Gold

[upside_umop]

Just remember when its all falling around you EZ....EZ come, EZ go! LOL

Here's a good article for you.

http://www.smartmoney.com/investing/...costs-of-gold/

5 Hidden Costs of Gold

ROCKVILLE, Md. (MarketWatch) There?s a lot of talk right now about how gold is booming, and how gold bugs who have been stashing bullion under their mattresses over the last decade or so have made a killing.

That may be true if you look at the price of the yellow stuff per ounce. The price of an ounce of gold is up about 30% in the last year, or over 400% in the last 10 years. How does that relate to actual returns for investors?
The truth is that gold has steep hidden costs, and that looking at the numbers on paper doesn?t tell the whole story. Here are big costs many investors overlook.

Higher taxes

The affinity for gold investing and a dislike of the government seem to go hand in hand, from predictions that massive government debt will render the dollar worthless to conspiracy theories that there will be another Executive Order 6102 in which Uncle Sam loots your safe deposit box and seizes your gold.
But the biggest reason for gold investors to get mad at the feds is their tax bracket. The IRS taxes precious metal investments ? including gold ETFs like the SPDR Gold Trust (GLD: 127.91, -0.04, -0.03%) and iShares Silver Trust (SLV: 21.31, -0.09, -0.42%) ? as collectibles. That means a long-term capital gains tax of 28% compared with 15% for equities (20% if and when the Bush tax cuts expire next year).
While you may see your gold as a bunker investment, the IRS will treat you the same as if you were hoarding Hummel figurines. And that means a bigger portion of your gold profits go to the tax man.

Zero income

Just as the math game on gold price appreciation doesn?t tell the whole story, the lack of regular payouts is another reason why the long-term profits quoted in gold are incomplete. Many long-term investors can?t afford to stash their savings in the back yard for 20 years. Income is a very valuable feature of many investments and gold simply doesn?t provide that. Read about seven dividend stocks with better than 11% yield.
Remember, simply looking at returns in a vacuum can?t tell you whether an investment is ?good? or ?bad.? Is it a good idea for a 70-year-old retiree on a fixed income to bet on penny stocks because they could generate huge profits? Even if those trades pay off, 99 out of 100 advisers would say something akin to ?You got lucky this time, but don?t tempt fate. Quit while you?re ahead and don?t be so aggressive.?
Similarly, the volatile and income-starved gold market is not a place for everyone. Just because past returns for gold have been so stellar, that does not mean that gold is low risk or that investors who need a secure source of regular income will be well-served.

Gold scams take a toll

In a previous article, I detailed gold coin scams in detail. They include false gradings on the quality of the coins, the use of cheaper alloys instead of pure gold and even brazen scams where you don?t actually even own the gold that you buy. And that?s just on the coins front. Scams abound in pawn shops and ?cash for gold? enterprises that refuse to give you a true value for your jewelry or other gold items. Read about five gold coin scams.

You?d think it would be obvious that precious metals should never be purchased from anyone other than a broker or seller of good repute who provides proper documentations. But many investors fail to do their homework, or worse, can?t tell forged documents from real ones.
Gold is ready-made to be a retail sales item, and with that comes all manner of unscrupulous activity. Vigilant investors can protect themselves, but do not underestimate the very real price of being taken to the cleaners by a gold scam if you don?t do your homework.

High ownership and storage costs

Maybe through some creative accounting or selective amnesia at tax time you can mitigate the tax burden of gold. But one expense you can?t as easily avoid is the high ownership cost of gold. After all, it?s not like you mined it yourself ? and all those middlemen between the ore and you want to get paid.
The first is that old tightwad Uncle Sam again. Even if you can avoid him going on the capital gains front, he gets you coming into gold via sales tax on most jewelry and coins. And then there are the high transaction costs and commissions that gold can carry. Anyone who has bought jewelry knows significant markups are part of the precious metals trade, and that?s the same for investment gold as it is for engagement rings. The bottom line is that some of your initial buy-in goes towards the business of gold and you?ll never get it back, not unlike realtor fees or broker fees.
And then there?s the additional cost of storing your gold. You have to pay a fee for a safe deposit box, and if you have a lot of gold, that can run you a few hundred bucks a year for a good-sized box. Of course if you?re afraid of that Order 6102 scam pulled by FDR you likely have your gold at home in a safe ? so that?s a one-shot deal. But are you really foolish enough to distrust the government but trust your gold stash to be safe without insurance?
The presumed ?safety? of gold is good on paper, but obtaining the actual metal and keeping it safely stored is a costly endeavor.

Yes, gold can lose value

Proponents of gold love to claim that gold has never been worthless like Lehman Bros. or GM. And while this is true on its face, it is actually a half-truth. While gold may never become worthless, it is foolish to think it will never lose value.
Consider that after reaching a record high of $850 per ounce in early 1980, gold plummeted 40% in two months. The average price for gold in 1981 fell to a mere $460 an ounce ? and continued nearly unabated until bottoming with an average price of around $280 in 2000. For those folks in their 40s and 50s who bought gold at that 1980 high, it took them 28 years to reclaim the $850 level. That?s hardly much of a retirement plan, unless they lived to be 80 or 90 and just cashed out recently.
Gold is an investment, period. And no matter how gold bugs spin the metal as a hedge against inflation and a sure thing that will only go up, gold can lose its value ? sometimes in a hurry, as in the early 1980s.


Jeff Reeves is the editor of InvestorPlace.com . Follow him on Twitter at twitter.com/JeffReevesIP

EZ, my arguments are inline with those like Warren Buffett and Charles Munger. Your saying they're arguments have been slaughtered too? I.e. The most successful investors of all time?

That was a well balanced post Peat. Keep it up.

