive (several percent, not to mention the trip to the safe deposit box and then across town to the coin dealer). I now own a little GLD instead. I don't have to wire money, I don't have to research fees, and I can trade it anytime the market is open for no more expense than an ordinary brokerage transaction. GLD has huge volume; it's extremely liquid; the spreads are miniscule.

From an investment perspective, you don't make money by owning gold, you make money by rebalancing it. So make sure that however you own it gives you the ability to make incremental trades for reasonable cost and trouble.

Posted: Wed Jul 30, 2008 10:33 pm
by Speedy
Agree with dave d. I also own a little bit of GLD.

Posted: Thu Jul 31, 2008 4:08 am
by pastafarian
magellan wrote:I suppose my thinking on this is similar to the famous Pascal's Wager where the philosopher Blaise Pascal posits that believing in God is smarter than not believing because it's not that "costly" to believe, and the cost of guessing wrong is quite high (eternal damnation).
Interesting investment philosophy. Owning gold for the last twenty years until it rebounded would have been very costly IMO. You believe in the value of gold because recent (last three years or so) market trends confirm your belief. I'd be willing to bet that your portfolio is not 100% gold/CCFs so you really don't believe, you're hoping you covered all your options. The evidence of MPT demonstrates (at least to me) the power of diversified asset allocation, so for me there's no need to accept any form of Pascal's Wager. No wasted time hoping I've picked the right portfolio salvation. :D

Cheers

Posted: Thu Jul 31, 2008 5:47 am
by Tramper Al
dave.d wrote:I've sold bullion coins and found the fees utterly ridiculous, in fact prohibitive (several percent, not to mention the trip to the safe deposit box and then across town to the coin dealer). I now own a little GLD instead. I don't have to wire money, I don't have to research fees, and I can trade it anytime the market is open for no more expense than an ordinary brokerage transaction. GLD has huge volume; it's extremely liquid; the spreads are miniscule.

From an investment perspective, you don't make money by owning gold, you make money by rebalancing it. So make sure that however you own it gives you the ability to make incremental trades for reasonable cost and trouble.
I agree that the physical gold is not what you'd want to be re-balancing small quantities with, as the transaction costs would dwarf any annual expense savings (vs. 0.40 GLD, for example).

In other asset classes, I have sometimes elected to hold it in one form at the core, with low expenses but not as accessible or liquid. And then hold in another form at the margin, a bit more expensive but easily bought/sold for any rebalancing needs. It may not be the best example, but something like owning several commercial properties (directly) as well as REIT ETF shares, that you consider together for AA purposes.

Posted: Thu Jul 31, 2008 1:25 pm
by MitchL
Thanks, Al, for posting a question that I've been pondering myself. I was thinking about buying some gold as part of an emergency fund, not to take the place of any of my usual investments.

I came across BullionVault.com reading a newspaper article. Had you heard of this? It looks legit the best I can tell. The only concerns I had were storing an amount of gold outside the country and needing to disclose this to the Treasury department and also the 28% tax rate on gains...

Posted: Thu Jul 31, 2008 4:08 pm
by eurowizard
Heres what I do with my "Gold" portion of my permanent portfolio.

My AA is based on the permanent portfolio but scaled back so that 80% of my portfolio is PP based and 20% is variable based.

Therefore I have 20% "gold" in my portfolio.

However rebalancing and storing would make it complicated to have it all in gold and I want to hedge against gold slightly in case theres some magical space gold reserve found or a new way to transmutate it from lead or something. Obviously very low chance of that happening but I can achieve similar inflation protection in commodities.

So here is what I do:

1/2 physical gold coins
1/2 CCF - Pimco PCRIX

The bank safe deposit concerns are valid. A small box is approximately $20 per year. So I would feel safe having $10k in a single box. Thats a very low expense ratio and its not putting everything in a single box.

I would probably feel safe having $10k gold at home, then $10k gold in one safe deposit box, then another $10k in another box. Once I got $100k in gold, I would likely have $50k of it put in a swiss bank and then have 4 boxes locally with 10k each and 10k at home. Then anything additional goes into the swiss bank until $100k and then open a second account at a diff swiss bank.

