Your Questions About Is It Smart To Invest In Gold

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Richard asks…

I want to do a long-term investment in gold, is it smart and how exactly is it done?

I’ve had a bunch of people saying me that gold is a very stable thing that has been highly valued throughout history and will continue to be valued, etc, etc. Now I must say that I am still not fully sure about this: whether gold is going to have value in case of a major world-wide economic crash (like would a farmer sell me food for a piece of metal), is it really that valuable or is it another inflated bubble and so on? But let’s assume that it really is valuable and all those things are true.

I have a certain sum of dollars and I have a stable income, a good part of which I never use. So my sum of dollars increases every month. I live in a 3rd world country and there are not many investment options here. Until now I’ve been happily using bank deposits (here they give you 5-10% in the most conservative banks). However as my account has been increasing and increasing, it has been getting more and more scary to keep that sum of money in banks.

Now, to the actual questions. Soon, I am moving to the USA which I guess might open me a world of new investment options. I’ve heard that in the USA bank deposits give you veeery tiny interest rate that barely covers dollar inflation and most people play with stocks markets, etc.. I must say that economy and investment is not my trade and I don’t want to spend all my free time studying how stocks and other similar things work. Plus I don’t really trust things long-term. So I’ve been thinking to convert all my money to gold and keep it somewhere adding more gold every month.

So the first and main question: is it smart or am I missing something big here?
And the other major questions how exactly do you invest in gold? Some people told me that I can buy a huge and heavy safe and keep it there. I can’t do this though because I need to be mobile so I am renting apartments plus I don’t see keeping gold at home to be fully safe. And also other people told me that when I’ll want to sell this gold, I’ll need to pay for very expensive tests to prove that there is nothing wrong with the gold. Now the other option I’ve been told about is that I can create an equivalent of dollar deposit but in gold instead of dollars. The problem with this option is that I am not sure the money is safe there. If there is a major economic crash and banks go down, do I actually get that gold or they simply close up and say “sorry”?

financi4 answers:

One of the best ways to invest in gold is to buy shares in the gold ETF. This trades just like stock and its symbol is GLD.

If you’re totally new to investing and want to get a broad-based overview then read _Dummies Guide to Stock Market Investing_.

Paul asks…

How smart is it to buy gold or silver?

Im worried about the possibility of an upcoming debt crisis having a lot of money in the stock market. Its not my money, but money being handed down to me. Whats the history of the dollar vs gold and silver? How stable are they compared to the dollar etc etc. I need an answer that will convince my dad that investing SOME money in this would be a good idea, he’s stubborn and watches way to much fox news

financi4 answers:

Many would agree with your philosophy. Certainly, having a variety in ones asset allocation has merits especially since the future is so uncertain. It however is my opinion that investing in blue chips stocks is about as good a bet as any. At least they DO pay a dividend which gold and silver DO NOT.

Charles asks…

Is Gold a good investment?

Would it be smart to invest $20,000 in gold?

financi4 answers:

Remember that an investment is a specific term. If you really mean holding on to that investment for a full year before selling, then definitely. But if you see the price fall next month and you get antsy, then no.

The US government is building up fiscal deficits at an unheard of rate. Our gross national product is either (depending on who you listen to) either growing at a very moderate rate or seriously losing ground. We still import far, far more than we export. All said, the value of the dollar is dropping and the number of dollars it takes to buy much of anything is going no where but up. In a case like this which would you rather own, dollars in the bank (banks are folding so fast some wonder if the FDIC will be able to keep up), or gold that will be worth far more dollars simply because the dollar is increasingly worth less.

Here is a problem though, how to invest. Last year I changed all the available funds I could into exchange traded funds for gold and oil. Then I thought that silver has much better and more phenomenal prospects, so I sold it all and invested into a silver ETF, Now I am concerned because there are indications that some big banks maybe trying to corner the market on these precious metals. Years ago I lost my shirt by being “all in” in the Maine potato futures, the year when some 90 millionaires tried to force the market, then defaulted on their contracts. The don’t trade Maine potatoes like that anymore. The banks that hold the most gold for ETFs and metal futures markets have short positions equal to almost the whole value of the contracts on the metal exchange.

The short of the story is this, there may be a major financial market default before the year is out. When the dust settles the value of gold will be far above what it is now — if you and I still actually own any. So if the bank that holds the gold, silver, or whatever also is betting against it to the fullest extent that they can, either way it looks like a serious concern.

You could buy US Treasury buffalo gold and eagle silver coins, except the demand for them is beyond what the Treasury seems able to supply. Still, if your coin dealer can give you a reasonable price in relation to market gold, go for it. At least you will physically have gold, what I’ve got is a piece of paper that says a trust is supposed to be holding silver, while the company that actually holding the metal is selling the metal short on the market. The thing with short sales is that they are selling what they really don’t have, so someone bought what they think there is actually metal out there for it. There are more of these contracts out there than there is metal covering it. I may be sitting pretty this time next year, or I might be left holding an empty bag like the one that was supposed to be holding potatoes several decades ago, but ended up empty because the ones who sold me the contracts couldn’t deliver the goods.