[STRAT]

In the last few months the Aussie dollar has climbed against the US$,.

Hi elZorro.

Been a little bemused by the passion in the last few pages from everyone and no body in particular but I think you have inadvertently pointed to the key which may be the flaw in everyones argument. Has the Aussie dollar climbed or has the US dollar fallen.

The most important number to anyone in NZ with gold under the bed in NZ is the NZ/US exchange rate I would have thought.

Sill reckon you fellas are all accidental FX traders with Armageddon insurance but if you are making a dollar, power to you.

Hi Oooomop.
Nothing like playing the morality card for stirring things up eh?

[elZorro]

Hi UU, at least I've got you thinking about backing up your comments, but that latest cut/pasted article might apply to an uninformed American investor, but not to someone out this way who buys certified gold/silver at the right price, and stores it in a discreet home safe. But I've said all along, if you believe the gold/silver story will continue, holding gold (and prospective gold) in the ground in the form of producing miner shares is probably a much smarter investment, and it has many productive aspects. Jobs, service industry, tourism, upskilling, etc.

JB has already pointed out several times that the peak gold price in 1980 was only there for a few hours, and very few investors would have been stuck with those prices, or anything near them. What about many NZ finance company investors, how did that compare? They'll never get their money back, it's gone.

Maybe you didn't look at the Munger feedback article, but anyone who writes a story about the hazards of gold hoarding, while being evasive about their firm's recent heavy interest in silver hoarding for several years, has to be a big jerk himself.

Strat, thanks for your comments. I don't have ready access to a chart of gold price in NZ against the NZ$ value against a basket of currencies. That would be interesting to see, for the last few years.

[inghamp]

Nicely said

i guess its obvious and stated already by others but the continued devaluations of all the major currencies through quantitative easing v2 is clearly a major factor in demand for PM's. BoE, Fed, BoJ, ECB have all acted in various ways to debase their currencies and the fact is they are happy to compete in the race to the bottom in an attempt to stimulate demand both internally (low interest rates) and externally (low exchange rates). Even BoJ is now resorting to selling yen to hold up USD/JPY rate and of course (and I dont know why NZ doesnt do this a bit more to be honest) if a nation state is selling their own currency to prevent its appreciation against others there is of course potentially an unlimited supply!

The alternative to fiat is hard assets and gold is the winner at the moment though I still believe silver is a better choice as it has that 'actual use' side of the demand/supply equation covered whereas gold merely glistens. I do still think theres a reasonable chance that serious deflation will knock commodity prices and that may affect gold and silver as well. I've reduced my virtual silver holdings now by selling into the rallies, possibly too soon but c'est la vie. Will only sell the physical when prices are fully parabolic or I need to so as to eat.

It seems to me that while its happening quite slowly and one would think lessons from history had been learned , the major governments are in fact repeating the same mistakes as in the 30's. USA is bitching about the yuan passing passing trade barrier legislation, China is retaliating and holding back the real earths from Japan , wide social unrest in Europe - the signs are all there for further escalations in tension at all levels. The bottom line is when everyone is feeler poorer they become more insular and self centred especially politicians who are not focussed on the long term good but only the retention of power.

Stock markets and currencies seem to be doing a lot more of 'the megaphone pattern', a broadening wedge shape with both higher highs and lower lows indicating a fundamental uncertainty with volatile swings in sentiment brought about from fleeting factors - a kind of speculative schizophrenia.

Have a good weekend ;+)

[STRAT]

Strat, thanks for your comments. I don't have ready access to a chart of gold price in NZ against the NZ$ value against a basket of currencies. That would be interesting to see, for the last few years.

Let me know the time frame and which currencies you want and I will whip one up later for ya

[peat]

Chart of Kiwi/Gold 10yr
go from there.

[inghamp]

well the facts speak volumes UU you should head round to the NZ mint or local jewelry an rant to them how over valued an worthless GOLD is LOL tell us how you got on..

when people are talking about Gold via currency it's more so as a backing to the paper tenders of exchange so yes it will be held in the banks vaults but the ultimate is holding the PGM in your own vault -personal I'm all for free choice in holding assets IMHO holding Silver bullion will return a sizable return in years to come so far for me it's gone from $25-$35oz thats if I was trying to buy 1oz rounds in bulk

Speaking of NZ mint and the like (e.g. Perth Mint). Their prices in fractions of an ounce are not very competitive and supply is variable.

I now get mine from here: http://goldsave.co/

[JBmurc]

just sold some Silver bullion 1oz rounds the other day just freeing up some cash with GST increasing are house building costs up 10k ended up getting average sell price after costs $34ea paid $27ea inc all costs earlier in the year(25% return for 6months),only selling a small amount of my Silver bullion as Silver will go much higher , wish I didn't have to sell any be worth another 25% more early next year at the worst IMHO ..

Now what have you anti bullion guys been getting at the bank for the last 6months ?

[Skol]

That's the thing with the anti-golders they've been proven wrong for a very long time an will continue to be they just don't get it.

A real sign of a bubble, they "just don't get it".

The exact words Jeffery Skilling of Enron fame and now incarcerated for many years used to scold his employees with when they expressed reservations about the firms accounts, and you all know what happened to Enron.

[upside_umop]

Now what have you anti bullion guys been getting at the bank for the last 6months ?

That's ridiculous comparing silver bullion vs bank deposits. The relative risks are completely different!

It's just like old EZ here trying to saying that gold is a store of value and advocates it over TIPS? I just don't get it.

What you guys don't seem to get is that investing in bullion...is actually speculating.

I speculate sometimes too (MEO at the moment, oh and also some AUD on iPredict ), but I don't try and compare its returns vs the bank, as they're not comparable.

Where do you think we are now on the chart?
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