I would feel comfortable going as far as 25% gold 75% CCF before I felt the need to rebalance between the two. The CCF has 1/3 precious metals so its not a big deal. I just prefer not to sell anything and instead rebalance with new money.

Re: Gold in what form?

Posted: Tue Aug 23, 2016 2:41 pm
by lemonPepper
Trying to resurrect the old thread. I want a 5% allocation to gold. Anybody know where i can buy IAU or GLD commission free?

Re: Gold in what form?

Posted: Tue Aug 23, 2016 2:52 pm
by tludwig23
lemonPepper wrote:Trying to resurrect the old thread. I want a 5% allocation to gold. Anybody know where i can buy IAU or GLD commission free?
Don't think you can.

Re: Gold in what form?

Posted: Tue Aug 23, 2016 2:54 pm
by Rob5TCP
At $7 a trade - is it worth bothering to look around to where you can buy GLD commission free?

Re: Gold in what form?

Posted: Tue Aug 23, 2016 3:01 pm
by Atgard
Just in case anyone is reading this very old thread, please check the dates... and know that Tulving filed for bankruptcy and had all kinds of problems. (There are other reputable online dealers, APMEX jumps to mind.)

As for storage, I prefer safety deposit boxes. Sure, there's some theoretical chance of the bank being destroyed or the vault robbed, but what are the odds someone is going to go all Mission Impossible and clean out your box, especially if you don't generally boast to criminals that you have gold stuffed in box #123 at Bank XYZ? And boxes are cheap or free depending on your bank relationship.

Re: Gold in what form?

Posted: Tue Aug 23, 2016 3:08 pm
by nisiprius
Atgard wrote:... Tulving filed for bankruptcy and had all kinds of problems...
What was the experience for Tulving's customers? I started to ask some questions about whether it was like the failure of an FDIC-insured bank (not even inconvenience for depositors), like Reserve Primary (people eventually got over $0.99 on the dollar back but it took two years, or whether there were really losses--in dollars or in ounces of metal. I decided to Google...

Answer: It was serious. People sent money to Tulving and experienced huge delays receiving their metal. Someone send 220 ounces of gold to Tulving and couldn't get them to pay her, so we're talking about a six-figure loss.

Re:

Posted: Tue Aug 23, 2016 3:11 pm
by Epsilon Delta
Tramper Al wrote:
magellan wrote:I suppose my thinking on this is similar to the famous Pascal's Wager where the philosopher Blaise Pascal posits that believing in God is smarter than not believing because it's not that "costly" to believe, and the cost of guessing wrong is quite high (eternal damnation).
I like that analogy. Portfolio insurance for the soul.
An analogy that compares something that is infinite (eternal salvation) with something that is finite (utility of gold in a crisis) is suspect.

Re: Gold in what form?

Posted: Tue Aug 23, 2016 3:43 pm
by TMCD75
Buy Mexican gold, preferably the 50 Pesos. They are large, beautiful gold coins that actually contain 1.205 troy ounces of gold per coin. I like them because the premiums on them are much, much cheaper than other gold coins. Don't buy too many smaller gold coins like the 1/10th oz American Gold Eagle, the premiums on small coins are high. Buy one ounce coins or the 1.205 coins I described above. Mexican gold is definitely the cheaper entry.

Take possession of your coins, buy a safe and be done with it. There are horror stories about other methods of holding gold. While you're at it, buy silver too. Silver has a bigger upside than gold AND if we are in a war torn situation, you want to pay your bribes, buy food, and other important decisions with silver. Gold would be my last resort in a SHTF situation. You would use gold to save your families' lives...silver for rides to town, groceries, etc.

For the record, I'm not a prepper but am familiar enough with precious metals to understand just how important they are in that situation. A catastrophic storm event, think Katrina or Sandy, could absolutely become a dog eat dog scenario where society crumbles and banks/grocery stores are robbed/looted.

