09.29.08

How to Buy and Own Gold – The Layman’s Guide to Escaping the Dollar

Posted in Investing, Politics at 6:26 am

For nearly 40 years, the government and Federal Reserve has been destroying the value of your money. If you’re like me, you don’t support any bailout plans which effectively give money to criminals at the expense of a worse dollar and higher cost-of-living.

This post is not meant to discuss those issues – it’s here to discuss one solution for your personal savings – how to hedge on some gold (and silver) to preserve personal net worth in the case that the dollar gets further devalued. Having followed gold for a while, but not knowing many ways to actually own good bullion, I finally did some research.

Here’s how you can buy and own gold and silver:

  1. BullionVault.com. This is a service that will store gold for you in your choice of three vaults in three different countries (US, UK, and Switzerland [my preferred choice]). It is similar to the popular GoldMoney.com but with better rates and an easier application process. You can purchase the gold from others and will get commissions for selling as well.

    There are many free ways of putting money into BullionVault, such as using their BillPay system, but if you are in a hurry, you can wire it in with a fee.

  2. CEF or GTU (I like CEF). These are Canadian Gold Royalty Trusts, which means that they give big dividends (Canadian energy trusts don’t have to pay taxes if they redistribute their income… for now until 2011). With these, you have some new tax forms to do and it can get complicated. See this link for a bit more on these trusts: http://www.dividenddetective.com/canadian_royalty_trusts.htm

    Now here’s the trick when buying CEF or GTU: Around last week, there was a 7% premium (ie http://www.centralfund.com/Nav%20Form.htm – they own $1.446B of assets [mostly gold/silver bullion], but the market cap for the fund is $1.56B. Just take 1.446 and divide by 1.56. The good days to buy are when this premium is less than 10%). If the premium is over 10%, then there are too many shares outstanding for the amount of gold they have, and you are buying into an overbought situation.

    You cannot get physical gold delivery from CEF. You can only sell the fund back for dollars.

  3. GoldMoney.com – Open an account here, buy gold or silver at a premium, and they keep it safe in France and Switzerland. They charge you fees for wiring money in and out, and also fees for storage. I haven’t seen a bad review out there on them, so long as you know the fees and premiums you’re going to be paying. I don’t see any free way to transfer money into GoldMoney like BullionVault (above) — you must wire it in at a fee.
  4. Perth Mint Certificates (Australian Mint) – They’ll hold your gold too – www.perthmint.com.au/investment_certificate.aspx – I’m just not so sure I trust the Australian Government with my gold.
  5. Buy coins and lock em up in your gun safe – These guys are reputable and right here in Inglewood, CA – GoldDealer.com. Tulving.com is also well-known. Risks include robbery and US Government confiscating it (google “Gold Confiscation Act”). See also Friday’s news: http://biz.yahoo.com/ap/080926/mint_gold_coins.html … wtf?
  6. Everbank Gold Select – www.everbank.com/001Metals.aspx – I have done very little research on this one, but it sounds quite interesting. Anyone have any thoughts? It might compare better to #2 and #3
  7. ETFs, such as GLD, DGP, and a billion others. GLD is 10% backed by REAL metal gold. This is why I’m not as huge on it – when the shit hits the fan, will they be able to keep up?
  8. Added a new one – Gold Mining Companies’ stocks. Often times, the mining companies own a lot of gold too, which you will then indirectly own. You, of course, will not be able to get physical delivery.

Please post any comments, links to reviews of the stores/funds, and other ideas. Gold and silver are only ONE way of getting into precious metals, it’s still rather speculative, and there are many other commodities that you should research as well.

8 Comments »

  1. Larz said,

    10.05.08 at 2:46 am

    Open a multicurrency bank account in a country/jurisdiction not so USD centric and buy gold with one click.

    http://www.hsbc.com.hk/1/2/hk/investments/mkt-info/gold?pwscmd=cmd_init

  2. Bron Suchecki said,

    10.15.08 at 1:33 am

    Perth Mint Certificates (Australian Mint) – these are issued by Perth Mint, not Royal Australian Mint. Perth Mint is 100% owned by State Government of Western Australia, not Australian Federal Government. Why is that relevant? Because Western Australia is where all the gold is in the ground and the mining industry employs a lot of voters, so you have to consider if State Government is going to do anything that hurts the gold mining industry.

  3. Chris said,

    10.17.08 at 12:15 pm

    Mike, I commend your interest in gold and your efforts to help people choose which form to invest in, but I cannot endorse most of the vehicles you list there.

    The ETFs are the worst possible way to seek bullion exposure. They all run at least some risk of failing outright. Off-site storage services are only advisable of you live in the same town as the vault. :) In the equities space, CEF is the best, and is the one choice I agree with you on. It’s either paper, or it’s not… there’s no in-between.

  4. Mark Herpel said,

    10.23.08 at 8:24 am

    Mike great effort.

    I can only endorse the allocated bullion in storage, such as Bullionvault.com, GoldMoney.com and AngloFarEast.com with these you are buying and own the actual gold, not some paper representation which carries counter party risk. You can take actual delivery of it, but most everyone holds the digital version.

    The Important
    Difference Between “Allocated” & “Unallocated” Gold

    Good post,
    Mark
    [email protected]

  5. qwan said,

    11.10.08 at 4:00 pm

    >If the premium is over 10%, then there are too many shares outstanding for the amount of gold they have,
    ==========
    Each share of CEF is always backed by the same amount of gold & silver. They are not allowed to issue shares without acquiring more bullion to back them up. I think you mean that the total market cap is worth more than the spot price of all the gold & silver in their vault (due to the premium).

  6. buckeyes2234 said,

    01.10.09 at 12:40 am

    you are a fucking disgrace to this university and anyone who represents it when yo are calling out people younger than you when you have no idea what they have been through and no idea how hard they have worked towards competing with the best and playing like a team. True Laurinaitis man not be the best linebacker to ever come through OSU but he sure is damn well one of the best and it’s not his fault that we got blown out in 06, or beat in 07. If you would be a true OSU fan you would have realized that he set a BCS record for tackles in a game in 07, my friend that doesn’t just happen by being overrated. you are an idiot and deserve no respect from any OSU player or fan who truely believes in this program. When you have a thorpe winner like jenkins and other glorified players you are as ignorant as those that bash on us for “not being able to win the big one” . I bet through the years of 02-06 you were as big an OSU fan as we could find… do all of us a favor, turn in your degree if you’re so ashamed of it and quit being a fan of us if all you want to do is complain when we don’t win national title after national title. how unrealistic and dumb are you?

  7. Berto said,

    01.10.09 at 10:08 am

    Not sure what the above comment has to do with buying gold, but ummm.. okay.

  8. Joe D said,

    01.12.09 at 4:53 pm

    I am with buckeyes2234, the price of gold is such these days that you don’t understand ohio state football, so investing in Perth Mint Certificates allows one Thorpe winner like Jenkins to open an account on goldmoney.com, which is clear to anyone who knows the Bucks can still win the big one, provided you thoroughly understand the speculative market, you Bucks-hating fag!

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