Gold Bullion

Gold Bullion Investments – Will Buying Gold Bullion Alone Protect Your Wealth?

Official figures out show gold bullion prices have risen for yet another day as people continue to get jittery over exactly how much their paper money will continue to be worth. Fears over mounting debt in the western world have fuelled a demand for gold and precious metals that mean prices have climbed 13 percent this quarter – the most since 2007. If you are looking at gold bullion investments, will buying gold bullion alone protect your wealth?

The facts are difficult to ignore: amid the fanfare that the worst of the recession is over, American companies did not increase their workforce as much as predicted and some reports show that business expansion actually slowed compared to last month. Seen as a sign that the US workforce is struggling, this provoked a desire to protect wealth in the face of an uncertain economy, and many turned to gold bullion.

Historically, it has been proven that gold bullion has the ability to ignore global recessions and does well when other forms of investments fail. It has soared in value when currencies fall and grows from strength to strength in times of high inflation.

We are living in uncertain and unprecedented times. The riots in Greece over currency devaluation has provoked fear and it is only natural that people turn towards the one thing that has stood the test of time in not only increasing their wealth but also protecting it.

In the light of the above, one could argue a very strong case that gold alone is the best wealth protector and you should go all out to increase gold bullion investments. However, I would like to point you towards wealth creation alongside wealth protection – one that can even produce in these uncertain times.

The internet explosion has opened up multi-million dollar industries. Having had this technology unleashed into the world, there is no going back – there will never be a time in the future where the internet will pass away as ‘a phase’. Increasing technological inventions will continue to bring new visions and ideas to a computer near you – whatever that may look like. This in itself will continue to open up many more million dollar opportunities.

Protecting your wealth also means finding new ways of increasing your wealth. If you knew there was a key that would open the door into a prosperous future, would you take it? Would you be prepared to invest your time and money in learning new knowledge that would equip you to survive a volatile work market for many years to come?

If you have no desire to sit back and wait and see what the future brings but would prefer to gain insight into how to increase your wealth now, visit the following link. http://www.earnyourwealth.co.uk All the hard work has been done into creating a wealth-increasing business model that can be put to use immediately. When looking at gold bullion investments, if you are asking yourself whether buying gold bullion alone will protect your wealth, you will be able to consider wealth creation as well.

Olive Bush is an online marketer teaching people from around the world to make money online and how to build their home based business. To learn more about Olive and her business please visit http://www.earnyourwealth.co.uk

Which Gold and Silver Bullion to Invest In?

I have long been sold on the need to preserve your savings and wealth in gold and silver and other commodities. This is all thanks to Rich Dad advisor Mike Maloney. Since then, I have done my own independent research and even had to find my own sources of gold and silver. This is very different from the US where it is easier to buy your coins online. If you have a budget like me, what can you do to invest in gold and silver?

-Basics

Since the spot price is in ounces, it would be more convenient to buy and sell your coins and bars in ounces as well. Be sure also to buy only pure 99.99% gold or silver. Do make sure your dealer has been in business for awhile. And of course, do buy your gold and silver from reputable mints.

-Avoid

Avoid numismatics for investment purposes unless you want to pay an unnecessary premium for their artwork. Although jewelry is sold in pure gold, try to go for coins for the reason of the spot price. Jewelry would have to be measured first before a value can be put to it. Of course, there is no denying that it looks pretty and you cannot exactly wear bullion around your neck or hand.

-Which Mints

The US mint is a world renowned mint and their bullion artwork is very famous. So getting their gold or silver eagles guarantees it is highly recognizable anywhere in the world and therefore can be sold too. The Canadian maple leaf is also highly recognizable and it is even famous for bringing gold to the highest purity in the world. However, if you are in other parts of the world you may want to check your local mint, but do your due diligence and check the spread with the spot price. For example, the Perth Mint is quite famous too but perhaps is not so sought after in places like America which already have their own bullion. You may want to avoid the Singapore Mint though. Even though their quality is not in doubt but they mark up the price a little too much for my liking. Their bullion is no less popular though. Again, do make the effort to avoid their numismatics, of which they spend a lot of time trying to sell.