Re: Re:

Posted: Tue Aug 23, 2016 4:05 pm
by happyisland
Epsilon Delta wrote:
Tramper Al wrote:
magellan wrote:I suppose my thinking on this is similar to the famous Pascal's Wager where the philosopher Blaise Pascal posits that believing in God is smarter than not believing because it's not that "costly" to believe, and the cost of guessing wrong is quite high (eternal damnation).
I like that analogy. Portfolio insurance for the soul.
An analogy that compares something that is infinite (eternal salvation) with something that is finite (utility of gold in a crisis) is suspect.
Strange that Pascal's Wager gets used every once in a while on these boards as an analogy - it is not the most well-constructed of philosophical arguments. See for example: https://scepticalprophet.wordpress.com/ ... als-wager/

Re: Gold in what form?

Posted: Tue Aug 23, 2016 4:11 pm
by lemonPepper
Rob5TCP wrote:At $7 a trade - is it worth bothering to look around to where you can buy GLD commission free?
only reason is I'm starting with a small portfolio ($120k) and I will be buying more gold as I save more. So I may have a few buy transactions every year if gold drops in price or a sell transaction if it goes up significantly.

Re: Gold in what form?

Posted: Tue Aug 23, 2016 4:16 pm
by evilpiaget
For a small PM investor I would recommend holding bullion yourself. I use bullionstacker.com I regularly buy gold and silver for close to or under spot.

Re: Gold in what form?

Posted: Tue Aug 23, 2016 4:39 pm
by evilpiaget
tludwig23 wrote:
lemonPepper wrote:Trying to resurrect the old thread. I want a 5% allocation to gold. Anybody know where i can buy IAU or GLD commission free?
Don't think you can.
TryRobinhood-

Central Fund of Canada has a discount to NAV- with 40% silver exposure.

Re: Gold in what form?

Posted: Tue Aug 23, 2016 7:37 pm
by lemonPepper
evilpiaget wrote:
tludwig23 wrote:
lemonPepper wrote:Trying to resurrect the old thread. I want a 5% allocation to gold. Anybody know where i can buy IAU or GLD commission free?
Don't think you can.
TryRobinhood-

Central Fund of Canada has a discount to NAV- with 40% silver exposure.
Just looked into robinhood. They don't support an IRA. I haven't made an IRA contribution for this year yet so I was hoping to buy hold thru IRA as gold gets taxed at collectibles rate

Re: Gold in what form?

Posted: Tue Aug 23, 2016 8:41 pm
by miles monroe
gold isn't an investment, but if one wants to speculate then use GLD.

if one wants gold as a store of value in an armageddon situation, then buy coins and keep them hidden in your house. in an armageddon situation coins in a safe deposit box aren't gonna help ya when the banks are shuttered.

Re: Gold in what form?

Posted: Tue Aug 23, 2016 9:02 pm
by in_reality
lemonPepper wrote:
evilpiaget wrote:
tludwig23 wrote:
lemonPepper wrote:Trying to resurrect the old thread. I want a 5% allocation to gold. Anybody know where i can buy IAU or GLD commission free?
Don't think you can.
TryRobinhood-

Central Fund of Canada has a discount to NAV- with 40% silver exposure.
Just looked into robinhood. They don't support an IRA. I haven't made an IRA contribution for this year yet so I was hoping to buy hold thru IRA as gold gets taxed at collectibles rate
You should check out https://www.regalassets.com and get their GOLD IRA roll-over kit with includes a FREE DVD of the award winning documentary of the HIDDEN SECRETS of the Federal Reserve!!!!!!!

I'm laughing now but wait till inflation kicks in ...

Regal Assets seems to be pretty respectable but do your own due diligence...

Re: Gold in what form?

Posted: Tue Aug 23, 2016 10:48 pm
by Rob5TCP
On Regal assets you have to do a little digging to find this:

"The difference between our sell (also known as ask) and our buy (also known as bid) is referred to as our spread. Our spread currently ranges between 3% and 20% on all of our precious metal products. Spreads vary significantly by type of precious metal, client investment amount and over time based on supply and demand issues. "

I just have a hunch that collectable coins have the greater spread and that sales people tend to push those. Just a bunch. Goldline was famous for their SPREADS on coins.

On a 20% spread - you would have to have a 25% increase just to break even (100/80) 80 back to 100 25%.
Sounds like a winner NOT

I have bought from Apmex (not coins) and the spread in some cases was less than 2%. With my credit card (on EBay) it was almost an even spread.