Comments on: Advantages and Disadvantages of Investing in Gold Bullion vs. Gold Stocks vs. Gold ETFs

By: MoneyEnergy

MoneyEnergy — Tue, 08 Dec 2009 05:23:41 +0000

@Robert – yes, there are different risk scales with regard to how one invests in gold. As you said, bullion can be stolen, and there are different risks involved with companies. Good reason to diversify your gold holdings.

By: Robert Happek

Robert Happek — Sun, 06 Dec 2009 15:53:06 +0000

You mentioned the risk of losing gold in physical possession due to theft for instance.

However, you did not mention the risk of total loss due to bankruptcy or fraud of gold stocks or gold related ETF’s, A gold stock company might go bankrupt simply because the resources in the ground may simply not be there. Similarly, an ETF may go bankrupt like any other stock company traded on the exchanges.

Even the gold held by central banks is subject to risk. The gold the central banks hold may not be gold at all as the Ethopian central bank found out some time ago. That remark applies therefore to the gold holdings of GoldMoney or BullionVault (a similar company to GoldMoney) as well.

To sum up, investing into gold is risky regardless what venue one chooses to invest into gold.

By: MoneyEnergy

MoneyEnergy — Thu, 17 Sep 2009 02:25:40 +0000

Thanks, Blake. Looks like you’re being rewarded. Not surprising that gold is up to $1019 today. Some are saying it’s hit the ceiling of a trading range, I think there will be profit-taking but just as many are pitching it for it to go higher.

By: Blake

Blake — Wed, 16 Sep 2009 03:48:22 +0000

I’ve got about a half-and-half split between a bullion fund (CEF) and physical gold that I hold myself.

Other than the liquidity issue, and the pain of actually finding some and taking possession of it, I really enjoy holding it in it’s physical form. My stepfather is really big into studying economic crashes and how individuals should prepare for one, and often passes along material that he has read. While we try to remain optimistic, it’s hard not to think about the “what if?” situations. If something catastrophic happened, it’s highly possible that precious metals would be the last thing on our minds, but it still feels good to actually have some of the stuff safely in our possession.

Plus, I’ll admit that I like taking it out and looking at it every now and then! ;) The Maple Leaf is a gorgeous coin.
Should say good post. Looking forward to reading the next one!

By: Blake

Blake — Wed, 16 Sep 2009 02:00:08 +0000

I’ve got about a half-and-half split between a bullion fund (CEF) and physical gold that I hold myself.

Plus, I’ll admit that I like taking it out and looking at it every now and then! ;) The Maple Leaf is a gorgeous coin.

By: Bron Suchecki

Bron Suchecki — Wed, 16 Sep 2009 00:56:46 +0000

Perth Mint also offers Allocated storage (bars or coins with your name on them) and GoldMoney is primarily a pooled physical, but you can ask for a bar with your name on it as well. It is not a case of either/or with these services.

By: MoneyEnergy

MoneyEnergy — Tue, 15 Sep 2009 20:03:20 +0000

That’s a really good point, and a factor that should definitely be looked at when dealing with commodities stocks in particular, so it would apply to silver, potash and natural gas, as well. Thanks for mentioning that.

By: Philip Brewer

Philip Brewer — Tue, 15 Sep 2009 19:22:45 +0000

One aspect of buying gold stocks that you don’t mention is the inherent leverage: If the company can make $100 profit on every ounce when gold is selling for $1000 an ounce, then a 10% increase in the gold price amounts to a 100% increase in the company’s profit. (Of course, this works the other way as well–a 10% drop in the price of gold can cut the company’s profit-per-ounce to zero.)

This effect can be relatively small for the low-cost producer (Barrack can produce an ounce of gold for around $400), but huge for a high-cost producer. In a rising market, you want to own a company whose costs of production are just below whatever the future price of gold is going to be.