Investing in gold

dutt1975

Some of my friends have suggested that it is worth investing in gold as it is on the rise and could double over the next few years. Any advice

purch

Any advice

1. Never invest in anything just because 'some friends' told you......

2. Research..Research...make sure you understand fully what you are doing

3. Errr....


Gold is a very complex market, and some of the very simplistic reporting on the Gold price and the market is sure to lure the unwary into investing in haste and then regretting...

The price of Gold has 'historically' often risen and fallen very rapidly over a short timeframes. If you buy into Gold at current levels, you could see a 7-10% fall very quickly ( and a quick drop of that magnitude would be very helpful chartwise to the longterm uptrend ) so you need to be aware of the market you are buying into, and how it works.

Personally I think we will see $2,000 oz in the next few years, but there will be a lot of volatility along the way, so you will need to be able to cope with that if you intend to jump in !!!!

cloud_dog

Would agree with purch, you can't just decide to invest in gold because someone thinks it might be a good idea.

I'm very positive on gold BUT......

• It is VERY volatile
• It is relatively easy for the price to be manipulated by big investors / shorters, etc
• Right this minute may not be the best time to get in to gold

I posted the below on another thread recently.......

The below links to a very good interview with Paul Walker from GFMS and his take on the Gold cycle (moves a bit on to Platinum towards the end). His views come across as being very balanced and reasoned. Rather than reading it you can also listen to it.

http://www.resourceinvestor.com/pebble.asp?relid=40334

If you want to get in to gold (or precious metals, etc) I suggest you start researching and getting up to speed with how gold behaves.

Sites like the below are very useful........

• http://www.resourceinvestor.com/
• http://www.kitco.com/
• http://www.minesite.com/
• http://www.mineweb.com/mineweb/view/mineweb/en/page1?

Some of the info's or articles may be superfluous but are a good source to start with.

cloud_dog

Edit: Forgot to ask, how are these 'friends' getting exposure to gold?

dutt1975

Thanks for the advice. My friend sent me the following explaining how he has brought into gold:

You need to get a trading account set up with TD Waterhouse www.tdwaterhouse.co.uk , once you have this you can buy into an ETF (Electronic Traded Fund) on the London Stock Exchance with the code GBS which is Lyxor Gold Bullion Securities.
By doing this you are in effect buying shares, not in a company as such, but rather a share linked to the value of gold. NB you will be charged circa £50 for the transaction so probably best making it a decent sized purchase (TD Waterhouse are pretty helpful when you ring them).

I was thinking of only investing £1000 and would be willing to leave it a few years but I agree that I need to do some research. Would I be right in thinking that if the price reached $2000 per oz this would only be good if the dollar remained weak or would the strenght of the dollar affect the gold price anyway?

AuxArmes

Buying into gold right at this moment is probably not such a good idea as this morning's London fix price of £474 per ounce is pretty high - possibly an all-time nominal high or very close to it (can't be bothered to check). You should aim to buy on the dips, as one of the previous posters has mentioned.

Also, an alternative to buying into an ETF would be to buy physical gold. The advantages are that you get the real stuff in your hand and, if you buy Britannias or Sovereigns, any gains will be CGT-free. Disadvantages are that you need somewhere secure to store it and the buy-sell spread is quite large - a Britannia bought today will cost about £514 from a dealer but you'll only get somewhere around the spot price of £474 if you were you selling back to the dealer. Krugerrands have a smaller spread (cost about £500 today) but you will be taxed on any gains, subject to your personal CGT allowance.

Further information at:

http://www.goldline.co.uk
http://www.atsbullion.com/

I wouldn't recommend physical if you are just after making a quick profit because that spread becomes a problem in that situation. Physical is more an insurance policy - start drip buying, perhaps just a couple of Sovereigns (only about £120 each) a month, put them away somewhere safe and stop when your stash reaches 5% to 10% of your total assets. You've then got yourself a nice, tax-free rainy-day fund that no-one knows about.

cloud_dog

Well, if its something you want to do then GBS is one way. Are you comfortable in losing £200 (20%)???

In the short-term I'm not sure where Gold's going next. Have a look at the below charts.......