Check out Krugerrand Gold Coins here.

My name is Christopher Brown and I hope to accumulate even more gold and silver into my investment portfolio. Check out http://www.canadian-goldcoins.com/krugerrand-gold-coins

Hedge Fund Stock Games, Gold Remains Firmly Bid.

Central Bankers poured $500 Billion Dollars (that’s Billion!) into the monetary system last week. The sheer quantity of intervention indicates an enormous monetary dislocation is taking place — current gold prices remain firmly bid.

Wow! Last week’s action left us breathless simply due to the sheer magnitude of money being forced down the markets throat. What we have here is a situation where risky fixed income investments ala CDO’s and sub prime mortgages have been written down to Zip Nudda!

Now obviously holders of these securities are not exactly writing them off their books, but what is happening is in an effort to fund redemptions the banks / hedge funds / pension funds or whoever holds these securities is finding they are UNMARKETABLE at exactly the time it really counts!

That left Central Bankers holding the bag to provide liquidity and help fund redemptions. This was necessary to prevent holders from selling other assets and causing a severe market rout.
An argument against gold stock investing is that they are just another asset class for hedge funds to dump when required to fund redemptions. So why buy Gold or Gold Stocks when they seemingly offer no protection against a market meltdown?

Of course it is a valid argument in the short-term (as we have all too painfully witnessed), but it fails to acknowledge that market participants understand that the central bank bailout will cause the money supply to rapidly increase. Gold has done a great job against an increasing money supply over the last 6 years.

In fact it is this tussle which has caused the AMEX Gold Bugs index to remain range bound for over 1 ½ years.

Chart 1- HUI finds strong support at 280; Current Gold Prices outperform Gold Stocks.

Churning Stock Market and Gold, Silver Bullion Positions

The quick drop in silver this week seemed to have caught a few off guard to the extent that talk of manipulation pervaded the air. However, The Silver Analyst had already suggested a sell off in silver last weekend to subscribers and was not taken by surprise by current events.

However, in the light of that weekend comment about a silver price correction, I was asked a question about whether to sell silver stocks. That is a natural enough question which I answered but which I want to expand on here. If like me you believe we are still in a primary bull market for silver, then you may want to consider one or two matters before churning a stock or bullion position.

Let us suppose you somehow knew your favourite silver stock was about to correct by 20% but you were not sure of the exact day, only that it would do so in the next week or so. Should you sell looking to buy in at a lower price? The obvious answer seems to be yes, but look at the things you have to contend against.

* You will not bail out at the exact top unless you are lucky.
* You will not re-enter at the exact bottom unless you are lucky.
* The bid-ask spread on a stock guarantees a loss even if you sold and bought in the same minute.
* The broker fees ensure further erosion of a re-entry profit.

So let us suppose your stock is going to lose 20% and will drop from $20 to $16. Let us further suppose that you get the exit and re-entry correct to within 5%. Furthermore, let us assign a bid-ask spread of 2% either way on this stock. This is not an easy number to fix; a recent check of 20 silver stocks gave spreads between 1% and 8%. But in plain English, for a $20 price, you get $19.60 when you sell the stock but it costs you $20.40 to buy it back.

Let us finally assume that your broker fees plus any taxes will be $10 to sell your stock and another $10 to buy them back. That is not so bad.

We will now assume you have 500 shares notionally valued at $10,000 (based on a $20 quote) that you wish to sell. The stock hits a price of $20 and you exit at 5% below this at $19. The bid on this is $19 – 2% or $18.62 and your broker charges $10 for the privilege. You are left holding $9300.

The price drops to $16 and you get back in at $16.80 and the ask price is 2% higher at $17.14 plus another $10 fee means that you can afford to buy 542 shares i.e. ($9300 – $10)/$17.14. So your net gain for the whole exercise is 42 extra shares. That seems worth the effort you may reply. Now suppose you are only 10% accurate in your exit and re-entry. Now you will end up with 490 shares or 10 less than you started with and the whole exercise has been a waste of time. Evidently timing is a prime factor here.

