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A. Choosing the right gold firm can mean the difference between success and failure as a gold owner. Choose the right firm and it will help you stay the course on protecting your assets from economic uncertainties. Choose the wrong firm and your funds can be diverted to an assortment of bullion-related investments and/or derivative investments that are not truly asset preservation vehicles. Gold stocks, for example, are an investment in stocks first and gold bullion second. Mint state and proof coins graded by independent services usually sell for high mark-ups over their gold value that immediately put the buyer at a disadvantage. Precious metals exchange traded funds and certificates introduce counter-party and systemic risk to the investment equation. These are just three examples of the kinds of investments that can lead the investor away from the stability of conventional coin and bullion investments, and generally should be avoided by investors whose goals include building a hedge against economic certainties or a long-term store of value.
Over the past decade, the technology sector has accounted for more than 380 tonnes of gold demand annually, a significant figure in itself and almost 13% ahead of central bank net purchases during the same period. Yet gold’s role in this vibrant and growing industry is broadly unrecognised and often misunderstood. This edition of Gold Investor focuses on technology, analysing gold’s current use and future potential across a range of applications.
In June, I rated Barrick Gold "underperform" on Motley Fool CAPS because, at the time, Barrick stock wasn't generating anywhere near as much real free cash flow as it was reporting in net income. Thus, I argued the stock wasn't as cheap as its low 10.7 price-to-earnings ratio suggested it was. This wasn't a popular opinion, but with Barrick stock down nearly 21% since I panned it -- against a 4% rise in the S&P 500 -- I'd argue it was the right one.
While heavy gold bars are an impressive sight, their large size (up to 400 troy ounces) makes them illiquid, and therefore costly to buy and sell. After all, if you own one large gold bar worth $100,000 as your entire holding in gold, and then decide to sell 10%, you can't exactly saw off the end of the bar and sell it. On the other hand, bullion held in smaller-sized bars and coins provides much more liquidity, and is quite common among gold owners.
This is perhaps the best-known form of direct gold ownership. Many people think of gold bullion as the large gold bars held at Fort Knox. Actually, gold bullion is any form of pure, or nearly pure, gold that has been certified for its weight and purity. This includes coins, bars, etc., of any size. A serial number is commonly attached to gold bars as well, for security purposes.
Gold is actually quite plentiful in nature but is difficult to extract. For example, seawater contains gold -- but in such small quantities it would cost more to extract than the gold would be worth. So there is a big difference between the availability of gold and how much gold there is in the world. The World Gold Council estimates that there are about 190,000 metric tons of gold above ground being used today and roughly 54,000 metric tons of gold that can be economically extracted from the Earth based on current extraction technology. But advances in extraction methods or materially higher gold prices could shift that number. For example, gold has been discovered near undersea thermal vents in quantities that suggest it might be worth extracting if gold prices rose high enough.
That’s why even investors who generally favor gold, such as Russ Koesterich, a portfolio manager for the BlackRock Global Allocation Fund, advise you to treat precious metals with the same caution you would any other physical asset, such as real estate. Over time, property tends to rise in value. But in a down market, like the 2008 recession, people can lose their shirts — and homes — to plummeting prices.
Paper/ETF (exchange-traded fund): ETFs are shares in a fund or trust representing an ownership interest in gold bullion, where shares are held in paper form and shareholders have no rights of redemption. Owning an ETF is clearly not the same as owning physical gold. This scenario is typically utilized by equity traders, institutional investors and hedge funds.
Instead of buying gold itself, investors can buy the companies that produce the gold as shares in gold mining companies. If the gold price rises, the profits of the gold mining company could be expected to rise and the worth of the company will rise and presumably the share price will also rise. However, there are many factors to take into account and it is not always the case that a share price will rise when the gold price increases. Mines are commercial enterprises and subject to problems such as flooding, subsidence and structural failure, as well as mismanagement, negative publicity, nationalization, theft and corruption. Such factors can lower the share prices of mining companies.
Ancillary businesses, boarding houses, bars, shipping, retail, transportation and entertainment, sowed the seeds of California’s economic birth and traded with millions of dollars worth of transactions over the seven years of the gold rush. Gaming houses, saloons and brothels, often run by women along with laundry services and food, also did spectacular levels of business. “Supplies” really took off. The miners relied on goods being shipped or moved slowly overland. There was no infrastructure in place. As the gold became harder to find so more and more equipment was needed to dig for it, shore up the diggings, transport the spoil and the ore, house and feed the miners, refine, then securely store the gold. Once processed, the gold was used as money amongst the people, to pay for everyday expenses both locally and in other countries, for goods shipped to California. The longer-term and more careful prospectors did not spend, but returned to their homes, both here and abroad, with their spoils.
Investment Grade Coins are higher quality and more rare than bullion coins. These coins are also graded and are enclosed in a protective slab to ensure and preserve the condition of the coin. A study commissioned by the U.S. Congress has proven that certain Investment Grade Coins are shown to have an annual return of 15%. Investment Grade Coins are for investors planning to hold onto their investment for at least 3 years.
One of the top reasons why the dollar is losing value is inflation. The government decided to completely remove the US dollar from gold, which was its robust protection against market instability. The expenditures and national debt will continue to force the government to print more paper money to stay afloat. You paid for this in your inflation and tax rate (Significantly reducing the dollar purchasing power). Your $100 today could soon be equal only $40.00 or even less if this trend continues.
