investing in precious metals

What are the options for investing in precious metals?

- Buying actual gold and silver.

- Buying ETFs such as GLD. What are the risks here other than the price of gold itself?

- Gold Money

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Do folks consider this safe? Are there any other options?

Thanks, Anoop

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Reply to
anoop
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Several years ago I bought silver in physical form, in 100 oz silver bars, from Kitco.com. I think that I had 7 such bars, but I sold them all several years ago. It is very easy to own metal in physical form, plus it is easy to avoid paying capital gains tax if it appreciates.

I see nothing wrong with GLD either, assuming that you want to bet on gold.

No idea about goldmoney.com.

Reply to
Igor Chudov

This question is phrased in a way that indicates you really don't want to be talked out of this. Long term, gold is a losing proposition, and I'd suggest that the word "investment" is not even applicable to gold. Gold has shown itself to do no better than inflation and depending on the timespan, to just keep up with it. So TIPs are a better choice. In the case of the short term, the use of gold is akin to market timing. So if you were prescient enough to know that gold was about to go on a tear, you'd likely have been better off buying inverse S&P ETFs to short the market. If you insist on being in gold, the ETF is my first choice, but a diversified gold mining mutual fund may be better, as the mines' profits tend to spike as gold rises, and the return is higher than the rise in the price of gold. This last remark is based on an observation I made years ago, and I have no current data to support. I saw Igor's reply as well, and suggest that any advice to commit tax fraud has no place on this NG.

Joe

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Reply to
JoeTaxpayer

Futures contracts that would have to be periodically rolled forward.

Gold and silver are much better for speculation purposes than for investing purposes. This applies for the actual metals and for mining stocks.

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Reply to
catalpa

How do you avoid paying the capital gains tax?

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Reply to
Greg Hennessy

A quick look at their website makes me think this is the same kind of scam as DxInOne which I wrote about here some time ago.

(As an aside, I was asking here for documentation at that time so that I could prove that DxInOne was a scam to an associate. A quick Google and I see now that there's tons of evidence available now. I hope he didn't put in too much money...)

-Will

william dot trice at ngc dot com

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Reply to
Will Trice

Pay to get in, pay to get out, the metal would have to go up 25% just for you to break even. That doesn't sound like a good plan.

ETFs that invest in mines and processing companies, which just as often as not are scams or shell companies. Look at all the people that got burned in the late 90s when the Indonesian gold rush turned out to be totally fake. Again, not a good plan.

This looks like one of those scams where they sell the same ounce of gold to 10 different people. Everything works fine until someone asks to have their gold shipped to them. Once the scam cannot send out any more gold, the whole thing collapses. Again, not a good plan.

Invest in a diversified portfolio of securities and stocks.

-john-

Reply to
John A. Weeks III

I looked at the website and did not find the company to be trustworthy enough (no audit, etc).

It is a lot easier to just buy gold bars at Kitco and keep them in a bank deposit box without worrying about some website's integrity. Just

20-40 dollars per year in bank vault costs.

As another poster mentioned, I would not personally buy gold at the current prices, and gold does not pay dividends.

Silver, at least, is an important industrial metal with certain demand for it that depends on more than fashion.

Reply to
Igor Chudov

I am buying GLD ETFs and then selling covered calls against them. In addition to the risk of the price of gold falling, I have the risk of it rising above the strike price.

-- Ron

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Reply to
Ron Peterson

The reason I was considering gold was because there are several bears that expect it to do well over the next few years, the argument being that we will have to inflate our way out of this mess, and during that time earnings, and therefore stock prices, may stagnate.

I haven't decided what to do yet...just evaluating options.

Anoop

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Reply to
anoop

You need to be careful listening to pundits, especially if they have something to gain from what they say. Remember that there were people and books predicting the DOW would crash the entire time it was going from 1000 to 14000. And there were people hyping gold as it fell from $800 down to $300.

And even if you buy the gold, what are you going to do with it? You cannot eat it or cook with it. It doesn't pay a dividend or have a rate of return. It has no practical uses and it is only very rarely ever used in industrial processes. Each year, they keep digging billions more of it out of the ground, so it is hardly in short supply, yet the industry is so secretive that a non-trivial fraction of the offers made each year are out and out scams. Even if you find legit gold companies, you have to pay to get in, pay to get out, pay to have it stored, and pay to have it transported, and pay to have it insured. You have to make 30% on your money just to break even at the time of sale. I'd rather earn that 30% than pay it in fees.

-john-

Reply to
John A. Weeks III

If he buys the ETF GLD, he won't have any storage problems. And he can get paid for doing so by selling calls against it.

Reply to
Ron Peterson

But one doesn't have to pay these fees to invest in the ETF, right?

How would you recommend investing if you thought a dollar crash was imminent? I think the signs are starting to appear and if/when it does happen things will be happening too quickly to react. I'm trying to think of a hedge. It seems like all currencies are in danger at this point, so buying foreign currency probably won't help in this scenario.

Anoop

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Reply to
anoop

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Real estate comes to mind as something of lasting value, from which you can extract income by means of renting. Since it has become cheaper, good deals could be found easier.

Reply to
Igor Chudov

Despite the drop, at least in my area, with 20% down and a 30 year mortgage, I still would not be able to break even (mortgage + property tax

  • mello roos + maintenance cost + insurance >= rent).

Anoop

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Reply to
anoop

BTW, spending some time researching this topic, I read somewhere that the precious metal ETFs are considered collectibles and therefore treated differently than regular investments for tax purposes.

Anoop

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Reply to
anoop

Thanks for catching that. You appear to be right, so it would help to hold the ETFs in a Roth or standard IRA instead of a taxed investment account.

The calls also aren't eligible for the long-term capital gains rate.

-- Ron

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Reply to
Ron Peterson

Newmont Mining has a profit margin of 11%, so any drop in the price of gold would reduce production for that company.

-- Ron

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Reply to
Ron Peterson

I don't know that the word 'investment' can be consistent with the market timing and short term prognostication of a crash, but my answer is to buy RYWBX (Rydex Weakening Dollar 2x Strategy).

Usually the dollar needs to fall against something. Not really sure it makes sense to fear that all currencies will fall, this implies a long term serious inflation issue. Inflation isn't at the top of the risks the world seems to be facing right now, IMHO.

Joe

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Reply to
JoeTaxpayer

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