Gold

[sparroa]

I hope this is appropriate discussion material. Not courting any controversy.
I have been devotedly watching the gold prices for the last five years, long before the economy took a major nosedive. I wish I could say I have lots of bullion stashed away, but I have been dead broke for nearly all of that time and still am in no place to invest. If I had the money of all those sub-prime mortgage speculators, I would be laughing in my own personal "Fort Knox" vault at this very second! It tipped $US1448.60 a troy ounce today, an all time record, before settling slightly lower. With all of today's currency woes, war in Libya, strife in Japan, total unrest in the Middle East, economic collapse in the EU - everyone is returning to Old Faithful.
I personally think the price of gold has nowhere to go but up in the coming years as people seek out something with inherent value over worthless paper and digital fortunes. Even though its more expensive than ever, I still view bullion as a sound investment. What do you gentlemen think?
(I think with our collective cellaring mentality, pipe smokers can appreciate its long term value despite the fact that Wall Street and the media make "goldbugs" sound crazy)

 

[cortezattic]

I've never quite known whether it's better to buy gold stocks or bullion. It would seem that bullion has a high PITA factor once you possess it. In addition to the usual brokerage fees (as with stock), you have storage, security, and insurance costs; and you're probably looking at assay costs when you cash-out.
I dunno. Are there any high finance experts out there?

 

[duncan]

I bought into a bunch of silver a few years ago and watching the current market it has gained 300%. Now with that said I never bothered into looking where to sell it at in the end. With the metal market at this point I believe buying in is a bad idea. It is at a very high and expensive starting point. You will still stand to make some money, but I see stocks on the rise and dropping the value of metals.
P.s. I will only buy the actual bullion, I want the real deal not a piece of paper.

 

[sparroa]

Just to be clear, I am a complete layman.
Cortezattic, there is a definite convenience factor from gold stocks and certificates but to me there is far too much risk involved. I agree with duncan and I'd want the real deal only. Otherwise, if a bank goes bust, you are officially up the creek - to me, gold is a hedge against the devaluation or failure of the conventional financial system. There's nothing to prevent a bank from issuing you a certificate of ownership without the gold bars to back it up, making your investment a complete waste.
Duncan, I also thought of silver as a more affordable alternative but never stepped into that market either. Still saving up my coppers! Buying now is definitely something of a risk, as you say, but I feel that there are much worse places to put your money. I was too young to raise any investing capital back when the metals were more affordable, but I think time will tell that its not too late to enter the market just yet. In my opinion, the world is only going to get more unstable and there's more folly to be found dabbling in stocks without any physical holdings to show for it. In the case of some unforeseen calamity, gold proves invaluable. (Making your bullion liquid in such times of distress may be another story - ask Gaddafi about that one, for an extreme example)

 

[bhpdrew]

I picked up 60 lbs of silver back when it was a little less than $9 an ounce. It's my "rainy day" stash. If you're going to buy silver or gold, buy the action bullion. As has been stated. If TSHTF, that piece of paper you have in gold stocks is really worthless.

 

[sparroa]

Good advice, bhpdrew.
Cortezattic, one way to bypass assay costs I believe is to deal in gold coins. Especially for small fry like all of us. I'm also willing to bet that some people skim on the storage/security/insurance aspect in lower volume instances and take care of those things themselves.

 

[duncan]

I am a true believer int the silver market for a few reasons. First, at this time it is much cheaper than gold hence being able to buy much more of it. Second, Being of a smaller value it is easier for trade paying by the ounce is easier than by the gram. Third, almost all major electronics use silver in the contacts and or wiring/solder. Just like gold there is only so much silver, but we use more silver daily than gold.

 

[ohin3]

Im not a fan of money in general myself. I could never understand the value of shiny rocks. I like the way some of them look, but if you offered me a lump of gold or all of the things that gold can buy me that are useful or satisfying to me in some way, I would surely opt for the latter.

 

[cortezattic]

Well Phil, any money is just a convenient medium of exchange. The alternative is, what, barter?

 

[ohin3]

I'd be happy to go back to the trade and barder days. Socialism should work. But the the greed that prevails amongst the majority of human kind will never allow it.

 

[forsooth]

I think goodness for "greed." It is what motivates some people to grow and harvest tobacco, others to prepare it, and others to sell it competitively.
Without greed, there is chaos. Milton Friedman is a great source on this.

 

[ohin3]

I feel that greed is the downfall of the human species.

 

[lonestar]

A good investment for those too late to jump on the gold an silver bandwagon, is US Nickels.

Sounds dumb right ?