Choose the Best Gold Stocks for 2017 with the Golden StockPickerAdd to cart It is often said that one should buy only the top gold stocks - but what are the best gold stocks? The answer can change on a daily basis. Golden StockPicker provides the answer and keeps you updated - each day. Every day the situation changes slightly, and Golden StockPicker adjusts accordingly. It ranks stocks in order of their leverage and exposure to gold, and tailors this ranking to your specific trades and needs.
Many types of gold "accounts" are available. Different accounts impose varying types of intermediation between the client and their gold. One of the most important differences between accounts is whether the gold is held on an allocated (fully reserved) or unallocated (pooled) basis. Unallocated gold accounts are a form of fractional reserve banking and do not guarantee an equal exchange for metal in the event of a run on the issuer's gold on deposit. Another major difference is the strength of the account holder's claim on the gold, in the event that the account administrator faces gold-denominated liabilities (due to a short or naked short position in gold for example), asset forfeiture, or bankruptcy.
One approach to deciding how much of a diversified portfolio should be allocated to gold is to measure the percentage of worldwide financial assets that bullion represents. According to the World Gold Council, the total value of all the gold that has ever been mined is around $7.5 trillion. That’s about 4% of the combined value of the global stock, bond and gold markets.
"Gold's return is solely based on the price going up. Thus when you sell gold you create a capital gain, that in most cases will be taxed at the more favorable capital gains tax rate," he says. "However, if one invests in gold in a tax-deferred account, the gains one receives will be taxed based on their income tax bracket, which is typically higher than their capital gains rate. So if an investor does want to own gold it should be done using taxable assets."
For those that appreciate how gold works to improve investment reward vs volatility/risk in a portfolio, it is recommended that a minimum of 10% of an investment portfolio should be in gold, or other precious metals. However, investors often purchase more when economic or geopolitical uncertainty in the markets and around the world rises. Mathematically, “How Much Gold” over time would have suggested preferred diversification is close to 10%, but certainly your preferred mix of assets is dictated by your personal views and preferences.
From gold exchange-traded funds (ETFs) to gold stocks and buying physical gold, investors now have several different options when it comes to investing in the royal metal. But what exactly is the purpose of gold? And why should investors even bother investing in the gold market? Indeed, these two questions have divided gold investors for the last several decades. One school of thought argues that gold is simply a barbaric relic that no longer holds the monetary qualities of the past. In a modern economic environment, where paper currency is the money of choice, gold's only benefit is the fact that it is a material that is used in jewelry.
Predictions of gold and gold stocks falling as interest rates rise are proving to be quite far off the mark. Gold prices just hit five-month highs, and most gold stocks are turning out to be outperformers this year, thanks to gold's flight-to-safety appeal. Donald Trump's presidency has come with its fair share of unpredictability, and Brexit and geo-political events like the Syrian strike have created the perfect environment for gold -- and everything related, such as gold mining stocks -- to thrive.
Lear Capital, for example, recently offered an IRA Bonus Program that picked up $500 of fees for customers who bought at least $50,000 in silver or gold. But the company’s Transaction Agreement said the spread on coins and bullion sold to IRA customers “generally” ranged between 17 and 33%. So if the spread were 17%, a customer who opened a $50,000 IRA would pay $8,500 for the spread — and receive only $41,500 in wholesale-value gold — which left plenty of margin for Lear to recoup that $500 bonus.
Buying Gold bars is one of the most cost-effective, safest and easiest ways to own physical Gold. Gold bars generally match sovereign coins in content and purity, but cost less over Gold spot price than Gold coins because they’re usually minted privately. APMEX sells Gold bars produced by Heraeus, Credit Suisse, Valcambi, Perth Mint and other respected Gold companies. Each Gold bar is stamped with its exact Gold weight, fineness and a serial number for added security.
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Gold mining stocks. One major issue with a direct investment in gold is that there's no growth potential. An ounce of gold today will be the same ounce of gold 100 years from now. That's one of the key reasons famed investor Warren Buffett doesn't like gold -- it is, essentially, an unproductive asset. He prefers to own investments that are "procreative," meaning they produce an income stream of some sort.
Risk Disclosure: Purchasing precious metals in bullion bars, coins, proof coins, and numismatic coins involves a degree of risk that should be carefully evaluated prior to investing any funds in a Gold IRA or making a cash purchase. American Bullion and its agents are not registered or licensed by any government agencies, and are not financial advisors or tax advisors. Past performance is not indicative of future results. Investors should do their due diligence before committing any money to purchase gold and other precious metals. If you have additional questions, please contact American Bullion.
James Fraser and Kevin Pederson, authors of the book “The Mining Stocks Investor Guide” (Miningstocksguide.com), recommend that investors stick to “the old saying ‘sell in May and go away’ as the summer months set in and prices tend to flat line.” By September, volumes pick up and continue to rise going into October and November. December can vary and depends heavily on the gains investors have earned throughout the year.
A. For the conservative, risk-averse investor who is concerned about economic uncertainties and instability in the financial system -- the answer is an unequivocal "yes." Former Fed chairman Alan Greenspan recently remarked that "Gold is a good place to put money these days given its value as a currency outside of the policies conducted by governments." The rationale for gold ownership within a retirement plan is the same as it is outside the plan. (Newcomers, please see Gold Chartography 101 - The case for gold ownership in ten charts you will never see on CNBC)
Gold Mutual Funds- Mutual funds invest in a diversified selection of gold stocks and charge a small management fee built into the share price of the mutual fund. They tend to invest in established mining companies with some investing in a mixed bag of smaller mining and exploration companies. Again, I don’t recommend or suggest mutual funds because I believe fund managers have a tendency to select fully valued or overvalued companies to include in the funds. The purpose of investing in gold stocks is to find undervalued companies relative to their share price. More on this below.