Wednesday, November 18, 2009

why + when + how 2 buy GOLD + SILVER?

my original blogpost was 1st posted on informedtrades.com

paper, gold, silver, ... money?

why + when 2 buy gold?
[quote]: Originally Posted by forexer
But the very fact they don't know how high gold is right now means they don't care and don't want to care.
This is a sad case for them and i don't care either Jaro, will it be wise to invest in gold say 2 ounces of gold at the current price? I think most people wouldn't buy gold now because there is a HIGH chance price will correct. I'm sure influenced by your blogs and i now want to get into that yellow metal. I know gold won't drop too much because it can't. It's one of the safest things to place my cash into. Do you advise me to wait for a better price to buy or what?
Forexer [/quote]
hi forexer,
1st of all, thx for your confidence in my ideas and of course you have 2 decide concerning your own feelings/considerations, but let's philosophize a little bit how could the best possible solution looks like :-)

there are many reasons why 2 invest in gold/silver, so you have to decide what is the most important for you
1) as protection for your existing wealth?i would suggest 2 start immediately with at least 50% of intended funds and prolly even with 100% of these funds. of course, it is a little bit late as the price is at all-time-high now, but who cares? if you want to make sure you don't like to risk losing your money on hyperinflation, so it still is ok. btw, i think the gold price will not fall below $1,000 in our lifetimes for longer than a week (if at all) and we will begin the year 2010 with a gold price above $1,300. of course, i could be wrong, but if you OWN + HAVE your kruger rand and/or american buffalo (my 2 favorites) and reverse them from one side to the other, u will not be less happy if the paper gold price falls 20 bucks on a 'red ink' day, will u?
2) as alternative 2 keeping monthly surpluses/savings in cash?the easiest solution - just buy some gold/silver at the end of each month, no matter what the current price is, so you will buy more stuff if the price is low and less when the stuff is expensive ...
3) in order 2 protect yourself against monetary reform and riots in the streets?
buy small silver coins you could exchange for food then (1 oz american eagle, 1 oz canadian maple leaf, ...). why? you will prolly have to survive more than 2 days and as far as i know farmers give no change on kruger rand in war times ...

4) in order 2 make money?
buy silver instead of gold

5) because you like gold?
also easy, just buy GOLD (not GLD!)
6) ???
etc.

i hope it will help u to take the best decision for your specific situation :-),
just my 2 golden cents,
j.

ps: as for me, i've decided 2 place two different bets:

a) in order 2 protect myself + my family against hyperinflation and to make sure we could buy some food if no farmer and no baker accepts paper money, i've accumulated (hopefully enough) 1oz silver coins before the end of the last year .... yeahhhh, my worst-case-scenario-investment is today at least +30% more worth than last year, not bad return on insurance/security policy in a year, isn't it?
b) in order 2 make money i've invested abt 75%-90% of all my available funds in gold + silver + commodity stocks, especially in junior explorer companies ...

pps: do not forget InformedGold

addendum november 18, 2009, few answers 2 questions concerning reason #4 (SILVER)