If you can time your exits and entries to a high degree and the share price drops more than 20%, it could be well worth it – but that is a big if. You can repeat the exercise for bullion but the rewards could be less as bullion can drop less than stocks in a correction and the bid-ask spreads are higher.

I sent the gist of the above to subscribers early this week but after that I decided to put back into silver some science rather than the speculation we so often see about trading the gray metal. I applied what I knew about mathematics and came up with a formula whereby silver stock and bullion investor can risk assess whether to churn their positions or sit still. The formula is as follows:

N e = N b x ( P b/ P e) x A ² x S ²

So we have N e, which is the number of shares one will have at the end of the exercise, and N b is the number of shares held at the beginning. The aim is obviously to have N e greater than N b. Continuing, P b is the price of the stock at its peak prior to the downturn and P e is the price when the correction ends and the stock bottoms out.

Our variable A is the accuracy of one’s ability to predict an exit and re-entry point. So, in our first example above, we assumed the investor was within 5% of the top and bottom. That is a 95% accuracy and this would mean A would equal 0.95. The formula then squares that number.

Finally, S is the bid ask spread on each side. In our example, we took a 2% spread either side of the quoted price. Therefore, S would equal 0.98 (100% – 2%). Again we square that number.

One thing we have omitted from this equation is the brokerage fees. Including these complicated the formula too much and so long as we used a large value for the shares such as $10,000, it had little impact on the final result. So, if we feed the numbers from our original example we get the following formula:

N e = 500 x ( 20 / 16 ) x 0.95 ² x 0.98 ²

Giving us an answer of N e = 541.7 which agrees well with our manually calculated 542 shares. I encourage anyone thinking about selling to do the sums first based on their own expectations and costs and experiment with this formula in their portfolio risk assessment.

Source: marketoracle.co.uk

Fitch Report: Perspectives on the Global Market for Gold

n a recent report, Fitch Ratings states that the price of gold is heavily influenced by investor demand on one side and official gold sales on the other.

Gold supply has been in surplus since 2002 and is expected to stay in a slight surplus through 2007, whereas prices have been on the rise. Gold prices have benefited from investment demand driven by a variety of macroeconomic trends. In particular: the weakening of the U.S. dollar since 2002; increased perceptions of geopolitical risk; low interest rates; and inflation concerns following the run-up in commodity prices, especially oil.

Worldwide supply of gold comes from mine production and the drawdown of existing stocks of bullion and fabricated gold held by governments, financial institutions, industrial organizations and private individuals. In recent years, mine production has accounted for 60%-75% of the total annual supply of gold. Official sector gold sales have accounted for about 13% of gold supply over the past three years. Some transparency and stability to official sector sales comes from the Central Bank Gold Sales Agreement first entered into by many European country central banks in September 1999. Supply from old gold scrap, at 31% in 2006, is up, indicating profit-taking on the sharp price rise during the year.

Gold is primarily used in product fabrication and as an investment. Jewelry accounts for approximately 70%-75% of the worldwide demand for gold, but fabricated gold is also used in electronics, dentistry, industrial and decorative uses, medals, medallions and official coins. Gold investors buy gold exchange traded funds, gold bullion, equity in gold producers, official coins and high-karat jewelry.

While pricing in the gold market has declined from the start of the high of $725.75/oz. in May 2006, gold remains near its highs on a historical basis: it is currently about $640/oz. compared to the 10-year historical average of $359/oz.

Fitch’s full report ‘Perspectives on Gold 2007′ analyses the drivers of the gold market, and is available on the Fitch Ratings web site at www.fitchratings.com.

Fitch’s rating definitions and the terms of use of such ratings are available on the agency’s public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch’s code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the ‘Code of Conduct’ section of this site.

Wealth Building Thru Gold Investing – It is All About Supply and Demand

I took me a good year and a half to get back into the groove after the pounding I took during the internet implosion of 2000. That was an extremely painful year and I was in no hurry to donate more money to Wall Street. I tried a few of the same old things from 2000 in early 2002 with little success. By late 2002, I discovered Adam Hamilton and the world of commodity stock investing.