But the value of a nickel is 5 cents, and the value of metal in a nickel is already 7.5 cents. Obviously, they cant afford to mint 7.5 cents of metal into a 5 cent nickel for much longer, and they have already talked about changing the composition of them. After the change is made (no pun intended) it will be a chore to sort through thousands of nickels to find the old style. But right now, any nickels you stash are worth more than face value, with the price of all metals to keep rising.

Theres a lot of people out there quietly buying $50-$100 of nickels at the local bank each week.

 

[papipeguy]

Try buying a steak at Morton's with a Krugerand. Commodities can be a heart attack market if you're not on top of them every minute of every day.

 

[lonestar]

Also forgot to add, in the event that the economy does collapse, a wall made of boxes full of nickels would have sufficient mass to slow down most incoming small arms fire. Now THATS hedging against an economic downturn.

 

[marmal4de]

I feel that greed is the downfall of the human species.

The human species is going to be the downfall of the human species.

Life is a sexually transmitted disease and there is a 100 % mortality rate....

R D Laing

 

[sparroa]

papipeguy,

I don't know about a Krugerrand, but a $1500 Canadian Maple has a $50 face value - if the server has anything resembling a brain he would shut up, accept the coin, swap for it out of his tips, and head to the bank first thing in the morning!
Seriously,

I know that bullion is not perfect. In the case of market collapse or currency hyperinflation, however, what would you rather possess? Gold for most people is just a small part of their portfolio for the very reason that it is not a readily liquid method of exchange. As I said - Gaddafi has billions in gold reserves but it is worthless because he is bombarded on all sides unless he sneaks through the desert and tries to cash it in sub-Saharan Africa. (Imagine!)
On the other hand, however, if you were in Weimar Germany or present-day Zimbabwe, gold coins would be a godsend compared to the ten trillion dollars you carried to the bank in your wheelbarrow. It has been valuable throughout world history and it will continue to be valuable. Gold and other precious metals are finite resources, as someone mentioned, and they are used widely. I think they are more secure in the long run than some of the more recent financial constructs you'll encounter.
These are extremes and generalities; take them with a grain of salt. But I think there is something to be said for gold bullion even if it doesn't show a profit for many years. (You may say that is a poor return and an inefficient use of capital, but even without expertise one can have an idea what they are getting into with gold and other metals - try to wade your way through the stock market unassisted! Turbulent waters, indeed...) I wouldn't advise anybody to relentlessly hoard gold, but it doesn't hurt to have some. Again, as papipeguy said, the markets are volatile and aren't for the anxious or irritable.

 

[sparroa]

Wading in on the barter debate...
Most of us in North America would have NOTHING to offer if our economy suddenly lost its capitalist way.
Those people with a survivalist bent and an incredible degree of self reliance could forge a living but you would certainly see pandemonium on a massive scale if everyone suddenly reverted to a barter system. There are no communities to support the weak, and we have turned more luxuries into necessities than ever before. I think things would just fall apart, period, thanks to the modernizing steps the generations before us have taken.
I'm not greedy and don't covet money for the sake of having it. I agree with you to an extent, ohin - it's far superior to have the things money can buy. Moreso, however, I side with cortez in saying that money in all forms is just a method of exchange and you can use it to better yourself and protect what you've already earned.
I used to approve of socialism in theory but the old maxim rings true - power corrupts, and absolute power corrupts absolutely. Tyranny tends to be the only way people have instituted far-left ideals, unfortunately.
Capitalism is pretty corrupt, I must admit, but it's all most of us have ever known and its hard to comprehend the existence of America and many other modern nations without it.

 

[forsooth]

In general, one man's greed is another man's enlightened self-interest.
Why do Apple, Google, and Microsoft (etc.) produce such great products that benefit each one of us? Out of the goodness of their hearts? C'mon, bro!
And, of course, M. Thatcher's oft quoted advice: "The problem with socialism is that eventually you run out of other people's money."

 

[strongirish]

I won't get into the socialism argument as it has never worked and never will work. Redistribution of wealth creates mediocracy whereas green flames invention and forward movement.
Problem with investing in metals guys is that the average Joe which most of us are have to buy it at retail, but when we want to sell it we only get wholesale back for it. Noone will pay us retail back. Therefore in the short term we are taking a loss when buying it and it has to go up dramatically to get into the positive. Then one has to keep and protect it and if it get's stolen, it is a total loss. There are much better ways to make and keep one's money and not have to worry about it all the time. The best investments I have made are oil wells and real estate. And beleive it I made a 742 percent profit on buying up old estate pipes and refurbishing them and reselling them. Not the average pipe sold for $10 but I find rare old eight dot Saciennis and Dunhills and such for mere couple of dollars and end up selling them for hundreds. Not a bad investment really.