General Question

Jeruba's avatar

What can you tell me about investing in gold?

Asked by Jeruba (55824points) 4 weeks ago

Gold bars. Gold bullion. I know nothing.

Let’s pretend some money is coming to me and I’m thinking about lasting value. What might I do if I were interested in gold?

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16 Answers

Lightlyseared's avatar

When you say invest in gold do you mean purchase gold physically or investing in a commodity fund or investing in companies that involved in the production of gold like mines etc?

Buying physical gold is probably the easiest but leaves you with the problem of where you keep the stuff. If you keep it a bank safe deposit box for example there will be on going. Cost associated with that while you won’t see any return on your investment until you sell. If you invest in a commodity fund it’s just like having a savings account but with the chance you may not get out what you originally invested.

The value of gold tends to be related to the stability of the economy/ political situation. The stock market and real estate tends to prosper with stability and the value of gold tends to increase with instability.
At the moment gold is probably a good investment depending on the outcome of various elections happening around the world this year, Ukraine, Israel etc

Smashley's avatar

That prices have been rising steadily since 2016. This doesn’t mean it will go down, but down seems historically more likely.

While gold prices may reflect economic outlook, it’s also important to note that a lot of gold is pushed on old people, between Tucker and Alex Jones episodes. Fear sells gold as well. The American gold industry, at least, has been in a pretty steady trend of fear mongering and selling FOMO. Again, this doesn’t mean gold is overvalued, but I wouldn’t put my money there, personally.

gorillapaws's avatar

I would argue that gold isn’t really an “investment.” It’s not doing any work or producing anything new or valuable. It’s basically an “alternative currency” with a valuation that can increase or decrease depending on factors around the world (often fear in the market causes gold’s value to rise).

The thing is, in order to extract value from buying low and selling high, is that you have to be willing to sell high. That means you have to be willing to sell your gold when the market is at its most bleak and fearful point and jump back into dollars. Otherwise, if you wait for things to recover, your gold probably won’t have changed in value much overall.

This is not investing advice and I’m not a certified financial adviser, I’m just an asshole on the internet with opinions. IMO, a better track for investing is in a well-rounded portfolio. As you get older, you’ll probably want more income-based securities (i.e. stocks that pay you dividends every quarter if you own them). There are mutual funds that specialize in dividends that will generate income for the fund. Bond funds can also generate income.

gondwanalon's avatar

Do NOT buy old gold coins or “numismatic” (coins crafted for collecting) coins. The value of such coins is generally over rated when you buy them and far under valued when you sell them.

Only buy gold bullion coins. There is no mistake as to the value of such bullion coins. When you buy a gold bullion coin then never pay more than 3% over “spot” value. Spot value is the established value at current date. And when you sell gold bullion then don’t accept a price less than 1% under spot price.

There are a lot of companies that sell gold bullion coins. The best company that I’ve found is APMEX.

I’ve learned the above the hard way from buying gold coins from many sources over the last 30 years.

A source of information are coin shows (that periodically happen) where coin stores have booths with coins and coin experts. There may be some in your area. There’s at least one coin show a month in the Seattle area. You can go there and ask questions to coin experts and or talk about gold coins. I’ve leaned a lot from coin shows.

Also forget about buying silver coins. I consider silver a junk metal.

Good luck!

seawulf575's avatar

There are a number of ways to invest in precious metals. You can invest in the stock market, basically buying paper gold, which is easy to do if you want to get rid of it later easily. It will be bought at the market price and any gains or losses in value are dictated by the market, just like every other stock. Pro: easy to invest in, easy to get rid of. Con: isn’t solid gold that you can hold in your hand. If the economy goes into the toilet, you won’t have anything on hand that could readily be used to buy stuff.

Another option is to put money into a plan like a Gold IRA. Plans like this buy and hold physical gold which you can request at various times as you like. These plans work like IRAs in that they accrue interest and build value. Pros: builds interest on your investment, can be redeemed for material gold. Con: the rules surrounding IRAs apply. You are not allowed to hold physical gold and call it an IRA. All early withdrawals from these plans are subject to the same early withdrawal penalties as every other IRA, all disbursements from these plans are taxed as income.

Another option is to buy physical gold. There are a number of reputable sites where you can buy the gold and it will be shipped directly to you. These sites offer both government issued coins as well as bullion coins. The difference is really a matter of how it will be viewed later on. Government issued coins have to meet specific purity requirements so it is sort of a guarantee it isn’t just gold plated and it can be assumed to be pure gold. Bullion coins can also be pure gold but they aren’t “backed” by the same rules as government issued coins. I would find out what the spot price of gold is when I go to buy. That allows you to see if they are trying to gouge you on the prices or not. Typically you get a better price per ounce if you buy more and typically it is only a little over the spot price/ounce. Pros: you have solid gold that doesn’t require anyone to be the custodians of it other than you. You don’t have to pay extra taxes on it when you get it. Cons: selling the gold can be somewhat problematic. You have to find someone willing to buy it and that person is likely going to try paying far less than it is worth. If the economy came to a point that it could be used as barter, holding an ounce of gold might be problematic as well. It might be worth WAY more than anything you are buying and there is likely not a way to get change back.

