Thursday, April 21, 2011

Investing in Gold for Beginners

Gold in New Zealand dollars: $1885.28 per oz
Previous all time high: $1955.10 per oz

Silver in New Zealand dollars: $56.77 per oz
Previous all time high: $48.58
per oz

You want to put some of your savings into gold? How much should you invest in gold? Should you buy gold and take delivery?

Here are 5 tips for the new Gold Investor.

1. How much should I invest in Gold?

This is a personal decision, but most commentators would recommend anything from 5 – 25% of your wealth should be in gold. It depends on how ‘bullish’ (or brave, or trusting in paper) you are.

Gold is an insurance for the bad times. Primarily an insurance against bad government. In the second world war, and other conflicts, many displaced people had much of their wealth in gold and actually carried their gold out with them when they had to leave countries. Will society ever break down like this again?

Gold will never go to zero value. Many other investments have that possibility.

2. How much gold bullion should be in my possession and how much in a vault?

It is sensible to have some physical gold bullion in your possession. The ratio is yours to decide. Small gold bars and gold coins are the best option. But remember that small gold pieces hold a large premium over spot price, so don't get too much. Buying large amounts form bullion companies and having it stored is the cheapest option.

For bullion storage I recommend The Anglo Far East Company. This company matches your gold investment with the actual physical gold. It is custodial, allocated gold and silver. You own it, they don't. It is a highly personalized, white glove service and has a minimum purchase amount.

3. Where do I store my physical gold bullion?

Most people buy a safe and install it in a secure place in their home. Some put it in paint tins in their shed (but don't let anyone else clean out your shed!!) Others put gold into Bank Deposit boxes. Or you can split between the two. Remember it may be difficult to get YOUR gold out of a bank deposit box.

4. When do I sell my gold bullion?

Gold is very liquid and can be quickly sold in times of monetary stress. If you are looking at gold as an investment, then look at some of the better commentators on the internet for advice of when to sell. There are experts that will give this sort of advice for a fee. A well known gold company will tell their paid subscribers 24 hours after they have personally sold their precious metals.

5. Who will accept my small gold pieces when I need to trade them or sell them?

Most bullion dealers will be happy to buy pure gold. Also, in times of financial collapse gold will be acceptable as money to most people in exchange for goods or services.

In New Zealand we have little understanding of the world of gold. Those from Asia and the Middle-East and Eastern Europe have such a history. I suggest they would readily exchange goods and services for gold and silver.

Articles of interest:

Tell me that Political Leaders don't put pressure on Ratings Agencies

See article here
Trader Dan Norcini

Interview: Jim Sinclair on Gold and the World Financial System

See article here

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