Invest in Gold Fool!
April 7th, 2008 UMO · 7 Comments
There is a way to invest in gold and precious metals without copping a watch or chain. As a matter of fact, having a small percentage of your portfolio invested in precious metals can be very beneficial for your overall balance, especially in times like these. Keep reading to find out why.
People have been buying and selling gold for almost as long as the Earth’s creation. The ancient Egyptians buried the Pharaohs with gold ornaments because gold doesn’t rust or decay. In the US, one of the primary reasons for western migration was because of the gold rush. Most monetary systems were built on the gold standard. Over time, the use of gold has faded because of the increased reliance on paper currency, but gold still remains a solid investment for the following reasons:
Bank & Credit fears: The price of gold and the level of uncertainty regarding banks is directly correlated. If people fear a bank failure, then it is possible (but highly unlikely these days) that a bank run will occur. This makes gold more desirable to hold.
Increased inflation: In Germany in the 20’s and in Zimbabwe today, paper currency was basically worthless. As a matter of fact, Germans used the currency to light their stoves. As people feel that their dollars are worth less and less, the value of gold increases.
Low or negative real interest rates: If the return on bonds, equities and real estate is not adequately compensating for risk and inflation, the demand for gold and other alternative investments such as commodities increases.
Decreased value of the American dollar: Put shortly, investors have choices. When faced with investing in the depreciating dollar vs. gold, most would choose gold.
Now that you know the ‘Whys’, here is the ‘How’
Buying gold bullion or bars: While this is probably the least efficient way to buy gold, it definitely has to be the most fun. I get giddy just thinking about building my own mini Fort Knox at my house. Keep in mind that once you buy the gold, you have to find a way to keep it safe and undamaged. Also gold in the physical form is very illiquid, meaning you can’t easily sell it once bought.
Gold mutual funds and ETF’s: The Street Tracks Gold ETF (GLD) represents one tenth of an ounce of gold and replicates the movement of the underlying commodity. There is also the iShares Comex Gold Trust (IAU) that operates in the same fashion. Another route to take is to invest in mutual funds that own companies involved in the mining and exploration of gold and precious metals. These companies give you exposure to the gold market but not 100%(which may not be a bad thing)
Keep in mind that gold can be very volatile, so don’t have more than 5-10% in your portfolio.
For more info check out www.molifeney.com
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7 responses so far ↓
1 Allen Taylor // Apr 7, 2008 at 9:00 am
Nice writing. You are on my RSS reader now so I can read more from you down the road.
Allen Taylor
2 jmac // Apr 7, 2008 at 9:18 am
Before you invest, consider this article
http://www.ens-newswire.com/ens/dec2007/2007-12-06-01.asp.
Investigate your options, what may be an investment for you could be a huge detriment to others.
3 Lionel Carter // Apr 7, 2008 at 11:07 am
Great info, the investment club I am in is looking in to investing in commodities and were planning to go the “storage” route I will be sure to bring up gold mutual funds and etf’s at our next meeting thanks!
4 Dash // Apr 7, 2008 at 11:20 am
Jmac–the link was messed up so I could not read the article. As with every investment each individual or club in Lionel’s case has to make sure it fits them. Not telling anyone What to do but just providing info…
5 Jello // Apr 9, 2008 at 2:35 am
http://youtube.com/watch?v=Xh2RWggjZCs
6 jmac // Apr 10, 2008 at 11:36 am
Sorry for the failed link.
Basically, I learned this past semester in my human rights lawyering class that the biggest US gold mining company, Barrick Gold Corporation, has been in litigation with the Western Shoshone Tribes of Arizona and Nevada for their strip mining procedures over traditional Shoshone lands which are central to their native philosophies. Processes to seperate gold from rock in these areas include the use of cyanide (yes, i did say cyanide) within the soil.
“The Cortez gold mine is located 60 miles southwest of Elko, Nevada in Lander County. Barrick is the owner of a 60 percent joint venture interest and is the operator; the remaining 40 percent interest is held by Kennecott Explorations (Australia) Ltd.”
From the article;
“Even if the Western Shoshone win the Tenabo/Horse Canyon exploration case, the lawsuit will not stop the newly proposed Cortez Hills Tenabo Project. This development includes a new open pit, underground mining, three new waste rock facilities, a new heap leach pad and related roads and facilities, requiring new surface disturbances of 6,792 acres and the permanent loss of 817 acres of pinon trees, which produce pine nuts, a traditional Western Shoshone food source. ..The Cortez Hills Tenabo Project is expected to extract eight million ounces of gold worth $6.4 billion at today’s prices. The current Cortez mining in the valley is about 15 miles from Mt. Tenabo but the new mine would blast directly into the mountain.”
-From http://www.ens-newswire.com/ens/dec2007/2007-12-06-01.asp
A short video detailing the issues has been released by OxFam. It’s available on YouTube: he Cortez Hills Tenabo Project is expected to extract eight million ounces of gold worth $6.4 billion at today’s prices. The current Cortez mining in the valley is about 15 miles from Mt. Tenabo but the new mine would blast directly into the mountain.
7 Greg // Apr 19, 2008 at 9:40 am
I would avoid exploration stocks, unless you know something others don’t. Companies that sell commodities (gold, silver and yes oil) have zero pricing power which makes it tough to carve out a competative advantage. I’m with UMO on the ETF’s. Also check out ticker symbol OIL. This summer’s gonna be a b*tch at the pump.
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