OT: Precious metals as part of retirement planning?

[Ranger Dan]

I know that stocks are more volatile but also higher earning potential, and bonds are more stable but less upside. My laypersons take on investing in gold and silver is that it's not as potentially lucrative as stocks, not as steady as bonds. Maybe this is a sophomoric view... I guess the one benefit is that investing in gold/silver/platinum (not companies who mine them) is insulation for the stock market. I've read on line that some recommend 5% of your portfolio be in precious metals, but this was from a site that was selling precious metals. Anyway, do any of you have any opinion on buying gold/silver as part of an investment strategy?

 

[sluggo72]

I know that stocks are more volatile but also higher earning potential, and bonds are more stable but less upside. My laypersons take on investing in gold and silver is that it's not as potentially lucrative as stocks, not as steady as bonds. Maybe this is a sophomoric view... I guess the one benefit is that investing in gold/silver/platinum (not companies who mine them) is insulation for the stock market. I've read on line that some recommend 5% of your portfolio be in precious metals, but this was from a site that was selling precious metals. Anyway, do any of you have any opinion on buying gold/silver as part of an investment strategy?

Yes, I don't do it. First question is, how you going to do it?? Buy the actual commodity ?? If so, and in an IRA does your custodian allow it??? Next do you buy vs an ETF??? Which have their own set of problems
Besides in the big scheme of things, what's a 5% allocation going to do for you??

 

[Nitwit]

I wouldn't do it, Precious metals might be emotionally satisfying but there are better ways to hedge against market downturns.

 

[rutgersal]

Don't invest in anything you don't fully understand. Investing in commodities is playing with fire, especially if you don't understand the market. This is why I don't invest in commodities.

The easiest way is to invest is a vanguard fund which invests in commodities like gold, for example. You would invest in gold as a hedge against inflation.

At least stock prices are mostly dependent on company performance, and well run companies will continue to increase in value over time. Commodities are dependent on the vagaries of the market.

 

[Nittany Ziggy]

I've got one word for you...

 

[Ranger Dan]

I guess the 5% would be "SHTF" insurance, short of building a fall out shelter in the back yard and filling it with canned spam.

I don't know if my current "custodian" does it or not, but I'm looking for a new one anyway. My wife and I have been doing our own thing since we've started before we met and now want to have it managed as a whole. How hard is it to find custodians who can do IRA of precious metals?

 

[Ranger Dan]

Don't invest in anything you don't fully understand. Investing in commodities is playing with fire, especially if you don't understand the market. This is why I don't invest in commodities.

The easiest way is to invest is a vanguard fund which invests in commodities like gold, for example. You would invest in gold as a hedge against inflation.

At least stock prices are mostly dependent on company performance, and well run companies will continue to increase in value over time. Commodities are dependent on the vagaries of the market.

I have 401k and IRA funds as well as company stock shares. What I want is something tangible in case the market completely collapses.

 

[Fox Chapel Lion II]

Absolutely, positively NOT. Don't do it.

1. Your investment has ZERO earning potential. None. It throws off no stream of income whatsoever.
2. Your asset is COMPLETELY illiquid. If you need or want the cash, there is no way to know what the market will be and how long it will take to sell the asset.
3. Your transaction costs will be through the roof. You will pay a premium above market value for the metal when you buy, and you will have to pay again when you sell. They get you both ways. There is no transparent fee structure.
4. Who holds the metal? You? First of all, what are you buying? You buy $10,000 from Gold-R-Us, you will get an assay certificate that says how much and how fine. Do you trust them? When you sell, nobody but nobody is going to credit your assay. It will need to be done again, and you'll pay.
5. If you have your own gold bar, what do you do with it? Like cash, it is not insurable. So if it is stolen, too bad, you eat the loss. Now you're buying a safe, or at best renting a safe-deposit box.
6. Or the metals company may offer storage for you. Of course they will - since you're the one who will be paying for it. And if they disappear into thin air, where's your gold bar?

