inspirasi dari: Buying Gold and Silver: Why, How, and How Much?
Dalam pandangan saya, kita saat ini berada pada masa yang mengerikan dalam investasi. Mengapa demikian, pertama karena saya membedakan antara investasi dengan spekulasi. Dan ini memang saat paling menggembirakan bagi spekulator, bukan investor.
Apakah bedanya? Seorang investor melakukan penelitian, melakukan penelitian mendalam sendiri, dan berhati-hati dalam mengambil resiko dan keuntungan sebelum menginvestasikan uangnya. Seorang spekulator hanya menaruh uangnya, menyilangkan jari-jarinya, dan berharap semoga hasilnya bagus. Ciri khas dari spekulator adalah mereka berharap dapat menjual ‘investasi’ mereka kepada orang lain kemudian hari demi uang lebih, atau cara yang disebut ‘greater fool investing theory’.
Ketika artikel ini pertama kali ditulis (Desember 2007), sudah sangat banyak uang ‘palsu’ yang membanjiri sistem seperti surat utang yang beredar lebih sedikit daripada rate inflasi yang diumumkan (which itself is fraudulently low), utility stocks are yielding ~2%, and some companies like Google are sporting a total capitalization value in excess of $200 billion and a p/e in excess of 50(!!). These are signs of excess, or distress, not health.
So what’s a person to do under these circumstances? What if a person’s primary goal is to avoid losing money? What if someone does not wish to speculate? Unfortunately, the options are not very attractive at the moment.
Money is supposed to be a store of energy, specifically human labor. This concept of money being a store of wealth is weakened when money is printed out of thin air, but not necessarily so. It is at least theoretically possible for fiat money systems to be managed both responsibly and fairly. In reality, they never are.
This dynamic is captured beautifully in this snippet from a recent Bank Credit Analyst article:
The authorities are caught in a trap: they can’t let the system implode, and the only solution is to encourage more excesses that will cause greater problems later on.
There is a school of thought that the authorities should stop pushing the inevitable adjustments into the future and take the pain now. But no government or central bank would condone such an idea. The time horizon of most politicians is dictated by the election cycle. There is little appeal in creating a grim near-term economic environment that would push current politicians out of power, and only potentially benefit the politicians of tomorrow.
From the perspective of central bankers, the problem is the threat of a catastrophic deflationary slump. Even though the Fed and other central banks eased aggressively, after the tech bubble burst, there was a deflationary scare in 2003. The experience of Japan shows what can happen if a deflation is allowed to take hold. That economy has performed poorly for more than a decade, and the Topix (Japanese) index is still down 45% from its peak of 18 years ago. That must constitute the worst performance of any major equity market since the 1930s. Such wealth destruction in the US would have cataclysmic effects.
In sum, there is no way to have a cleaning of balance sheet excesses without running enormous risks with the economy and possibly the entire financial system itself. So policy makers feel they have no option other than to keep easing, regardless of future consequences.
All of the above is a slightly roundabout way of saying that policy makers always prefer to put off for tomorrow that which might cause some pain today and, further, that postponement usually makes things worse, not better. Said another way, we can probably count on our authorities countering the problems that sprang from cheap money by issuing an even larger flood of even cheaper money. If you want to know how this story goes, just ask a still-living heroin addict (the rest are unavailable for comment). A little bit of cheap money requires an even larger dose, and then larger and larger doses to achieve even a little bit of relief. In money terms, this means you can expect inflation, and lots of it.
But there is one way for the common man to protect what they have, at least if history is any guide, and that involves holding gold and silver.
OK, so you’ve finally decided to buy some gold and or silver. Now what?
Here’s a primer to get you started.
