Four big questions about buying gold

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Buying Your Gold

Four big questions about buying gold

Is Gold Overpriced?

There is no definitive answer to this question. Certainly it is not as underpriced as it was 10 years ago (Jan 2001). And, if we look at it in inflation-adjusted terms it is still not nearly as high as it was at the peak of 1980. In order to get that high we still have quite a ways to go. However it currently is above the inflation-adjusted average for the last 30 years. So from that perspective it is moderately overpriced. But we have to remember that once long term trends get going they often barrel on well beyond the averages.

Can I (or anyone else) guarantee that if you buy gold today the price will continue to go up? Of course not. If someone tried to suggest they “knew” the price of gold was going to continue upward they would probably be a charlatan or fraud.  But given the strength of the trend and the lack of any final “buying panic” we don’t currently have any counterevidence to expect the trend to reverse.

What forms does gold come in?

Gold is available in many forms.

But aside from its industrial uses, the most common forms are: jewelry, bullion coins, numismatic coins and bullion bars.

If you are looking to own gold simply for the value of the gold itself you will most likely want to avoid buying jewelry or numismatic coins. Jewelry usually has enormous markups due to the craftsmanship that goes into the product. Numismatic coins (those with historic value, often called collectible coins) have a completely different value component which has to do with the rarity and historical aspects associated with the coin. Though they can be excellent investments, they are generally not appropriate for someone interested in owning gold for its own, intrinsic value. I say generally here because there are exceptions, and you may want to talk to an experienced coin dealer for details. But for the most part gold investors should focus on buying either gold coins or gold bars.

Though gold bars are excellent investments, they tend to be less liquid and can be more difficult to sell. So, unless you are a true financial powerhouse, you should probably focus on gold coins.

Bullion Gold Coins include, for example, the Canadian Maple Leaf, the South African Krugerrand and the American Eagle. There are numerous others.

Where Should You Buy gold?

There are thousands of coin dealerships throughout the world. In the United States most states have dozens of them. Most of these are perfectly reputable. But beware that some shops will try to steer you away from bullion coins which have a relatively low markup and into numismatic coins which generally offer better profit margins for the store. Be firm and politely refuse if they try to push you into rare coins. It is also a good idea to shop around. One shop may consider a fair markup to be 5 percent over the spot (current) price of gold. Another may be satisfied with 2 percent.

You may also want to check the Better Business Bureau (www.bbb.com) to make sure they don’t have a lot of outstanding compaints. It should not be hard to find a store with a BBB rating of A- or better.

You may also want to check out gold sources online, especially if you can’t find a good shop nearby. Type in “buy gold online” and you’ll find a number of choices. Just be sure to check the dealer with the BBB website.

Is Gold Hard to Sell?

Not at all. It is as simple as walking into any coin shop and saying “I’d like to sell some gold coins”. However, beware that they are not in the business of losing money. No dealership is likely to give you any more than the spot price for a gold coin. In fact they will often insist on paying you somewhat less, which may seem unfair given that they sell the coins for 2 to 10 percent over the spot price. But the fact is they do need some monetary incentive to engage in a transaction.  In general you should not settle for anything less than 2 percent under the spot price. Most dealers will go for 1 percent under if you are firm (and turn to head for the door). If you develop a consistent relationship with a dealer he or she is more likely to give you a better price and you can often get the spot price especially in a rising market.

One to Three Years Left For Gold's Run
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This week's chart looks at the Dow Jones Industrial Average expressed in terms of the number of ounces of gold it would take to "buy" the DJIA's index value. This is a popular comparison that a lot of chartists like to show, especially when it gets up …

Buy Gold question by frozen555: Is it possible to buy gold call options somehow?
I looked at the options chain on GLD, and I saw no options. Why is that? Is it possible to buy gold options at all? Where should I look?

Buy Gold best answer:

Answer by lithium630
No. Not every company sells options.