why silver instead of gold?
i think silver will go much, much, much more up in price than gold. why? many reasons ...
  • mostly all gold ever mined is still there, mostly all silver ever mined is gone => above the ground is silver much more rare than gold
  • the historical gold-silver-ratio is approx 16 : 1, which IMO corresponds also to the geological ratio of these 2 metals in earth. the current ratio is above 60 : 1, those of you who are mathematically skilled (or own a calculator) could easily divide 1,148.05 by 18.82. if silver becomes a monetary metal again we will see the historical ratios again, i think. btw, i've written abt that recently in one of tek's or simit's threads, maybe will s.o. find the link to that posting ...
  • the industrial silver consumption is going to increase (batteries, RFID chips, electricity (esp. solar energy), medicine, ...). what about gold? it just lays useless in bank safes or makes pretty women even prettier ... there was also a posting abt that in some other IT discussion ...
  • if the economy continues to slow down there will be less silver on the market as the most silver mined comes IMO as a by-product from zinc, led, copper mines
  • silver is soooo obscene cheap!
how 2 trade silver?
there are plenty of ways ... ETFs, options, futures, CFDs (my choice), warrants, physical/bullion, stocks, ... just choose one which fits 2 your account size and of course 2 your risk tolerance:o). pls do not forget that silver is volatile like hell, last year there were days where silver fell 20% in few minutes, so you shouldn't be over-leveraged in that case! you will find every dirty word i knew in my blog posts about these days and these markets here @ jaro gruber ;-)
btw, i have mostly bad experiences with trading silver (because of its volatility), the last 3 times i tried it i've lost 2-3% per CFD contract (leverage 100:1) as you can read here, than i told very nasty names to myself (stupid idiot was the nicest, i remember) and then i've decided 2 'trade' the IMO soooooo undervalued silver the jim-rogers-way i.e. first i've capitalized my account accordingly 2 survive even a major decline, bought a contract, placed NO STOPS AT ALL and computed that if silver will go up to the level of 17,70 i will make up my 3 former losses, i was so damned right on the market this time, so with the current quote at $18.82 i'm prolly with 10% in the green ink zone (you still have your calculator ready 2 work?)
last but not least, i've sold all my silver ETFs last year (oktober, november?) at a 20% loss and BOUGHT PHYSICAL SILVER + gold/silver stocks instead. why? as far as i know there is just one (!!!) ETF in the whole freaking world where you have the legal right 2 get your silver (run + stored by the ZKB bank in switzerland), in all others you just have some cash settlement + paper legal rights, so you can look for a good lawyer if the ETF is closed / bankrupt / robbed_by_some_new_stimulus_terror_law or the like. well, there is a big difference between OWNING + HAVING the gold/silver on the one side and having just a legal right for s.th. on the other side ...
of course y should also consider companies like goldmoney.com, bullionvault.com, egold.com ...
folks, i don't know how do you feel abt gold/silver bars as they are not really sexy in my opinion, but there are soooo many beautiful gold/silver coins of any size + price out there (you still remember the '100 kg gold coin & me' picture, don't you?). i love to watch them from time to time (like disney's dagobert duck likes to swim in his gold coins swimming-pool) and then i do reverse, watch, pet, compare and of course, weight them (lol)... my favorite is the mexican libertad (beautiful!), but the eagles, maple leafs, britannicas, austria's philharmonicers, australia's lunar series, somalia's wild life, chinese pandas ... and of course my silver companies' stuff (1st majestic silver, nevada pacific gold, scorpio mining, ...) is also pretty like hell :-)
addendum, november 20, 2009, well, if we already know why + when we should consider buying precious metals, let's think abt the 'HOW 2 BUY GOLD' (see original comment):
hi forexer, hi folks,
there was a lot of discussion abt spot vs. ETFs vs. gold vs. futures ...
as far as i understand the gold/silver market, there is no possibility 2 invest in the 'spot' or the like ... it is just the price @ wich some accredited buyers (bullion banks? etc.) are able 2 buy (physical) gold ...
of course there are many derivates (~ finanancial products ~ paper 'assets') which are oriented/based on the spot price:
  • the products/assets offered by fx brokers as mentioned by tek. their relation to the spot price? (1 : 1)
  • CFDs (1 : 1)
  • warrants i.e. calls & puts (1 : x)
  • certificates, the most modern 'invention' (1 : anything)
of course, there are also futures + ETFs + coin dealers + goldmoney.com + informedgold + ??? with slightly different (= higher!) prices. there is also the so called london price fixing (once a day?) where accredited dealers fix the physical gold price in some kind of an auction ...
basically, you just have 2 decide if you want:
I) GOLD
II) a promise of some counter party 2 pay you