The radio commercials touting precious metals ownership for retail investors - it's disgraceful. These guys are bucket shops, one and all. Avoid them like the plague.

 

[Cold Smoke]

Don't invest in anything you don't fully understand. Investing in commodities is playing with fire, especially if you don't understand the market. This is why I don't invest in commodities.

The easiest way is to invest is a vanguard fund which invests in commodities like gold, for example. You would invest in gold as a hedge against inflation.

At least stock prices are mostly dependent on company performance, and well run companies will continue to increase in value over time. Commodities are dependent on the vagaries of the market.

"Don't invest in anything you don't fully understand" Are you saying hundreds of millions of stock market investors should get out? Sorry to be a wise a$$, but I hope you know what I mean.

One little thing I have done for more than thirty years is own gold mining companies and write out of the money covered call options. Safer than owning the shares without the hedge. This approach has yielded roughly 25% through the ups and downs of gold. Works just fine on non-commodity shares also, maybe lower premiums. No need to be a John Urschal to do this stuff. Go to CBOE and read a little.
Dan

 

[Ranger Dan]

OK, thanks for the feedback. There doesn't appear to be any reasonable logic to justify IRA investment in precious metals...

 

[sluggo72]

I have 401k and IRA funds as well as company stock shares. What I want is something tangible in case the market completely collapses.

If you want the thing tangible then no mutual funds , etf etc. you are going to have to buy the commodity. Good luck with that. Makebsure you do your research on how to buy, carrying costs etc. next will you take delivery of the commodity, if so how will you store it?? Keep it safe ?? And if you do you know you'll have to pay money to have it verified when you sell. Gold coins are a little easier but many states charge sale tax so add another 5-6% to the costs. I know there is a bunch I forgot.

 

[Doc-M]

Fox Chapel Lion threw the red flag! Avoid investing in precious metals. However, if you are compelled due some inexplicable urge, then invest in a precious metals mutual fund. Fidelity has one and there is aforementioned by Vanguard. Avoid them unless you are an expert.

 

[fairfaxlion2]

I have 401k and IRA funds as well as company stock shares. What I want is something tangible in case the market completely collapses.

Just remember that in early 1980 the same people were saying gold was a sure bet. Then the price crashed and didn't come back for like 25 years. On an inflation adjusted basis, it has never returned to that level. Actually, if you study the history of gold prices going back hundreds of years, it's not uncommon for its price to peak and then crash and stay low for decades at a time.

 

[fairfaxlion2]

Fox Chapel Lion threw the red flag! Avoid investing in precious metals. However, if you are compelled due some inexplicable urge, then invest in a precious metals mutual fund. Fidelity has one and there is aforementioned by Vanguard. Avoid them unless you are an expert.

This makes no sense. If you are going to do it, why would it be better to buy paper instead of the actual asset?

 

[KnightWhoSaysNit]

Instead of gold, buy a plot of fertile land, a few bags of seeds, gun, ammo, fence materials, alarms, etc.

 

[NittPicker]

For the past several years some supposed experts have been saying platinum has been extremely undervalued in relation to other precious metals. They've been predicting the price to take off due to an increase in demand for use in consumer products. So far the self appointed experts have been wrong and the platinum price has been mostly static. You could open a margin account and increase your potential profits several fold but if the price goes against you your losses would also be several fold. It can be a disastrous game. There are many more investment options which are less stressful. While it may be fun to talk about investing in precious metals, IMHO it's not worth the aggravation.

 

[Nittany Ziggy]

Instead of gold, buy a plot of fertile land, a few bags of seeds, gun, ammo, fence materials, alarms, etc.

Lots of ammo. Double up on the ammo. You cannot have enough ammo!

 

[PSU20]

Just remember that gold was as low as "290.00" an ounce in the early 90's and went up to 1,895.00 a year or two ago; it now sits at around 1,050.00 or so. Experts and gullible people invest in commodities; guess who profits and who looses out. Don't fall for that "what's in your safe" bs by an actor turned salesman. I would really like to know where his money is.

