Gold Archives

Tips and Advice for Investing in Gold

Recently we brought you a blog  filled with tips and advice for investing in silver.  Today’s blog is going to be similar and yet quite different as it focuses on  the precious metal gold, including gold coins and gold bullion. If you’re looking to diversify your portfolio and invest in a bit of one of the world’s most famous and popular metals then you’ve come to the right place. So sit back, relax and as usual,  enjoy.

Investors who  love gold will tell you that, if you want to protect your investment against inflation, weakness at the stock market, currency fluctuations and many other financial uncertainties, there is one item that you must have in your portfolio and that is gold bullion and/or gold coins. Most experts will say that, if you’re going to invest in gold, you should do it  as a long-term investment and be prepared to hold onto it as long as possible.

The type of gold that you should invest in depends on the reason that you’re interested in investing in it in the first place. If you want to hedge financial uncertainty or take advantage of a price movement then you would do well to invest in contemporary gold bullion coins. Most experts agree that both this type of gold coin and historic gold coins normally trade at modest premiums over their melt value and enjoy internationally strong  liquidity, so interestingly neither one is probably an equal bet.

Some investment experts will tell you that gold is ‘ wealth insurance’  and that the best time to buy it is when you can. They will also tell you that you can’t approach gold the same way that you would stocks or investing in real estate. Even further, some will say that the best reason to buy gold is to make sure that, when economic catastrophe looms like the kind were seeing in Europe and Japan right now, gold will suddenly appear like a very intelligent investment.

As far as who is investing in gold you might be surprised to know that it’s not the super-rich by any means. In fact, teachers, dentists, carpenters, attorneys, small business owners and university professors own gold, usually in the form of bullion or coins as we mentioned,  which has made gold a  very popular part of many portfolios. Recently a Gallup poll showed that gold was rated the best investment by 34% of American investors, higher than stocks, bonds, bank savings and real estate.

One of the biggest differences between gold and the vast majority of capital assets is that gold is the only one that does not rely on someone else’s ability to pay in order to get its value. Unlike bonds, stocks and other investments, gold is always an asset for you but never a liability for someone else. Even more, no matter what happens with the dollar, the stock market or the economy, gold is tangible and has an intrinsic value that cannot be overstated.

As far as how much of your portfolio should be made up with gold investments the general rule is between 10% and 30%. A recent analyst on CNBC advocated investing 20% of your portfolio in gold if you’re keen on protecting your investments from the current economic, financial and political situation happening all over the world.

There are also in gold stocks that you can invest in but most people make the mistake of thinking that they are an exact replacement for physical gold in coins or bullion. If you ask some mine owners about their recent experience with gold stocks they will more than likely express their dismay that, even as the price of gold rose, their stocks failed to do the same. Keep that in mind if you’re keen on purchasing gold stocks.

Well, we sure hope this information has been golden (excuse the pun) for you. Good luck with your adventures in gold investing and always remember to invest intelligently. See you back here soon

How I Dodged the Silver Bullet (Symbol SLV)

A while back I was long on Silver (Symbol: SLV) for many reasons. Inflation scares, shaky markets, and diversity to name a few. Then suddenly I took a look at it versus the current market and thought “where can this even go from here?”

Are we going into a massive depression? Are we going back to a metal based pegged currency? I was bull on the market, so how could I continue to be bull on it’s counterpart indefinitely?

Already up a solid 55.0%, I decided it was time to sell. This might have been one of the luckiest sells. Not only did I sell before a downward movement, but I sold literally at the short-term peak.

And sure enough when Silver is falling, its usually because the indices are climbing.

I view silver as a semi-hedge against the market, and I’ll consider getting involved again if the market continues to rally and silver remains relatively stagnant.

Overall though, I’m very happy I got a little of the metal action, but I’m pretty bearish on the whole for gold and silver. I believe we are going through a lot of things with the economy which causes a bubble short-term, but I feel like we are more likely to see $1500 gold than $1900 gold (Currently $1700). One of the major reasons I decided silver over gold in the first place was that silver didn’t quite have the bubble that gold did at the time.

For now I’ll take it off the table and look for better investments.

 

JCpenney’s is Doom (Symbol JCP), Short on JCP

Revenues, EPS, traffic, and gross margins are all down. I for one am short on JCP.

The “nay-sayers” will say that their restructuring deal was a four-year plan, but frankly I feel like the results should have been extremely more positive in the short-term to have any chance of bearing fruit long-term.

How bad is it? I would argue it’s really bad.