@gondwanalon says he doesn’t like silver and that is okay too. Silver is typically worth less than gold by a significant amount. Gold might go for $2500/ounce when silver is only $23/ounce. The two metals fluctuate with the market as far as what spot price is with silver typically following gold on the rises and falls of the market. If you invest in silver, you will likely never make a killing all at once, even if the prices “soar”. And there are other precious metals that you can invest in: copper, platinum, etc. are all available and all precious metals can usually be obtained in the same ways as gold.

zenvelo's avatar

”... If the economy goes into the toilet, you won’t have anything on hand that could readily be used to buy stuff.

But despite what gold bugs say, if the economy tanks, you won’t be able to take your gold bars down to Safeway and get a brisket and a bunch of broccoli. Gold may be a store of value, but it is not money.

When gold first took off on a price spike to $900 an ounce in 1975,the big headache was storing them in manner that they did not have to be tested/verified when you went to sell them. And certified storage was expensive. And you can’t go to Starbucks and shave off enough for a latte.

Blackwater_Park's avatar

You can buy gold ETFs like GLD. Honestly, gold is overvalued right now. Silver on the other hand, is not, and for whatever reason prices seem to be much lower than they should be. You can buy silver cheaply and hold onto it long-term without much risk because it’s so low. If you need to spend or trade it for things, it’s more fungible than gold because of how expensive even small amounts of gold are. The prices of Silver are generally more volatile though. The big thing is when people on the radio or TV are telling you to “buy gold now” it’s usually the worst time. There are much better investments than metals.

gondwanalon's avatar

@zenvelo I don’t know about the difficulties of trading gold in the case that the USD collapses.
In that case the value of gold will skyrocket. Perhaps at that point you will be able to take a one ounce gold coin to a bank and trade it for a couple trillion USDs. Make sure to bring a wheelbarrow. HA!

JLeslie's avatar

If you mean the stock market, gold is sometimes thought of as a good way to diversify a portfolio, it has gone up over the long term.

In cultures that adorn heavily with gold, the gold is not only for beauty, but also a belief the gold is a good investment. You see it a lot in South Asian culture. Gifting gold to children and at weddings is gifting stability for the future, and also some cultures think it is lucky too.

My neighbor’s son is a gold miner. I don’t know if he works independently or for a company. I got the feeling he is independent. Gold miners still exist in the US.

If you mean buy physical pieces of gold, like gold bars, gold is heavy, that’s why Jewish people are stereotypically in the diamond business. Lighter weight when you need to flee. Although, gold is more easily liquidated to barter with.

gondwanalon's avatar

Also I was thinking that it’s a good idea to not by gold bars heavier that one or two ounces. Huge bars like governments store will require expert analysis to determine that it’s 100% solid gold. Easy to be cheated when buying it if you don’t measure the specific gravity of the bar (could have a lead interior that would cause the bar to fail a sp gr test).

Also you can hide a lot of gold bullion coins in a small place. Today 455 one ounce gold coins are worth one million USD’s. If the economy crashes then you might not be able to buy a single one ounce gold coin for million USD’s.

zenvelo's avatar

@gondwanalon If the economy were to tank to the situation you describe, gold wouldn’t do you anygood. The only things you could barter with would be food, medicines, and fuel.

gorillapaws's avatar

@zenvelo “If the economy were to tank to the situation you describe, gold wouldn’t do you anygood. The only things you could barter with would be food, medicines, and fuel.”

Quoted for truth.

Gold is planning for economic security in a scenario that can’t really happen. Ammunition, cans of beans, vegetables, meats and sacks of grain, as well as fuel, solar panels and LiFePO4 batteries will be infinitely more valuable than gold in the economic collapse financial planning.

Smashley's avatar

Exactly. If the economy collapses utterly, gold as almost as worthless as is it inedible. Alternatively, if the economy only changes or recedes somewhat, gold is as risky as ever. A period of hyperinflation as has not been seen in a century could occur, but it wouldn’t make gold easier to use as a currency.

gondwanalon's avatar

@gorillapaws and @Smashley I think that you two are right in the event of the absolute collapse of civilization. But that happing in the near future is slim. A huge asteroid or nuclear war could do that but we’ll all be doomed anyway.

Also food, ammunition and fuel all have very limited shelf lives. Gasoline starts to degrade after one year.

The value that I see in gold is if the stock market and economy crashes dramatically but not if civilization crashes dramatically.

kritiper's avatar

The price of gold doesn’t vary all that much, even when you take into consideration inflation.

Lightlyseared's avatar

@kritiper since January the price of gold has increased 14%. Define ” doesn’t vary all that much”

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