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I am looking at purchasing some precious metals within my retirement account. Would it be better to buy physical gold or silver or make the investment through ETF?
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>> I am looking at purchasing some precious metals within my retirement account. Would it be better to buy physical gold or silver or make the investment through ETF? <<

Depends. As a diversified portion of a portfolio if you don't think we're headed for a Mad Max situation, the ETF would be better as there are no storage or insurance costs or issues to consider, plus the liquidity and bid/ask spreads are tighter.

If you are looking at gold and silver as a hedge against apocalypse and the breakdown of civil society, there would be no substitute for physically holding the metal as the security of "paper assets" would be highly unknown.

By the way, if you own physical precious metals in an IRA, it MUST be physically held by a custodian for your benefit. (You own it but they hold it for you.) You are not allowed to have the bullion in your possession if it's in a qualified retirement account.

#29
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Ownership of physical gold has the problem of safe storage. If you have an adequate safe or safety deposit box, Ok. If not, it can be very risky.

Insurance riders can be expensive.

Keeping the lid on your "secret" can also be a problem. An aquaintence of mine back in the 90's overheard his son talking with a couple of his friends about his Dad's gold in the house. Needless to say, he was surprised beyond belief. He rented a safe deposit box the next day.

Gene
http://www.taylortel.net/~gdett2/
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...I am looking at purchasing some precious metals within my retirement account. Would it be better to buy physical gold or silver or make the investment through ETF?

Hi r1976smith!

As always, investing in anything is a personal decision, based upon many factors....and please NOTE: I am NOT a professional/certified investment anything...just an ordinary investor...and I am NOT part of any TMF analyst team; just a Home Fool.

Now that I have covered my patootie.... ;-)

Like any other potential investment ( or even speculation ), timing and/or the price one pays can be key. While some have correctly pointed out that over certain long-term periods, gold and silver have very low/zero real returns, I see things a bit differently. Simply put: gold and silver have a unique "cycle", one driven sometimes by economic fundamentals...and more often by the media-driven political/economic environment....real or perceived. Said still another way, I tend to buy G/S when they have been out of favor for a long period of time ( this usually occurs after tulip mania type of over-speculation and price run ups ) and nobody wants them....and then sell the bulk of my holdings when I feel that the speculation is reaching the unreasonable hype level...sort of like value investing. ;-)

Now, I'm NOT a gold or silver bug, but in 2004 I placed about 5% of my total investable assets in gold/silver related picks ( I don't count the coin collection I accumulated from age 6 to about 25 ). The investment objective of the 5% investment was twofold: to act as a quasi-hedge against a general stock market decline....and to take advantage of what I viewed as an overly long depression in G/S prices and the beginning of a sustained up cycle in G/S. Importantly, hindsight shows that a 2003 entry would have been better, but I needed more market confirmation of a G/S upturn.

Specifically, I bought some rated American Eagles from the lowest margin dealer I could find at that time and put them in a safety deposit box I already owned ( so no new net storage costs ).

The next leg of my gold/silver investments was to buy CEF..a fairly conservative play on both metals through a Canadian company. Importantly ( and unlike some other gold/silver investment alternatives ), they have strict ( and published ) requirements about the percentage of total assets that must remain in physical G/S bullion...plus, these assets can not be encumbered in ANY way ( VERY important, given the myriad of derivatives/hedges floating around out there ) Here is a link to more info about CEF: http://www.centralfund.com/

I also invested in a silver miner, since I thought silver was more under-priced than gold.....PAAS. From a hindsight standpoint, I should have spread that bet among a variety of silver miners ( or a silver miner fund ), given the potential for political unrest in Venezuela spreading to other countries where PAAS has major mines.

Lastly, I chose the Tocqueville Gold Fund ( TGLDX ) to round out my G/S investments ( speculations? ).

Were these the best investments in the G/S arena? Probably not ( in fact, a number of new G/S alternatives have been introduced since I invested in 2004 ), but the weighted average return to date has been a fantastic hedge during these unusual times

Now, all of the above is nice...and it does show it is possible to make money in G/S....but, your specific question was:

How do I feel about gold?

