Investing in Gold

Cardinal-Red

Morning everybody!

Quick bit of background - my wife and I have spent years paying off our youthful debts and are now almost debt free (student loans aside).

We're now looking to make some investments and anybody who recognises my name might remember I've been doing research over the last few months and have started investing in Unit Trusts (good diverse portfolio I think but still small) and defensively positioned shares. We have a small cash holding of around £14,000 invested mostly in cash ISAs.

The more I read the more I become convinced that holding cash is not the only/best way. As we've filled up our cash ISAs for the year, and uneasy about investing more in the equities side of our investment plan (still very much learning the ropes and evolving our attitude to risk) I was thinking of investing in some gold.

I've identified 3 ways to do this:

1) Through some mining stocks, (or perhaps a mining sector tracker if such things exist) - though this will expose us to risks over and above the spot price of gold itself. The companies I've looked at are Petropavlosk (POG) and Centamin Egypt (CEY). However just seen a news item on Australian taxes which I've not read yet but further backs up my point on a wider risk through this plan;

2) An EFT - not totally comfortable with this concept yet and doing more research, but did see a couple relating to gold. However there seems to be an added complication here of the gold being measured in US$, so the risk becomes increased by virtue of the spot price, and the exchange rate.

3) Bullion itself - sites like BullionVault which seem to allow drip trading for gold. This seems to me to be the best for somebody who thinks gold prices will go up.

Am sure there are people here with experience in gold investment. What extra risks are there with any of the 3 options that I've not yet considered?

In my research I came across comments from people discussing various providers for option 3) where they were worried that the gold would be stored in London rather than Switzerland. Why is this relevant?

And does anybody have any general ideas/comments on gold investment anyway?

:beer:

bendix

Cardinal-Red wrote: »

Morning everybody!



And does anybody have any general ideas/comments on gold investment anyway?

:beer:

None of your approaches is necessarily wrong nor right. How you 'invest' in gold is up to you. For my part, I have a small exposure to gold mining shares through Blackrock Gold and General, and my wife has a few ounces in physical bullion (kept in the house), but that's all.

Point of order though. Gold is not something you invest in in the normal way you think of investing - trading off risk for potential reward. Gold is a long-term store of wealth.

An ounce of gold today buys pretty much exactly the same today that an ounce bought 20, 50 and 100 years ago - no more, no less. In that regard it is a terrible investment, but a good store of value.

dixie_dean_2

Up 175% over 5 years though.

Cardinal-Red

bendix wrote: »

None of your approaches is necessarily wrong nor right. How you 'invest' in gold is up to you. For my part, I have a small exposure to gold mining shares through Blackrock Gold and General, and my wife has a few ounces in physical bullion (kept in the house), but that's all.

Point of order though. Gold is not something you invest in in the normal way you think of investing - trading off risk for potential reward. Gold is a long-term store of wealth.

An ounce of gold today buys pretty much exactly the same today that an ounce bought 20, 50 and 100 years ago - no more, no less. In that regard it is a terrible investment, but a good store of value.

Thanks for this comment. That is pretty much the reason we are looking at this - a long term way of storing what would otherwise be cash but minimising the risk of inflation eroding away its value.

The cash we're saving for a house deposit when the time is right would be kept as cash for the short term (i.e. probably around 3-4 years)

Cardinal-Red

bendix wrote: »

None of your approaches is necessarily wrong nor right. How you 'invest' in gold is up to you. For my part, I have a small exposure to gold mining shares through Blackrock Gold and General, and my wife has a few ounces in physical bullion (kept in the house), but that's all.

Trying hard not to give the impression of fishing for info with the aim of coming to rob you : how do you handle this in the house?

Specifically with regard to 2 items - the insurance (presumably declared to them as valuable items) and also maintaining its integrity as it were, i.e. keeping it as investment grade.

Looking at various places, there are (obviously I would suggest) holding fees for bullion in unallocated amounts which would eat into the value overall as time went by. You presumably get round this by storing it yourself?

bendix

dixie_dean wrote: »

Up 175% over 5 years though.

And down substantially over 25 years, but it's easy to play with single moments in time to make a point.

Anyway, gold is not a commodities or a metal play. Gold is a currency play. Talk to investors in Australia or New Zealand to see how they feel about gold's performance in recent years.

bendix

Cardinal-Red wrote: »

Trying hard not to give the impression of fishing for info with the aim of coming to rob you : how do you handle this in the house?

Specifically with regard to 2 items - the insurance (presumably declared to them as valuable items) and also maintaining its integrity as it were, i.e. keeping it as investment grade.

Looking at various places, there are (obviously I would suggest) holding fees for bullion in unallocated amounts which would eat into the value overall as time went by. You presumably get round this by storing it yourself?

What's there to handle? Have you seen how small an ounce bar of gold is? It's tiny.

It's kept in a personal safe at home, along with all other valuables.

DiggerUK

Cardinal_Red,
This is a link to a thread on gold started in 2004. The arguments for and against are the same today.
https://forums.moneysavingexpert.com/discussion/14783

Bullion Vault is an expensive way not to get physical gold, (BV are a particular bette noire of mine), avoid. Release fees to get physical are astronomical, and it has to be a 400oz bar!!!
A 1oz coin is a bit larger than a two pound coin, and a 250gm bar is the size of a custard cream. Together that's over 7K.

Here are two keen priced sites.
http://www.coininvestdirect.com/en/
http://www.hattongardenmetals.com/

Most household insurance policies cover valuables to 10K and up, but check item limits. After that get a deed box at bank, pound a week.
If it is paper gold you are after, stick to brand names.
Don't view it as a speculative short term purchase, think retirement or 5+ years.

Best of fortune.

JamesU

DiggerUK wrote: »

After that get a deed box at bank, pound a week.

But it is not insured at the bank is it? Any options on specialist insurers?

JamesU

C_Mababejive

So are we saying that Gold isnt an investment. Its simply a hedge against inflation? But Gold prices have rocketed recently. You cant spend gold in the shops. you have to swap it for currency so it is inextricably linked to paper money. If gold price drops as quickly as it has risen,then surely you loose money?

DiggerUK

JamesU wrote: »

But it is not insured at the bank is it? Any options on specialist insurers?
JamesU

Lloyds and HSBC just allow you to place a locked box with them. Insurance is your problem.
We viewed someone tunneling in to a bank as low risk, but will review insurance cover if we see a spate of bank robberies by tunnellers!!!