Information on investing in gold -( not a sales pitch!!!!) It is not a good investment for the

[old mark]

average person - the cost involved in buying and selling the small amounts of gold most people hold outweighs most gain in market price.

The fluctuation in gold "value" is driven by people, not by scarcity. The recent increases in gold price was driven by India increasing its gold reserves by buying large amounts of bullion and by the idea that China may do the same.

Link: http://en.wikipedia.org/wiki/Gold_as_an_investment

The gold that is advertised on TV is very overpriced and there is no potential for profit in it except for those selling it.
Someone posted last week asking about investing in gold, so here is some belated information on it.

FWIW.

mark

[Zynx]

1. It all depends very heavily on the timing.

If you bought gold in 1980 and held until now, you got slaughtered on an inflation adjusted basis. 2001 until now has been very good. There is no "long term trend" in gold. There are very particular moments where it makes sense.

[Statistical]

2. The "vig" also kills you.

Today gold has a spot price of $1180 per ounce but if you try to buy a gold coin you will not get one for $1180 an ounce.

You "might" get one for $1250 an ounce once you consider price, shipping, and insurance. More likely you will be paying $1260, $1270, $1280, even $1300 for a 1 oz coin.

Now if something happens and you need to sell that gold coin and gold is still $1180 an ounce you won't get the $1250+ you paid you won't even get the $1180 spot. You might get a small discount to spot price say $1150.

So you essentially have a $100+ (and likely a lot more if it is a small purchase) spread between buying price and selling price if you deal with physical coins. Now this spread will vary depending on dealer and qty but it is significant. True gains don't occur until spot price has risen by more than the spread.

[ret5hd]

3. why would you ship (and insure) a gold coin when you can go to a local...

coin shop and buy it?

[Statistical]

4. Depending on your locality a local coin shop may be even more.

I have seen gold selling for +$150 to $250 over spot price in coin shops. Not talking about rare coins either just common American Eagles.

Even paying shipping & insurance often online is the "cheapest" route.

[Matariki]

5. I owned an ETF for a while that tracked gold

That's an alternative that's easy to buy and sell.

[yellowcanine]

6. I think gold is a lousy investment. At least based on the past 30 years.

Gold was around $575 in Jan 1980 when my oldest daughter was born - I only know that because I wrote it down in her baby book. Today it is what - not quite $1200? So in 30 years it has barely doubled in value. That's a lousy investment.

[Statistical]

8. Another way to look at it.

The Dow was about 1000 in 1980.

So buying the dow would cost roughly 2 ounces of gold.

Today gold is worth $1200 so 2 oz would be worth $2400.

Today the DOW is worth $10,100.

$10,100 vs $2,400.

However it gets worse for gold.

Over the last 30 years the DOW has paid out a total of $1,100 in dividends.

That makes it more like $11,200 vs $2,400. However if you reinvested those dividends over last 30 years it would have yielded even more.

[yellowcanine]

9. $575 invested in 1980 in 5 year CDs would have been worth $6,560 in 2008

Not as good as stocks but a lot better than gold.

http://www.measuringworth.com/calculators/ussave/result.php

[the other one]

7. Your local coin dealer

will give you a good deal.

But you will have to pay some commission.

You will probably pay $50 per coin, less if you buy more then 10 pieces.

Considering the coin dealer has to pay more than spot for each coin he holds in inventory, a small commission is understandable.

Yes, you will receive less then spot when you sell.

But this doesn't mean its a bad investment. These things must be accounted for.