My answer: I consider 10% in ALL G/S investments a maximum ( and 3% a minimum, at least until the macro-economic smoke clears a bit )...and I would not hold it all in physical form. However, any third party holder should be one that can NOT pledge or encumber the held assets in any way.

And, of course.... most importantly, is now the right time to buy G/S bullion or stocks/funds.....or the time to sell? That's a question I'm asking myself as I write....and I sometimes force a little selling discipline upon myself via covered calls on PAAS ;-)

For a LOT more info on G/S investing, try the "Mining and Metals" board: http://boards.fool.com/mining-and-metals-100055.aspx?mid=287......

Cheers!
Murph
II/SPOPS/BigS/ALPHA home Fool
( who also notes that the above approach is right for him...age 64 with a certain asset set and risk tolerance level....but may be totally wrong for others )
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Thank you for the response. I did locate a company, www.getmyra.com, that will allow me to hold the physical metals inside my retirement account. I am just trying to debate on holding the actual metals over the ETFs.
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Murph,

I do understand. I am thinking that this may not be the best time to make the move into this market. I think I may look for some good alternative investments to Gold and see if there may be a time in the not so distant future that is a better time to pick up some Gold in my account.
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I think I may look for some good alternative investments to Gold and see if there may be a time in the not so distant future that is a better time to pick up some Gold in my account.


Hi again, r1976smith!

I agree....I'll be waiting for a big drop in G/S before adding to my position ( potential add-to price is around $1000, unless the macro-economic situation changes dramatically for the better, in which case I will unwind it from about 9.7% down to around 3-5% of total assets ).

Cheers!
Murph
II/SPOPS/BigS/ALPHA Home Fool
( and NOT a certified financial anything! )
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If you decide to jump in on precious metals, you must fully understand the downside risk.

In 1999 or 2000, I was in a coin shop buying some 1 oz gold American Eagles. While I was waiting, a lady came in with her son and daughter-in-law. She was a widow and wanted to sell her husbands Krugerands. He had paid about $780 each for them. (That would have had to be 1979 or 1980) I believe I was paying $275 for the am eagles.

Needless to say she was devastated and started crying. The clerk that was getting my coins came out and as we were completing the deal, the son came over to watch. I showed him the check, slip and coins. He went back to his mother and they were talking as I left.

It looked like they had brought in about 40 or 50 coins thinking that 20 years of appreciation would make them worth many thousands of dollars.

At $1,400/oz, gold is just over 63% of what it was worth in 1980, adjusted for inflation.

It is like any other investment, it must be managed.

Gene
http://www.taylortel.net/~gdett2/
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IIRC the last diatribe I read on gold tagged the inflation adjusted mean price of gold @ $456... I will see if I can dig that up again, but the point is this, in any days dollars the "average price" of gold would be $456 dollars an ounce. Right now, people are paying almost three times that.

And what makes you think it is worth it? If it looks like a bubble, smells like a bubble and pops like a bubble.. maybe it is a bubble.

OK - I don't have a crystal ball, it could go higher.. But it seems that most of the commodities of this type are a mean reverting animal. There are a plausible scenarios, gold demand by investors is up due to ETF's, central banks may seek to store value in gold, and all other sources of demand increase but I guess i am just an old stick in the mud and I dont think in the long run any of these are going to support the levels we are starting to see.

The doctor has been wrong before and I will be wrong again, but the end of 2011 is when I see gold coming back down.
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DrTarr,

You may be referring to the value based upon gold US coinage prior to the 1933 presidential order to abolish private ownership of gold bullion and coin.

Gold was "officially valued" a little over $18 an ounce. After the order, the value was raised to $35. The 2009 statutory value for gold was $42.22 per the 2009 US Mint annual report although they added a "market value" also.


Gene
http://www.taylortel.net/~gdett2/
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Ah - no I actually I wasn't!!
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