Gold coins as an investment

A

Alum03

250+ Posts
This thread is not about whether gold as an investment is a good idea, just the best way to go about it once one has decided it is a good idea.

So far all I have learned is that US minted Golden Eagle coins are not subject to reporting to the authorities, but South African Krugerrands are. Seems like Golden Eagle is a better idea there. Any good gold whole sellers in Austin? Is buying on the internet a good idea, anyone reputable online?

Thanks in advance for any help.
 
I'll tell you now what I said last year: Every single person I know in the gold business sells their gold the day after they buy it. NOT A SINGLE PROFESSIONAL GOLD BUYER WHOM I KNOW HOLDS THEIR GOLD.
 
Crayon, are you talking about dealers who sell with markups? It would only make sense in that case. Otherwise, could you please explain what a "professional gold buyer" is?
 
Holding gold seems sort of like a "worst case scenario" strategy. There are many better financial hedges. If its just a few grand, the kooks generally favor silver, as you are far more likely to be trading for things of more modest price, i.e. a bag of flour or something. For that you'd want a sack of junk silver coins, not a single gold coin worth a grand. And if things were really really crazy, then you'd be better off with just a closet full of freeze dried food, because who would trade a coin for something you can feed your kids?
 
The thing is, you can't really "mark up" gold, so to speak because the per ounce price is marked all over the place. I mean people who own foundries etc.. I know a handful of people who own facilities such as these who buy scrap gold from all over the world and melt it into bullion. Those people who melt it into bullion sell the bullion right away rather than holding it and waiting for the value to go up.

I'm not telling you that gold won't go up in value, what I am telling you is that today's gold prices look VERY similar to diamond prices in the early 1980s. In that time period EVERYONE was buying diamonds as an investment and the price kept going up. There were adds in all of the newspapers about buying diamonds and the public bought in. The problem was that the public was buying the diamond at prices which far exceeded production cost and at some point the bottom fell out.

Gold is right now being advertised on every TV station and in every newspaper and on the radio every fifteen minutes. Gold costs less than $500 an ounce to mine yet it is selling for double that amount. Am I saying it won't go up? No. Am I saying that it can and will at some point go down? Yes. I am just saying that if people who have been working in gold for 30 years are not stockpiling it right now, maybe they know more about it than you and me.
 
If you want to speculate in gold, the easiest way is to buy mining stocks:

Entree Gold Inc. EGI
Randgold Resources Ltd.
Exeter Resource Corp. XRA
Kinross Gold Corp (USA) KGC
Yamana Gold Inc. (USA) AUY
Gold Reserve Inc. GRZ
U.S. Gold Corporation UXG
Allied Nevada Gold Corp. ANV
Vista Gold Corp. VGZ
NovaGold Resources Inc. NG
Barrick Gold Corp (USA) ABX
Goldcorp Inc. (USA) GG
Newmont Mining Corp. NEM
Agnico-Eagle Mines Ltd AEM

Bernard
 
Crayon, every coin dealer out there sells with a mark-up over spot value and a buys at a slight discount from spot value.

in the case of your foundry acquaintances, it sounds like they pretty much have to sell the gold to keep a cash flow going for their business. I'm sure they are buying the scrap gold below spot if they are selling it as bullion (presumably at spot to dealers).

I'm still on the fence about buying a few coins (or some junk silver) for myself.

Also, I don't think most people buying gold are doing it looking to make a profit - just to maintain value with inflation (or a dollar crash).
 
About reporting to "the authorities", if you sell any type of gold coins that are not minted in the USA to a dealer, the dealer has to send a form to the IRS, but only if the sale is above certain amount (something like $25k). That requirement doesn't apply to coins minted in the USA. If it were me, I would buy Krugerrands, as they have the lowest price per ounce on the market, and an ounce of gold is an ounce of gold. Also, Krugerrands are the most well-known around the world.

About dealers in Austin, I don't know of any place in Austin where you can go in person and buy bullion. I know that Bullion Direct is here in Austin, but they only operate by mail.
 
something else I just thought of....

Have you noticed how companies who deal in gold are spending millions and millions of dollars trying to sell that gold? Have you noticed that none of THOSE companies are holding on to it?
 
The problem with Crayon's example is that he's talking about gold dealers selling gold rather than holding gold and using that as a guage of their opinion about the future price of gold. The problem is that these guys are gold dealers, not gold investors. They care about the price of gold today, not in the future. They buy scrap gold at one price, combine it with gold bought from others, melt it down, mark it up, and sell it at higher price. That's their busienss, buying and selling. They are not investors. Investors buy gold, hold on to it, and hope to sell later when the price rises. There's a big difference.

Crayon's example is more akin to a gas station, only in reverse (buying from one, selling to many). The station buys gas at one price, marks it up and sells it to others. The station owner is a gasoline dealer. This is a different business than buying a quantity of gasoline today at one price, and hoping that the price of gasoline rises so you can sell it someone else in the future at a higher price.

Bernard
 
The cost of mining gold doesn't matter. Gold mining only adds a very small percentage to the total amount of gold on the surface (something like 2-4%). Gold is not really consumed, so the amount is kind of constant.
 
yeah, i agree that crayon's example is a fallacy. if a dealer hoards, there would be no market (no supply). it would create a scarcity and demand would dry up due to increase cost. dealers need to facilitate supply as efficiently as possible. their profit margins are constant no matter what gold sells at any given point on time.

now, investing in gold is the ultimate hedge against inflation (and local monetary currency devaluation). gold does not increase or decrease your ability to purchase basic consumer goods. (well not more than a reasonable percentage). 1 oz of gold bought (roughly) the same amount of bread during the time of the Romans, in the 1920s, and now.

to build a layer of protection in the worst-case scenario, citizens should hold a reasonable (yet small) amount of their net worth in physical gold.

however, investing in gold is not a tool to gain riches. never was. never will be.

oh well. i am not sure i helped change anyone's mind. but whatever.
 
Honestly, I feel like the guy telling people NOT to invest in the stock market in 2000/2001 and NOT to invest in real estate in 2003/2004. Its YOUR money. All I can do is give you the best information I have available and let you make your own decisions.
 
yeah, too bad hindsight is always 20/20.

you are missing the point on buying gold. no one here is claiming to invest it to gain riches. it is simply to hedge against a worse-case scenario. (and the key being that a hedge impliess you can lose if the local currency improves and inflation is brought under control).
 
my point is that Gold seems to be a very flavor-of-the-year investment (like real estate and stocks were) and there is usually some correction after that fact.
 
Well said, in this thread, about gold being an inflation hedge. Gold is priced at more than mining costs presently. The present rise in gold is actually more of a sign of the drop in the dollar. Some of it is extra demand from investors parking their money in gold until the market rebounds. If you really think things are going to fall apart you'd need 10s of thousands of dollars in gold to do any real good.
 
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