Good luck. It is a great idea, if it works when the dust clears.,

Joseph asks…

Should I invest in gold coins?

I was thinking about starting to invest a little. I have never done it before. I am 20 yrs old and have some extra money I would like to put away. I want to start small. $500-1000 for now. Maybe in the coming months invest more. I have heard that gold is one of the smartest investments right now. I was thinking about buying some 1/10th ounce gold eagle coins. They run like $122 each. I was thinking about buying several of these just to get my feet wet. I know I wont become a millionaire or anything like that. That is not what I am trying to accomplish. I’m just trying to maximize some funds that would otherwise just be sitting in a savings account. Any advice is greatly appreciated.

financi4 answers:

You are very very smart. You you are even choosing the right product. Now Im going to elaborate on why this is a good idea.

First off you need to understand that gold is not an investment. Gold is and acts more like an insurance policy. You are insuring that something in your portfolio can never go to $0.00. All paper assets have the ability to go to $0.00. This is what you are insuring against. Te only other asset to not go to zero is real estate. But real estate is illiquid. It takes too much time to sell real estate and in a credit contraction like today this is the case. Because of the debt time bomb you better own gold. I have been selling my stocks and buying gold and silver but I understand exactly what is happening and know this market isnt comming back for many many years to come, if ever. There we be no jobless recovery. Who is going to buy all these paper assets in the market that are all in default. And with what job. We have exported every job that we can and we cannot survive not building, not producing and not manufacturing and only consuming. No.. Im buying all the gold an silver I possibly can and not allowing the Madoffs to steal my wealth. I know the gold will always be worth something. I had stocks down 95% and was taxed on undistrubted capitol gains that the Pin Stripped Bandits stole from the shareholdrs. When that happened I dumped all my stocks. Every one of them. The best way to own gold is to buy and take physical delivery of the gold itself. Silver is also in the gold realm as well, so when talking about gold, silver is included.

It is always a good idea to own some gold and silver at all price levels. To truly understand gold and silver, and why you should own it you have to understand the economy and get the movie of life on the largest screen possible.

Gold is money and a store of value. It is the “Currency of last resort” as Greenspan has stated many times through the years. Gold doesnt pay interest, dividends, doesnt restate earnings, has no lawyers, accountants, CEOs or CFOs lying to you on television. Gold doesnt ask for bailouts, doesnt go BK and cannot cook its books. Gold cant be debased or printed at the will of a company or governmetnt and holds its purchasing power.

Gold sits there as a store of value, is labor intensive, and a one ounce coin will not split into a bunch of half ounce coins at the direction of the pin stripped bandits on Wall Street. Also Gold is the ONLY asset class in the last ten years to increase in value and retain every dollar of its purchasing power.

The NASDAQ is up 1700% since it was created in 1971. Gold has outperformed all assets since we went off the gold standard in 1971. Gold would be even with the NASDAQ if it fell to $630 an ounce. Gold would be even with the DOW and the S&P 500 if it were to fall to $420 an ounce.

Gold has outperformed ALL asset classes since we went off the gold standard. No exceptions. However silver since 1928 silver has outperformed them all.

Investing in gold and silver for the short term is gambling. Dont do it. Putting cash into gold and silver for long term savings is the only way to go. History has shown that to be the best way to perserve wealth for 6000 years.

Some people say that gold is in a bubble. This isnt true. If it were then everyone would be owning it. There are very few people who own gold and silver. When looking at gold you must think of it as a currency, just like the Canadian dollar or the Euro. Begin pricing any and all goods and services in gold. If you are able to buy substantually more of your food, energy, transportation costs, taxes etc with the same amout of gold then you can today or historically then tht would be a sign that gold is in a bubble. Dont listen to those that tell you gold is too expensive. It isnt.

Again you are VERY smart for doing what you are planning.

Thomas asks…

Investing for Cashflow???? Is that smart right now?

So why would I invest for Cash Flow if they will pay me in dollars that are losing value?? Wouldn’t it be smarter to hold gold and silver now then after the dollar collapse invest for cash flow?? So I guess my question is why invest for cash flow if the dollar is going to be worthless?

financi4 answers:

If the dollar is going to be useless than all bond denominated in dollars will be useless first. You should invest in bond puts or Yen calls or EuroSwiss deposit calls or (a billion other things).. Or maybe the collapse of the dollar is not a fait accompli…

Ken asks…

Pay down a mortgage, save, or invest elsewhere?

I have 50 thousand to invest. I was thinking of paying down the mortgage, It might be smarter to invest in a physical commodity like silver or gold than use it to make a dent in the mortgage. how hard is it to sell a physical metal?

Where to go from here? Please help

financi4 answers:

In the 70’s -80’s you would’ve paid down your loan, especially with interest as high as 12%, everybody had a steady job…But now… Nobody is certain their job is secure, or if you could find a comparable job to replace it….So…..You need more accessible funds to tide you over.Funds/Shares to liquidate in case of an emergency.
Suzie Orman promotes this, and I agree
Somebody else can tell you what conservative option would work..Bonds..Balanced Mutual Funds,etc.

But anything besides Gold, gold is more a pyramid scheme than a investment..imo.
And expensive.

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