Investing in physical gold – discuss

PowerswitchClive · Post by **PowerswitchClive** » 11 Jan 2006, 14:06

For example, a year ago I bought a 1oz Krugerrand for just under ?280. Today it is worth ?328. Thats ?50 gain in one year. The value of gold seems to have a way to go, before it starts falling (a real energy or economic crisis or war and it will rocket even higher). It really does seem that in the short and long term with gold you can't lose.
Gold today is still cheap! Now some would say at over $500 that gold is not cheap. Now in historical terms, when you look at the average persons buying power, gold today is cheap.
For example, if you were to compare gold price and inflation, the price of 1oz of gold in 1960 was $37 and this is much cheaper than todays price if adjusted for inflation ($197-$200). But if you look at the average persons buying power, you get a completely different picture.
The average annual salary in the UK (for a man, for women it was less) in 1960 was ?190 and today the average salary is ?22411.
Now in 1960 the cost of a 1 oz of gold would have been just over ?13.
Sounds cheap doesn't it, until you realise that you only earnt ? 15 (before deductions) last month
In real terms of purchasing power thats ?1556 (compared to todays average salary) in todays money.
My suggestion is that we invest in some physical gold today, while it is still cheap and our purchasing power is still high

Andy Hunt · Post by **Andy Hunt** » 11 Jan 2006, 14:28

Could be handy for making tooth fillings . . .

MacG · Post by **MacG** » 11 Jan 2006, 14:28

Silver is even more dramatic. I have misplaced the link, but apparently there is just 1/3 as much silver as gold above ground. Much more silver than gold has been mined historically, but most of it has been diluted by entropy and is lost forever. In addition, silver is an industrial commodity which is still consumed and diluted. The last 40 years has seen net consumptions of reserves. The only thing is that you have to pay VAT when buying silver, but due to free trade agreements, it can be bought in Swizerland and brought to the EU free of charge. The Swiss VAT is something like 4,25%. Further, since gold have this social "shine" thing around it, it's much more monitored than the rather anonymous silver.

And silver seem to be a pretty good antibacterial agent at least.

PowerswitchClive · Post by **PowerswitchClive** » 11 Jan 2006, 15:08

http://www.atsbullion.com/

http://www.chards.co.uk/coins.html

Here are two gold bullion dealers that can sell you a ?40 1/10 oz gold coin, ?90 gold sovereign ?328 1oz gold bullion coin or physical investments into the many thousands. They will also be able to sell you Silver also.

If you buy bullion (not proof coins) you only pay for the value of the gold and these dealers will also buy back at the market rate later on.

So the minimum investment is ?40 (for which you get 1/10 oz of gold), but the minimum worth while should be a sovereign at about ?90.
The royal mint sells them for ?98

Joules · Post by **Joules** » 11 Jan 2006, 15:23

hatchelt wrote:I don't understand where you'd buy gold from and which form of gold is going to be of any worth come a fast PO crash. How do I get change from a bar of the stuff?!

Although you'd probably have to set up an account, or visit their premises in person, fine gold bullion bars (exempt from VAT just like the better known coins) can be bought from Cooksons: http://www.cooksongold.com/indexgb.html in denominations as small as 10g.

Historically, you wouldn't use it in a single transaction, but have it held by your local jeweller and use it as a store of credit. If this system was reborn however, we would probably recreate all the money problems we now have as a result of the fractional reserve banking system

DamianB · Post by **DamianB** » 11 Jan 2006, 21:28

A couple of points:

Buying in smaller denominations (ie. less than 1oz) means paying a small premium to spot.

Silver - the long-term (centuries) gold silver price ratio is 1:16 which roughly matches the amounts found in the earth's crust. By this reconning with gold at $540, silver should be $33/oz rather than its current $9/oz. Silver attracts VAT too.

Gold is a fair hedge against a falling dollar but be aware that if it reaches some of the higher predictions of $1500-2000/oz, its likely that the sterling price won't go as high because the USD/GBP rate will fall too.

Interestingly too the long-term (decades) oil:gold ratio is 15.4:1 which implies gold should be $924/oz with oil at $60/bbl.

DYODD (Do your own due diligence)

acrowe · Post by **acrowe** » 12 Jan 2006, 10:22

Gold is a good hedge when the economic situation gets rough (which is likely)

I have been looking into buying gold and here are some tips

www.gold.org - world gold council lots of links and info

www.godleyigh.com - gold house which you can buy allocated gold which they can store for 0.5%+vat of the value.

I would highly recommend you seriously think about how to preserve your wealth, I would recommend you buy into physical goods and energy (futures/stocks/indexs) as these will retain value or at least increase at a rate to off set the deflation of the dollar value.

Another useful idea would be to transfer any debt into dollars, with the dollar falling this will reducing your debt burden. Likewise, saving could be converted into other currencies likely to hold or increase their value against the dollar or pound (Euro would probably be most convinent, but yen or other Asian currencies are an option).

Some might say 'what good is gold when everything collapses', but I would argue the more likely outcome will be a serious economic recession/depression. It will not be an instant collapse of everything we know in a few days or weeks or months. But it could be a slow decline probably with economic ups and downs as the economy tries to recover after each crash, in this situation preserving your wealth is not going to be a disadvantage.