  • Revenues in Q3-2012 are down 22.6% from Q3-2011
  • Net income for Q3-2012 was -$147m versus +$14m in Q3-2011
  • Actual traffic in the store is down for a second consecutive quarter

I could go in to more detail about margins, but those numbers are enough alone to be justification of a short to me, but then again I’m bias. I hate J.C. Penney , Kohl’s, and Macy’s. We went through the cycle of coupons and discounts and now we are into reinventing ourselves similar to Target? I’m not buying it.

J.C. Penney is a dying company to me. Increased competition and what I would call the “dying age of the mall” will slowly push a lot of retailers out of the game. I admire J.C. Penney for trying the restructure, because honestly they didn’t have much choice if they wanted to continue long-term, but what exactly do they have going for them?

I would say the only thing that can save J.C. Penney now is quality of product. I’m not going to get into specific brands, but I believe J.C. Penney is still viewed as having higher quality than competitors like Walmart and Target. I’m not sure that will stand the test of time, but quality of product should Jcpenney’s future and things might get ugly when it comes to advertising (bashing competition or implying inferior competitors).

Then again, I just don’t think J.C. Penney  will focus on quality, and ultimately it will become a thing of the past. If I was long on retail, I would consider target (Symbol: TGT) if it got back down in mid to high 50’s. Although I personally hope target goes up, so I can short it on resistance. When it comes to Macy’s and Kohl’s, as much as I personally hate them both, their Year on Quarter revenues did not suffer like J.C. Penney’s. I view them as an avoid or potential short (again trading on resistance).

Could J.C. Penney rally? Of course, but I currently believe it is more likely to fail than succeed, and that is enough for me to take action. I can tell you one thing though, You won’t find me shopping there.

Disclaimer: Although I personally have taken a short position on JCP, my opinion and this article should not be used for any decision making of any kind. Always consult a professional before investing.

 

Buying Sterling Silver to Melt into Bullion

Believe it or not, buying sterling silver to melt into bullion is actually a thriving culture. With silver over $30 an ounce, it’s not a shock that people are out at thrift stores and estate sales looking for silver to scrap.

So whats the deal with Sterling silver?

Sterling silver is commonly 92.5% pure silver, and as such is marked with a “925” symbol on the piece. There are other purity silvers and it is common for them to be stamped with their purity, but there are some things to be warned about (covered later).

So how does this exactly work?

It’s actually fairly simple, and it should be considered how long coin minting has been in action.

Step #1 – Find a bunch of silver

Yard Sales, estate sales, thrift stores, or pawnshops. Anywhere you can find it a good price. Check the spot price via google finance or yahoo finance. Be sure to discount it for it’s purity (92.5% for example) and for your time. If you are paying 80% spot, it might not be worth your time unless you can get it in GIANT quantities. You are better offer looking for high margin but more infrequent transactions.

eBay sells a ton of scrap silver, but it’s rarely cheap enough to act on in my opinion. You maybe able to sneak a few deals out of it though.

Step #2 – Melt it down in a crucible with a torch or kiln furnace (Disclaimer: Never do either process ever. I am not advocating this processing, nor am I an expert in this field. Consult a professional and never attempt yourself.)

Melting Silver

Step #3 – Refine it with needed agents (borax is commonly used, again if you are serious about trying this, consult a professional.)

Step #4 – Poor it into a mold (typically graphite or stainsteel)

Step #5 – Polish it and sell/store it.

Yup it’s that blunt of a process. Now of course you can stamp your silver and even buy custom molds to add to the fun

What should I be warned about when Buying Sterling Silver to Melt into Bullion?

  • Markers marks for item #. You might see x869 and think it’s 86.9% pure, but it might be piece number 869.
  • Cement filled pieces. Yes that’s right, that 2lb candlestick is not solid silver! A cement polymer is often used to fill sterling silver.
  • Actually refining silver is a process that is probably best left to the experts, although that doesn’t stop a lot of people from trying.

But you know what? I don’t think all of this is worth the time.

The biggest reason why I don’t think it is worth the time, is that scrap silver sells for about 85% spot value on eBay. No crucibles, no molds, no energy costs, no borax, no misc tools. You just take your scrap sterling silver and presto, 85% spot. Ultimately I view this as a craft/hobby. If you enjoy making homemade bullion, then maybe it would be worth it. I am just doubtful that there is an actual financial net gain.

Final note, I think that because of silver prices.. quality sterling silver silverware is going to be more and more rare. I think you might get a better return just keeping full sets than melting them down. Hold on to that set, you will always have the option to melt it down later.

 

 

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