There are three ‘flavors’ of gold and silver:
- Rare coins (a.k.a. numismatic). Much, if not most, of the value in this investment class is contained within the rarity of the object itself, not in the intrinsic gold/silver content. Rare coins can exhibit the most marked increases in value during times of relatively stable inflation
- Jewelry & silverware. Ditto above. The value is embodied in the artistry/rarity of the object, not in the gold/silver content. Nuggets and so-called ‘native silver’ also fall in this category, as they are typically purchased for their rarity and not their intrinsic metal content. Silverware is sometimes the exception, if you have a sharp eye at tag sales, flea markets, and antique stores.
- Bullion. This refers to gold/silver that derives the vast bulk of its value from the metal content alone, typically over 95%. The various forms are:
- Bars. Ranging in size from ½ ounce to 5,000 ounces for both silver and gold.
- Coins. Gold examples would be Kruggerands, American Eagles, Pandas, Philharmonics, and Maple Leafs are all examples of gold bullion coins. Each is officially minted by a specific country. They range in size from 1/10 ounce to 1 ounce. Silver examples would be pre-1964 American dimes, quarters, half dollars, and dollars (a.k.a. junk silver). Also, the US Mint puts out a 1-ounce (.999 fine) coin called the Walking Liberty, while numerous private mints issue 1-ounce silver ’rounds,’ which are 0.999 fine and are stamped with their private marks.
What should I buy?
Assuming your intent in purchasing gold/silver is to hedge against paper money devaluation (inflation) or a potential paper money crisis, then I would only buy bullion (1 & 2 above) and nothing else. I personally hold both bars and coins.
Within this, there are several factors to consider.
- What are you planning to do with the coins and bars? If your answer is “to hold them for a while within the US and then sell them,” then besides getting the best purchase and sales prices, there’s not much of a distinction between and among your choices. However, if you think you might want to transport gold to, say, Canada for any reason, be advised that Canada currently assesses a fairly hefty GST import tax on any gold that is less than .999 fine. Many types of gold come in 0.999 fineness, including (ta da!) the Canadian Maple Leaf. However, Kruggerands and American Eagles are alloyed to less than 0.950 purity to increase their hardness, which is great if you want to handle them more often, but is lousy if you want to bring them into Canada.
- If you think there may come a time when you might be using gold/silver directly as a medium of exchange (i.e., as money), then you want to consider three things. (1) Make sure you have pieces that are of a useful size. 1 ounce gold coins and 1000 Oz bars of silver might be just a tad too big. (2) Be sure they are immediately recognizable and/or have the purity and amount clearly listed on the item itself. Ethiopian coins may be pretty exotic and cool now, but they may be frowned upon later. (3) .999 gold is extremely soft and would make a terrible circulating currency.
- What about the silver and gold ETFs (Exchange Traded Funds)? You can participate in ‘buying’ gold and silver in numerous ways, ranging from COMEX futures contracts, to mining shares (stocks), to the new ETFs where your money goes towards a secured amount of gold or silver in a warehouse somewhere. All of these represent paper claims on gold/silver and are not equivalent to owning it in physical form. As with any paper claim, they can vanish at the speed of electrons or with the stroke of a pen.
- What about online gold companies such as Bullion Vault? After you’ve got a core position in physical gold/silver in your possession, I do recommend BullionVault.comas a simple, easy, and transparent way for people to maintain a gold position. It is simple, secure and low cost.
How much should I buy?
I think a prudent investment portfolio should have a minimum of 5% to 10% exposure of the total net worth devoted to physical precious metals. Mine? It’s well over 50%, but that’s me.
A strong case can be made for even higher exposures. However, it is up to each person to decide for himself or herself what makes sense.
In any case, you should not be buying any if you think you might need to regularly dip in and out of the holding. Precious metals should only be bought as a long-term hedge, or investment, that you can safely put aside for a future date. As I mentioned before, that date for me is when I can exchange an ounce of gold for an acre of productive land. I consider my holdings to be property I will pass along to my children someday.
What buying strategy makes sense?