AllanH · Post by **AllanH** » 12 Jan 2006, 13:14

One of the main problems with investing in physical gold (& silver) is that they are hard to sell quickly & easily at the quoted gold spot price. Most gold dealers won't give you too good a deal on a few Krugerands & I doubt if Jewellers will touch them at all. Bullion is, I understand, even harder to sell away from the dealers who regularly deal in bullion.
Also you have the fact that physical gold is very identifiable & portable so there is a high theft risk.
You might be better off investing in shares in gold/silver mines or in a precious metals investment fund.

Joules · Post by **Joules** » 12 Jan 2006, 15:20

AllanH wrote:One of the main problems with investing in physical gold (& silver) is that they are hard to sell quickly & easily at the quoted gold spot price. Most gold dealers won't give you too good a deal on a few Krugerands & I doubt if Jewellers will touch them at all. Bullion is, I understand, even harder to sell away from the dealers who regularly deal in bullion.
Also you have the fact that physical gold is very identifiable & portable so there is a high theft risk.
You might be better off investing in shares in gold/silver mines or in a precious metals investment fund.

Gold is only traded at the spot price in the 'instant' that the price is 'fixed'. Either side of those times (it's fixed twice daily) gold is bought and sold at different prices on a deal-by-deal basis. If you're in London, Birmingham etc. you can buy and sell gold over the counter at the various bullion dealers. In the provinces, there should be an old-fashioned jeweller who'll be willing to buy and sell bullion, but he'll take a cut - 10% maybe even 20%, depending on his attitude to the business.

Yes, there's a theft risk, but if you don't go blabbing down the pub about how much gold you've got stashed under your mattress, who's to know?

Investing in gold-related shares is possibly even riskier - who's to say the markets will be able to function at all if we suffer the sort of economic crash considered on this forum? Hasn't the Stock Market ceased trading during historic crises? Then where is your money?

acrowe · Post by **acrowe** » 12 Jan 2006, 16:37

You can have it stored with the merchant you purchased it from; for example godley charge 0.5%+vat of the value per year and its is allocated, which means physical gold is set aside under your name rather than just an entitlement to it (this also protects you should the merchant/bank go under). Storing it with them also allows for instant sale.

From what ive read this kind of arrangement seem the most secure and allows for a quick sale or additional purchse.

Ballard · Post by **Ballard** » 12 Jan 2006, 16:47

Gold takes up very little space, for approx ?5000 worth imagine a tube and a half of smarties.

Very easy to hide, (you could even build it into the wall for instance), then your total economic crash insurance will be safe and sound.

(Don't forget it if yuo move house however, it could be hard to explain to the new occupants)

PowerswitchClive · Post by **PowerswitchClive** » 12 Jan 2006, 22:22

?5000 will buy you just over 15 oz of gold
An 1 oz bullion coin (22 caret) is the size of a two pound coin
The Maple leafs are 24 caret, pure gold, so slightly smaller
Both have an ounce of gold.
So it depends how big a smartie tube is, I don't eat chocolate

Sovereigns are smaller, slightly bigger than a penny and you would get 52 of these for ?5k

snow hope · Post by **snow hope** » 12 Jan 2006, 23:41

I think we are going to experience financial breakdown such that we have never seen before. After all we have never experienced PO and then the decline of oil before, especially not with the complex inter-dependent 6.5 billion people civilisation we currently have!

Maybe I am completely off the wall, but I think gold will become irrelevant if things breakdown the way some of us think could occur. You can't eat or drink gold and it won't keep you dry or warm or help you grow food to keep yourself alive.

PowerswitchClive · Post by **PowerswitchClive** » 13 Jan 2006, 00:23

Well of course that is a fair point. Perhaps society doesn't fall apart over night, thnn this is a good discussion for those of us that want to think about about buying gold or silver as a storage of wealth, that is more secure than stocks or bonds. We can only hope for the best. Gold has always been valuable. A small investment (and that doesn't have to be more than a couple of thousand, can be as small as a ?100 sovereign) can be sold, exchanged or pawned in times of need. It is better to do something, have some plan perhaps, rather than just sit back and say that there is nothing I can do to help myself. The times ahead are unknown, but I wouldn't count on everyone going bankcrupt and collapse over night.

Joe · Post by **Joe** » 13 Jan 2006, 10:51

Maybe I am completely off the wall, but I think gold will become irrelevant if things breakdown the way some of us think could occur. You can't eat or drink gold and it won't keep you dry or warm or help you grow food to keep yourself alive. Shocked

Well of course that is a fair point. Perhaps society doesn't fall apart over night, thnn this is a good discussion for those of us that want to think about about buying gold or silver as a storage of wealth, that is more secure than stocks or bonds. We can only hope for the best. Gold has always been valuable.

You could both be proved right, but I think timing is the key here.

I would envisage a big run on gold in the short term as people invest in it as an inflation hedge. However, as the economic climate continues to worsen, land's inherent value will become increasingly apparent.

Gold could be useful in facilitating a tranistion from a 3 bed semi in suburbia to rural house with land; you sell your semi now, put all your equity in gold, rent while you watch the property market crash and your gold to go up in value, and then you can afford to buy the house with land outright. Easy

PowerSwitch

Investing in physical gold – discuss

Investing in physical gold ? discuss