Since I worked in high tech, I had seen first hand how tons of money was plowed into anything internet related. Engineers with Power Point presentations had gotten millions of dollars in venture capital money, while capital intensive areas such as mining were ignored. The payback on an internet investment was infinitely shorter than an investment in mining. Mining companies had to find deposits, mine and then sell it. There were environmental and political issues to overcome as well as potential labor problems. With virtually no investments going into mining, it made sense that commodity prices were in the dump.

As I learned more about commodities, I understood why most of Main Street avoided investing in this area. Investing in mining companies have too many moving parts. Not only are you concerned about the company’s fundamentals, but direction of the commodity itself plays a major factor. Gold stocks seldom go up if the gold itself is trending down. There is also political risk. Gold is found in all parts of the world and sometimes the governments play by their own rules. Every now and then, a non-mining friendly government seizes a mine after companies have invested millions in development. Unfortunately, there are many more factors affecting the price Gold. In Adam Hamilton’s latest essay, he list 10 factors affecting Gold’s price.

Many people believe that we are in the second phase of a secular bull market in gold. If that is true investment demand will trump all other drivers; which happens to be the easiest of the factors to comprehend. Basic economics state that when demand exceeds supply, prices rise. Rising prices provide incentive for producers to increase production. However, like already discussed – it takes more than a Power Point presentation to produce Gold. In other words, prices will continue to rise until demand is satisfied.

The question becomes what will cause investment demand too increase. In November 2004, GLD a gold exchanged traded fund (ETF) was listed on the New York Stock Exchange. For the first time investors could purchase gold as easily as purchasing a stock. No more trips were required to the local coin dealer. No more concerns about storage. Simply click a few buttons and you are an owner of gold. GLD has become one of the fastest growing ETFs in the United States.

Not only has GLD provided opportunities for individuals, but also for many institutions like pension funds that were prohibited from directly owning gold. For diversification purposes, it is quite useful to own asset classes that are increasing in value while other aren’t. It is well known that commodities do exactly that – they have a negative correlation to equities. So, GLD becomes an excellent way for institutions to further diversify their assets. A silver ETF was listed in May of 2006 and there is discussion of introducing a platinum ETF in 2007.

That’s all well and good, but it is the demand from Asia that will send gold to all-time highs. Asian cultures have a strong affinity for gold. One’s personal wealth is traditionally determined by how much gold is owned. Indian brides receive dowries of gold often in the form of gold jewelry or gold coins. Indian families store extra income from the harvest each year in gold jewelry. It is truly a fabric of their life.

China is on the verge of becoming the world’s next super power. As Asian investors become wealthier, their ownership of gold will increase. There are literally billions of people in China. It is true that many will not attain the standard of living as enjoyed in the US, but the demand created by hundreds of millions of Asians buying small amounts of gold will be unprecedented.

Yes, that demand will take some time to materialize, but investors in gold are quite pleased today. In 2006, GLD outperformed the S&P 500, 22.5% vs. 13.6%. My preferred vehicle Central Fund of Canada (CEF) a 55/45 mix of physical gold and silver outperformed them both, 37.2%.

I used to try to convince my friends to buy gold by talking about inflation, the decline of the dollar and geopolitics. Now I simply talk about supply and demand.

BTW, GLD was just recently listed on the Singapore Stock Exchange.

About the Author

Michael Dawson recently said goodbye to a 20 year career in Engineering, Marketing and Sales to focus on living his dream of financial independence as a full-time trader on his on account. He has also established a financial education company, The Time & Money Group, to encourage others to pursue financial freedom and is publisher of the company’s blog “Breaking the Shackles of the 9 to 5.” His mantra is “Why trade time for money … when you can have both.”

http://www.thetimeandmoneygroup.com/blog

Make sure to read one of Dawson’s most popular articles: “Saying Good-Bye to the Time for Money Swap”

Peter Hambro runs into gold mining problems in Russia (Mineweb)

Christmas theme jingles coins (The Arizona Republic)

Gold Central Advises Investors: Watch China Now (PR Web via Yahoo! News)

Gold Central Advises Investors: Watch China Now (PR Web via Yahoo! News)