 

[Mary Anne]

Lots of ammo. Double up on the ammo. You cannot have enough ammo!

I have a friend who likes to say when the total market crashes the monetary unit will be the 9mm shell.

 

[royboy]

If you want the thing tangible then no mutual funds , etf etc. you are going to have to buy the commodity. Good luck with that. Makebsure you do your research on how to buy, carrying costs etc. next will you take delivery of the commodity, if so how will you store it?? Keep it safe ?? And if you do you know you'll have to pay money to have it verified when you sell. Gold coins are a little easier but many states charge sale tax so add another 5-6% to the costs. I know there is a bunch I forgot.

A good way to buy physical gold is through an ETF such as PHYS. Or PSLV for silver.

 

[Michael.Felli]

I know that stocks are more volatile but also higher earning potential, and bonds are more stable but less upside. My laypersons take on investing in gold and silver is that it's not as potentially lucrative as stocks, not as steady as bonds. Maybe this is a sophomoric view... I guess the one benefit is that investing in gold/silver/platinum (not companies who mine them) is insulation for the stock market. I've read on line that some recommend 5% of your portfolio be in precious metals, but this was from a site that was selling precious metals. Anyway, do any of you have any opinion on buying gold/silver as part of an investment strategy?

Invest in Humanism. It's the future.

 

[NittanyLogan'11]

The way this was explained to me was something like this:


The 2015 dollar is worth only about 7% of what a dollar was worth in 1923 (in terms of purchasing power) . Meanwhile, the value of gold has stayed relatively consistent. Gold is at an all-time high because of inflation, not because of increased value associated with the metal.

1 Ounce of Gold (~$90) in 1923 had the same purchasing power as 1 ounce of gold (~1,250) in 2015. As the price per ounce increases, so does inflation. Gold remains the constant, not paper money.

If you are to invest in precious metals, the only way to it is to actually possess the item. 1 ounce bars or coins hold value if the grid collapses, not an electronic note that says you own X-gold.


Whether any of this is really right or not, I don't know, but it makes sense to me.

 

[sluggo72]

A good way to buy physical gold is through an ETF such as PHYS. Or PSLV for silver.

no it isn't. you don't own the physical gold, you own a piece a paper, that may or may not be based on the current price of gold. That piece of paper doesn't even give you the right to turn it into physical gold. In times of high volatility, the price of the ETF is market driven, and not reflecting the price of the underlying commodity. Read the prospectus in there even is one.

 

[PSU20]

The way this was explained to me was something like this:


The 2015 dollar is worth only about 7% of what a dollar was worth in 1923 (in terms of purchasing power) . Meanwhile, the value of gold has stayed relatively consistent. Gold is at an all-time high because of inflation, not because of increased value associated with the metal.

1 Ounce of Gold (~$90) in 1923 had the same purchasing power as 1 ounce of gold (~1,250) in 2015. As the price per ounce increases, so does inflation. Gold remains the constant, not paper money.

If you are to invest in precious metals, the only way to it is to actually possess the item. 1 ounce bars or coins hold value if the grid collapses, not an electronic note that says you own X-gold.

The all time high for Gold was 1,895.00; it now sits at 1,075.00. That is 40% drop or more in the past two years. There is no inflation now whatsoever, and Gold has certainly not been constant. Investors who bought Gold at 1,850.00 + will probably meet the "Grim Reaper" before they get a return on that investment.


Whether any of this is really right or not, I don't know, but it makes sense to me.

 

[PSU20]

Gold is not at an all time high. It now sits at 1,075.00; the all time high was 1,895.00 about two years ago. There is absolutely no inflation at this time. Investors who bought Gold at 1,875.00 + will meet the "Grimm Reaper" before they get a return on that investment.

 

[NittanyLogan'11]

@PSU20 I'm far from an expert, I'm a biologist. Just providing what was explained to me (obviously a dumbed down version of reality) by somebody more knowledgeable on the situation than I.