Whatever your investment percentage, once you have made the choice to allocate to gold and/or silver, a prudent buying strategy would be to “dollar cost average” your purchases over 6-12 months.
For example, if you decided to invest $12,000 in gold, I would recommend buying $1,000 to $2,000 worth every month or two until you hit your target.
Like anything and everything, gold and silver will go up in price and they will go down in price. Trying to picks the tops and the bottoms is a nearly impossible task that eludes even the most seasoned professionals.
Just buy it and don’t sweat it. I have never looked back on my own purchases and sleep like a baby as a result.
The cost of buying.
You’ll quickly figure out that there are two prices for gold and silver: the oft-quoted spot price that you’ll see on TeeVee or in the newspaper, and the price you’ll pay to receive some physical in your actual possession. The spot price is the price for a pretty big slab of metal that you would have to buy directly from the Comex exchange in NYC. If you’d like to own a large-ish slab of metal, you can always pay spot, drive down to NYC and pick it up. However, for smaller, more convenient amounts, the price is usually spot plus 4% (but as much as 8% if you are a sloppy shopper) for both gold & silver, which accounts for the cost of fabricating a coin or small bar, plus the dealer costs to handle, store, and transport the coins & small bars. On the other hand, when you sell, you will also receive a bit more than spot, so it balances out somewhat.
For example, below are some current buy/sell quotes (as of 12/04/07). Gold is currently $802.50, so we can see that the buy premium is 4.1% ($836) while the sell premium is 2.3% ($821). Thus, the ‘trading friction’ to you is actually 1.8% (not including your storage and return mailing costs, should you decide to do business through the mail).
Where should I buy it?
There are lots and lots of potential sources. Go comparison-shopping and get the best price you can. A couple of good sites are:
- Colorado Gold
- The Tulving Company
- Certified Mint Investment
- California Numismatic Investment
But there are many more out there as well. Consider also your local coin shops, which have the advantage of enabling you to more easily participate in smaller purchases and preserve your anonymity, should that be important to you.
Again, after you have your core position in physical gold, and especially for those with significant wealth to protect, I recommend both BullionVault (low cost, easy) and Anglo Far East (discrete, allocated, jurisdictional breadth).
Where should I store it?
Lots of options exist. Safe deposit boxes, secure locations that you trust…people have been known to bury the stuff.
For now, I prefer safe deposit boxes, but there has been some concern (and more than a few rumors floating around) about federal authorities preventing access to safety deposit boxes again as they did in the 1930’s. I do not fret about this too much, since I am confident in my ability to remain aware of and stay a step or two ahead of such seizure attempts.
How should I get started?
Here’s my preferred ‘starter set,’ steering towards a 1/3 silver to 2/3 gold ratio.
- Pre-1964 quarters (sold by the ‘bag’, or $1,000 of legal tender face value, running at ~ 715 ounces of silver)
- Gold, split into 25% (by cost) allotments as follows:
- ½ ounce eagles
- 1 ounce eagles
- ½ ounce Maple leafs
- 1 ounce Maple leafs
After this basic allocation, I would move on to expand my holdings of junk silver so that I had some dimes and half dollars in my collection.
The gold should just be expanded in proportion as you go, although I would lean more heavily towards the one-ounce units as your collection builds.
Why? The one-ounce coins have a lower ‘premium’ (that is, price over the quoted daily ‘spot’ price for gold), so you are getting a better deal. Also, I cannot imagine ever having to do much direct trading with gold, so having a few pieces in the sub-one-ounce range should be sufficient.
Of course, and as always, do what seems best to you.
All the best,
Chris Martenson, PhD
Copyright, Chris Martenson, 2006-2010
Disclaimer: Chris Martenson has no financial interest in any companies mentioned herein, will accept no remuneration for the basic information presented above, and makes no claims about whether or not buying gold & silver makes sense for you. The above should not be construed as financial advice, only some organized thinking around a very common subject. Do your own due diligence and make your own decisions.