the specified amout of money (according 2 gold price development and chosen product) at a moment when you want to sell your 'paper gold' and your counterparty still exists (btw, say hello 2 lehman brothers if you will meet them somewhere on the road!)
if you would prefer II), then you have 2 decide if you want to a paper gold product:
IIa) with leverage (CFDs, futures, margin accounts @fx brokers, warrants, certificates, ...)
IIb) without leverage (certificates, ETFs, ...)
i hope that helps a little bit 2 choose the best shot on gold in your specific situation :-)
addendum, december 1st, 2009
folks, i'm not sure if i should tell you .... well, it seems to be a contra-indicator at least in the short term ...
well, my 60+ years old mum is going 2 buy investment gold tomorrow for the very 1st time ... she has never owned a stock in her life, she never did a different investment than a fixed interest rate account at her local bank office around the corner …. and 2day is she worried abt her savings and wants to move a part of that in gold :-)
hell, do you think it could be that strange taxi driver / shoe cleaner / hair cutter / my mum / etc. CONTRA-INDICATOR?
let's hope that her investment of last resort will be ok ... btw, i do not think gold will fell below $1,000 again, so what? better 2 start now than not at all, what's your opinion?
addendum, december 4, 2009
physical SILVER? just added a link 2 one trustworthy precious metals coin dealer ~ munich based pro aurum's online shop, so we can find gold+silver bullion prices easily here :-)
hi folks, these silver snowball guys are much too expensive ... in germany, we pay a premium between 25%-50% on 1oz silver coins (minting, transport, profit margins,...) depending on availability of that coins + depending on the worries concerning the paper money system (in october 2008 was the premium for very short time even higher than 50%)...
i've paid 4 weeks ago at the precious metals fair €15 ($22.5) per coin and even 2day there are much cheaper coin dealers with prices below $30 out there like e.g. the munich based proaurum with the cheapest silver coin (the austrian 'philharmoniker') selling for 15,52 EUR = 23.26 USD right now :-)
ps: nicht verf. (@ proaurum website) means not available :-(
pps: i would walk into their shop directly, so i wouldn't have 2 pay any shipping costs and on top there is also not these ugly name-address-bank_account_number-issue, you know?
j. (my orig. comment)
addendum, dec 11, 2009: my visit @bullion dealer
folks, my favorite bullion dealer pro aurum moved 2 a new location recently, got an own + in addition also a much, much bigger building, new customer vaults, some kind of small+cheap (but of course interesting) gold+money museum, two pretty assistants at the front desk and much more, but there are still the old well known guys at the dealing desks and there is still that shiny gold + SILVER + platinum + palladium inside ...
yes, there is a lot of physical gold/silver stuff on the market and the people are not buying much ... the shop guys told me that homo habilis aka homo sapiens financialis likes to buy in panic, so the shop is usually hopeless full after the prices advanced for a while.
ok, they didn't had all kind of silver coins (e.g. the chinese pandas were sold out), but they had the regular investror's coins like the austrian philharmony ('philharmoniker') or american eagles ... i've bought few philharmonikers at €14.71 incl. 7% VAT (~approx. 21USD) before today's 1.6% downride ... i've just compared the last price yet: €14.50 ==> by dealing without leverage is even a red-ink-day not really bad, it just gives us the huuuuuge opportunity 2 buy physical stuff cheaper! anyway, it is still a little bit cheaper than €15 i've paid in november at the precious metals fair for the (much nicer) austrALian lunar series coins ... and on the other hand significantly more expensive than €11.44 i've paid @ precious metals fair 1 year ago for the mexican libertads and austrian philharmonikers
i've asked also for 10oz silver bars (~19% VAT) and/or for 10oz silver coins (~7% VAT), but for some strange reason they have been more expensive than 10 single 1oz coins, so i've bought more small coins instead... btw, even the 1kg coins/bars are more expensive than the corresponding amount of 1oz coins (~crazy, isn't it?), prolly because of their mass production nature and lower tax rate ...
well, i've bought also a souvenir/talisman for myself: 1g gold bar ... i'm sure you wouldn't call it 'bar' if you would see that tiny piece of yellow metal lost inside the plastic-certificate-case, only pls do not ask abt the premium/spread i've paid according 2 the current gold future quote ... you know, i liked it, it is really nice, it fits into my usual valet, it is not so bulky as my 1oz NevadaPacificGold's silver coin which i've 'carried' with me for the last 2 or 3 years, so what?
hmmmm, as i see right now this new talisman didn't help too much 2day (i hope it will start working next week!) because all precious metals are USD-strength-driven down, down, down .... but look, the base metals + agriculture is up a lot => strange behaviour, isn't it?
well, let's go 2 gym and look at the final market quotes later ;O(

damn, these pigs are expensive like hell!
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