Daily - looks as if Gold might break-up again....

http://www.iii.co.uk/investment/detail?type=&display=chart&code=cotn%3AGBS.L&it=lb&timeframe=1f&index=&versus=&linetype=line&Go=Plot+&overlay=SMA_50&overlay2=SMA_200&overlay3=bolly_20&overlay4=&indicator=RSI_21&indicator2=slowstoch&indicator3=MACD&indicator4=MACDhist&chartwidth=760&gridlines=on&buylines=on&triggers=on

Weekly - looks like a pull-back may be in order....

http://www.iii.co.uk/investment/detail?type=&display=chart&code=cotn%3AGBS.L&it=lb&timeframe=1f&index=&versus=&linetype=line&Go=Plot+&overlay=SMA_50&overlay2=SMA_200&overlay3=bolly_20&overlay4=&indicator=RSI_21&indicator2=slowstoch&indicator3=MACD&indicator4=MACDhist&chartwidth=760&gridlines=on&buylines=on&triggers=on

You pay's ya money, ya takes your chance. If you look at the charts Gold has risen about 40% in a relatively short period (4 months), and historically has tended to stick fairly close to the 200 day SMA (average).

To summarise, short term I'm not sure where the Gold price is going, long term I feel $2000 is achievable.

cloud_dog

tradetime

NB you will be charged circa £50 for the transaction so probably best making it a decent sized purchase

That seems fairly pricey, does this involve trading commissions and stamp duty? If so might be worth seeing if this company allows you to trade US securities (ie no stamp duty) and look at ticker GLD if you want a gold etf, this is the Street Tracks gold etf, which is very liquid (actively traded) Without knowing what sort of commissions TDWaterhouse charge, I'd have said you should be able to buy this for somewhere between £10 and £13 from a quick look at their site.

cloud_dog

tradetime wrote: »

That seems fairly pricey, does this involve trading commissions and stamp duty? ...................... Without knowing what sort of commissions TDWaterhouse charge, I'd have said you should be able to buy this for somewhere between £10 and £13 from a quick look at their site.

I would have thought GBS (for example) should be traded as a normal stock, i.e. £12.50 (plus stamp duty - if this is applicable), BUT as their website says, any trades in the first month are free of dealing charges, so potentially zero dealing cost.

Edit: For info I hold mine in Central Fund of Canada (https://www.centralfund.com / CEF) which is a near 50/50 split between gold and silver bullion. Trades on the Toronto and NYSE and I use SelfTrade to deal (£12.50 no other costs).

Think I've mentioned CEF soooo many times I probably need to add it to my tag :-)

tradetime

cloud_dog wrote: »

I would have thought GBS (for example) should be traded as a normal stock, i.e. £12.50 (plus stamp duty - if this is applicable), BUT as their website says, any trades in the first month are free of dealing charges, so potentially zero dealing cost.

The first month free would be a bonus for him, although there is an inactivity fee with that account of £10 a quarter I think. Am not familiar with GBS I see it's traded on the LSE. My suggestion of GLD was because that account looks like it has international equities access GLD trades on the NYSE so shouldn't incur stamp duty. also its very liquid trading 9 mill shares per day avge so the spread will be tight 1c

cloud_dog

TT, I wouldn't agree or disagree with your suggestion. I think the OT needs to figure out if they want to invest, when they want to invest, and are they happy with the risk.

As you say there are others, PHAG for example.

There are lots of conflicting info out there atm. Dollar is weak, gold supply is tight (getting tighter wrt S.Africa) - all good for gold, BUT..... people are saying alot of bad news is priced in to indexes atm (not all but a lot) therefore stocks may be ready for a rise. If the institutions go that way then the fall off in demand will cause the Gold price to fall significantly.

Me, I've got some but am really not sure where its going short-term.

cloud_dog

mr_fishbulb

cloud_dog wrote: »

Edit: For info I hold mine in Central Fund of Canada (www.centralfund.com / CEF) which is a near 50/50 split between gold and silver bullion. Trades on the Toronto and NYSE and I use SelfTrade to deal (£12.50 no other costs).

I didn't realise I could invest in that the same as a UK ETF using selftrade.

Are there annual management fees for that fund?