I don’t evaluate the situation as so serious yet that one needs to buy physical gold and sit on it, but one needs to buy claims on gold that can be turned into physical gold that one can sit on should the situation deteriorate further, as it most likely will. Can anyone tell me what gold investments most plausibly make such a promise?
A lot of gold funds are investments in promises to deliver gold, rather than investments in gold capable of being delivered. The time is fast approaching when they are not going to deliver. Today, the credibility of gold funds is not so important, but may well become important rather suddenly.
You hit the nail on the head with the observation that credibility is the most important attribute to consider here. Credibility is the reason that I can give only a qualified recommendation (but a recommendation nonetheless) to one operator with a unique, well thought out business model.
That Web site is http://www.bulliondirect.com. It provides an exchange for the buying and selling of actual, physical gold products, cleared through their vault in Texas. After establishing an account, you can trade (for example) Krugerrands, various weight Eagles, or gold bars on their exchange. Just as with a stock exchange, you can enter a buy order for other traders to match with an asking price, or offer to sell at some price. When selling, you can either pre-ship your gold to their vault and have it held on your account before you sell, or send the gold in via overnight mail after you place the trade. Similarly, when buying, gold can be held in your account in their vault, or shipped to you for an additional, reasonable fee. Most users typically wait until they have amassed some quantity of metal before shipping it. A reasonable 1% commission is charged on each end, making this a pretty economical way to acquire physical gold.
The issue here, of course, is with the credibility of the people running the business: customers must be satisfied that they actually hold all the metal they claim to. Reaching this level of comfort is not helped by the amateurish way they handle customer service calls (leave a voice mail, and someone will call you back) or the long delays in shipping during periods of market volatility (which is when one would want their physical in a hurry.) However, there are no credible assertions of anyone ever being ripped off by them, and they seem to reliably make customers whole on their occasional errors.
I personally am convinced that bulliondirect.com is aboveboard, although sometimes overwhelmed; but of course everyone should do their own due diligence, and nervous sorts who would have a stroke after being informed of a delay in shipping their metal should probably steer clear. If you can put up with their foibles, though, they offer an excellent way to have both the benefits of owning physical and those of electronic trading. I have been a satisfied customer for several years.
Just as a FYI, Matt C. and Matthew C. are two different commenters. . .
Would be interested why people are wary of BullionVault (aside from reasons that apply to all investments where you are not taking physical delivery).
One detriment of BullionVault that I am aware of, is a flip side of of its benefit: the benefit is actual allocation (it is NOT paper gold); the detriment is that gold purchased in this way is taxed as a “collectable”, not a capital gain. So you will always pay 30% on gains in BullionVault no matter how long you hold the investment. If you buy a gold ETF or even unallocated gold such as through Kitco accounts, and you hold for more than one year, you will “only” pay capital gains of 15%. (Actually, I am not 100% certain that unallocated accounts are treated as capital gains, but of the distinction between an ETF and allocated accounts, I am certain.)
Then the ideal solution would be to buy an ETF that was backed by allocated gold – which I suspect does not exist.
Take a look at GTU.
GTU is supposed to be fully allocated. It is not an ETF, rather a trust that is traded publicly.
Why don’t you buy it on ebay?
I in fact do buy most of my gold and silver on ebay. But it is only a place for people who have the time to “shop” and get the best deal (many auctions end up being bad deals). And you have to then authenticate the gold and (larger) silver coins that you purchase.
For someone who doesn’t want the “Turkish Bazaar” experience, they should find somewhere other than ebay to purchase gold.
And it sounds like Jim would prefer someone else to handle the logistics and storing of gold (for now). I’d suggest PHYS for someone who wants a trustworthy gold ETF, and goldmoney for someone who wants allocated gold in a vault which can be used like a bank account.
How do you “authenticate” gold that you’ve bought?
Leonard,
To authenticate gold coins, you basically need to ensure that the density is correct.
The only materials as dense as gold are either equally or more valuable (platinum, osmium) or too hard and brittle to form into coins (depleted uranium, tungsten). So if the coin density is correct it is exceedingly unlikely to be a fake.
I measure dimensions (diameter, thickness) and weight and compare to the standards, easily found on the internet. If all measurements are within specs, then density is correct, therefore your coin is very unlikely to be a fake.
Note that it is much easier to make a fake gold bar out of gold plated tungsten or a tungsten core gold bar. Yet another reason to purchase coins instead of bars. . .
None of the gold investments today really make much sense. As long as the government knows about the investment they are very likely to tax it to death when the time comes to convert to a new currency. Not to mention holding physical gold is a security nightmare in a lawless nation.
This assumes that you are going to sell it, rather than that in the end we are going to use gold as money, and that when the time comes to sell it, the government is still going to be capable of collecting taxes.
As for a lawless nation, my expectation is that if police disappear some parts of the nation are going to get a lot more law abiding, though others less. Any area that people depend upon police to maintain order is not a safe area.
The police will most likely be the ones committing a lot of the crime. When you’ve got a certain skillset and you’re used to being paid to use it for good and now you no longer get paid, you find other ways of using that skill set.
I’ve come to see gold as something you only hold $5-10k of physically as a working supply of inflation-proof currency. The rest goes into stocks, bonds, REITs, etc.
There are, of course, key differences between us and Zimbabwe. They have no fractional reserve banking system or Federal reserve. Their system is much less tolerant to the shocks put on it (and it’s run by Africans, which is the biggest problem).
Argentina defaulted on their debt and has total lunatics running their central bank.
I suppose we could default on our debt (seems inevitable). We’ve had bad inflation here in the past. Anything could happen.
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Buy physical if you can.
If it is logistically impossible to buy and keep physical gold, the goldbugs tend to like Sprott (PHYS) for a gold ETF, and goldmoney (James Turk) for gold banking. They are NOT fans of GLD and bullionvault due to who owns them.
I like the simplicity of physical possession myself but I can see how that wouldn’t work for someone who doesn’t have a single fixed permanent residence / country of location.
Could you please expand on the perceived problems with the Bullionvault ownership? thinking about using them, and have no idea what you are referring to…
GLD is run by HSBC, a TBTF bank who is supposedly net short gold. There is a strong belief in the goldbug community that they play games with the GLD physical inventory, such as allocating those bars to other customers at the same time as they are part of the GLD backing.
Many in the goldbug community seem the feel that the Rothschilds are a negative influence in the financial system, promote central banking, fiat currencies, TBTF and the like, and they have an ownership stake in bullionvault.
Goldmoney is owned by James Turk and Eric Sprott, long time “gold friendly” individuals well respected by the goldbug community.
I am just passing this information on. For me personally, bird in the hand versus two in the bush, and all that. . .
A bank that is short gold may well be unable to make good on its commitments to deliver gold. Of late, lots of too clever by half financial instruments have been going bad.