 

[Fox Chapel Lion II]

Gold is not at an all time high. It now sits at 1,075.00; the all time high was 1,895.00 about two years ago. There is absolutely no inflation at this time. Investors who bought Gold at 1,875.00 + will meet the "Grimm Reaper" before they get a return on that investment.

And no dividends or interest payments to keep you amused while you wait. There is no good reason - none - to invest in precious metals.

 

[royboy]

no it isn't. you don't own the physical gold, you own a piece a paper, that may or may not be based on the current price of gold. That piece of paper doesn't even give you the right to turn it into physical gold. In times of high volatility, the price of the ETF is market driven, and not reflecting the price of the underlying commodity. Read the prospectus in there even is one.

Huh?

http://money.cnn.com/quote/chart/chart.html?symb=PHYS

So the ETF is market driven, but the actual commodity is not? Check the correlation of this ETF with the price of gold.
And, yes, PHYS does give you the right to receive delivery of the physical gold. Not in small quantities, but in the neighborhood of 400 ounces.

 

[sluggo72]

Huh?

http://money.cnn.com/quote/chart/chart.html?symb=PHYS

So the ETF is market driven, but the actual commodity is not? Check the correlation of this ETF with the price of gold.
And, yes, PHYS does give you the right to receive delivery of the physical gold. Not in small quantities, but in the neighborhood of 400 ounces.

I stand corrected about the delivery, good luck on that one, as how will the ETF sponsor have enough gold on deposit to satisfy everyone if they all decide to redeem at the same time?
Here's another example http://www.minyanville.com/trading-...-ETF-Lets-Investors-Trades/5/22/2014/id/55072

I stand by the market prices. You are correct the market drives the price of gold, in theory all the gold etf's are supposed to be some multiple of that price. That said, in times of volatility, the market for the ETF will drive the price of the ETF not the underlying commodity (and therefore there will be a disconnect from the underlying), just like an closed ended mutual fund. In normal times, the value of the ETF will reflect the price of gold. But you didn't really buy gold for times of stability did you?

heck look at your disconnects the third quarter of this year from your own chart, plenty of yellow spikes and the ETF not keeping up (down)

http://money.cnn.com/quote/chart/chart.html?symb=PHYS

Me, there's no way, but hey it only takes 2 to make a market.

 

[Ranger Dan]

I appreciate all of the great input. I've made up my mind...

I'll diversify by acquiring non-precious metals: brass/copper/lead. I'm sure I could barter a 20 round box of 5.56 if there was a need to do so in the future.

 

[Nittany Ziggy]

I have a friend who likes to say when the total market crashes the monetary unit will be the 9mm shell.

Correct, Mary Anne! 9mm shells will be like "cigarettes in prison".

 

[Nitt1300]

lead and brass

 

[sprout69]

no it isn't. you don't own the physical gold, you own a piece a paper, that may or may not be based on the current price of gold. That piece of paper doesn't even give you the right to turn it into physical gold. In times of high volatility, the price of the ETF is market driven, and not reflecting the price of the underlying commodity. Read the prospectus in there even is one.

You are absolutely wrong unless I didn't read it correctly?. I have a brother in law that purchases gold each week. He physically buys gold coins and has been amassing them for years.
There are a million places to sell these for cash and make them liquid.

 

[Nittany Ziggy]

lead and brass

And Sulfur, Charcoal & Potassium Nitrate!

 

[sluggo72]

You are absolutely wrong unless I didn't read it correctly?. I have a brother in law that purchases gold each week. He physically buys gold coins and has been amassing them for years.
There are a million places to sell these for cash and make them liquid.

you've read it wrong. someone talked about ETF's and being able to turn them into cash, which I did not think you could do , but it turns out you can. and you can buy gold coins if you like. Problem with Gold coins is, many states charge sales tax on the purchase. You can buy gold bouillon too, but that has its own set of problems, like security, etc.