Part 4 – How To Invest In Gold – Gold Investment Advice

Share on LinkedIn
Share on reddit
Share on StumbleUpon

This article was allowed to be reprinted with permission from

One of the biggest problems with investing in precious metals, particularly gold, is that there is a lot of conflicting and often times confusing advice. Here I break down the main ways of investing in gold and the pro’s and con’s of each. Hopefully this will help guide you in making the right choice for you and your family. I will list out the main methods of investing in gold but before I get into that, let’s go over the volatility of gold in-depth.

Precious metals are notoriously unstable. They can go up 40% during a few months and then bottom out, like it did in April 2013. Even as I write this, silver and gold is still coming off its lows but not really climbing.

If you are planning to invest in precious metals, you need to be aware that taking enormous short-term hits to your wealth are a real possibility. Don’t plan on selling unless you are willing to hold your investment for at least 2 to 5 years, and even then you may not want to sell. If precious metals go down 10% in 1 month, that means your retirement portfolio of $50,000 (an example) has a paper loss of $5,000. This can make anyone nervous, and understandably so.

It’s this kind of volatility that scares most people away, but it also means that demand is lower than normal and prices remain cheaper as a result.

Think of it this way. If everyone in your neighborhood (including you) wants to buy that amazing 8 bedroom house down the street, the asking price of $1,000,000 will be higher as time goes on. If everyone in the neighborhood thinks the house is cursed, haunted, faulty, or built poorly, no one will pay the $1 million. As a result, the asking price will drop considerably, and you can get it for cheaper.

Gold, silver, platinum, and palladium is no different.

Right now many media outlets and investors are bashing gold, so there isn’t currently a huge demand for it, and it doesn’t look like sentiment will improve for months, if not a few years. That means prices will remain lower than they could be.

If you have no immediate use for your cash, now is a good time to load up, especially on silver (I personally prefer silver).

The main ways to invest in precious metals are:

  1. Paper precious metals like ETF’s and gold mining stocks (stock markets basically)
  2. Buying and holding the physical product (coins, bullion, bars)
  3. Precious Metal IRA’s – a combination of holding the physical product but it is stored by an approved government depository until you reach 59.5 years of age and can begin taking physical possession of your metals (or leave it in storage)

Let’s go over ETF’s. These are the easiest ways to invest in gold. Also known as “paper gold”, ETF’s are shares of stock that represent (supposedly) real ounces of gold and silver. Some common paper gold ETF’s are GLD, AGQ, SLV, and PSLV.

You can also invest in gold mining companies such as Barrick Gold Corp (ABX) and Newmont Mining Corp (NEM). These are real companies with real overhead, but more believable profits. When precious metals do well, these companies excel.

These are all public traded stocks. The primary downside is that your wealth is assigned to paper certificates subject to heavy regulation by the government and you have zero control over your money. The ease of investing in paper gold is counterbalanced by having no say in how your money is handled. In the coming collapse, I do not feel comfortable unless I have full control over my money and finances, but that is just me.

The ease of profit does allow me to realize gains sooner, and that is a primary attraction to ETF’s and stocks. My gambling days are behind me, though.

Next is the obvious way to invest in precious metals, and that is to outright buy the coins, bullion, and bars.

I have a certain attraction to coins and bars. I’m not sure why but I just like to look at the shiny objects and go “oooooh!”

If you’re planning to buy the physical product itself, stick to coins because they cost the least premium, often called the “price over spot”. Bars and bullion tend to be more expensive for the same ounce because of the extra minting and molding required to achieve the shape.

If you have no way of safeguarding your metals, you want to at least get yourself a cheap safe with a lock. The upside to buying the real thing is that it’s basically pure cash, so if being tracked electronically is a concern for you, this may be a good route to go. Just remember that the pre-purchase funds of your order may be tracked, unless you’re paying cash.

The final way to invest in precious metals, is to have your retirement account hold the metals in a depository. This website covers this at length (or you can check the company I reviewed at the homepage here that handles this process) but I will summarize the pro’s and con’s here.

Your retirement account is basically a huge amount of invested money that you’ve worked all your life for. To keep as much as you invested, your 401k and IRA has certain tax advantages and penalties. A precious metals IRA is basically what allows you to purchase metals pre-tax and profit post-withdrawal.

The obvious downsides are linked to the 401k/IRA rules set forth by the IRS, so all withdrawal rules apply. But the main advantage is that you get preferential tax treatment until you decide to withdraw your money and metals. Another downside is that you’re required to work with a gold IRA custodian that specializes in this type of financial planning, but lucky for you I’ve reviewed the top and worst companies on this site.

You will also need to be aware that there are fees related to this type of IRA, just like every other company you’ve worked with. Some companies will charge more than others and I get into more detail in that in the next parts.

Hopefully this quick write-up gives you an idea of where you’d like to go if you’re set on investing in gold and silver.

Leave a Reply