[MONEY] Gold bar as an investment?

[cHodAX]

Sick and tired of getting zero return on my savings from the bank but have been speaking to the father of a friend and he has whacked quite a large sum into gold bars due to the continued growth. Now I know any investment is a risk but gold seems to be giving great earning potential at the moment. Initially I am looking to test the water with £5,000 with the intention of leaving that investment long term, if it shows good initial growth then I may double or triple the investment, again for the long term.

How wise that is I have no idea, so I am looking for any useful advice. Thanks.

 

[Wij]

In with the Gordon Brown gags now

 

[Vladamir]

If I give a brick a golden shower will you give me £5000?

 

[old.user4556]

Cho, I've been having discussions about this with people at work and was going to post a similar thread from a "where to buy" point of view.

Generally, imo, gold is a longer term investment but it's back in the news again regarding a sharp price rise based on US debt. I am of the same opinion that it's a better investment than savings accounts at the moment, but as with all investments it's best to have a spread to mitigate risk.

One thing that I could forsee being a risk is high commission rates on the buying and selling of it as it becomes more lucrative. On small amounts, short term gains could be eroded by this 'charge'. I'm not sure if that's a problem, but something that's on my mind.

Perhaps a more educated investor could advise.

 

[cHodAX]

In with the Gordon Brown gags now

As a Labour voter all I can say is gtfo!

 

[cHodAX]

Cho, I've been having discussions about this with people at work and was going to post a similar thread from a "where to buy" point of view.

Generally, imo, gold is a longer term investment but it's back in the news again regarding a sharp price rise based on US debt. I am of the same opinion that it's a better investment than savings accounts at the moment, but as with all investments it's best to have a spread to mitigate risk.

One thing that I could forsee being a risk is high commission rates on the buying and selling of it as it becomes more lucrative. On small amounts, short term gains could be eroded by this 'charge'. I'm not sure if that's a problem, but something that's on my mind.

Perhaps a more educated investor could advise.

Thanks bud and commission is definately something I need to look into.

 

[Embattle]

Well it won't technically be a bar as that is something like £400k

I partly look at gold as being sound investment but its rising price is down to people investing it it thus the rise has become slight self perpetuating.

 

[cHodAX]

Well it won't technically be a bar as that is something like £400k

I partly look at gold as being sound investment but its rise price is down to people investing it it thus the rise has become slight self perpetuating.

Ok, gold CHUNKS! Yeah the rise being down to alot of people buying has been a bit of a worry, maybe I should take it on as a 12 month investment and walk away with the profit instead? Going off current growth that could be as much as 20-30%.

 

[ileks]

I'd be too stressed about the price falling tbh. Also would surely be a lot of messing around for 5 grand. You can stick £5,000 in an ISA every year (although if you are thinking about buying gold you probably knew that.. ;p)

 

[Ch3tan]

ISA return is shit though.

 

[ileks]

Is there any better risk free way to invest cash? Surely the avarage person investing in gold/shares is just a gamble at the end of the day.

 

[pcg79]

Cho, I've been having discussions about this with people at work and was going to post a similar thread from a "where to buy" point of view.

Generally, imo, gold is a longer term investment but it's back in the news again regarding a sharp price rise based on US debt. I am of the same opinion that it's a better investment than savings accounts at the moment, but as with all investments it's best to have a spread to mitigate risk.

One thing that I could forsee being a risk is high commission rates on the buying and selling of it as it becomes more lucrative. On small amounts, short term gains could be eroded by this 'charge'. I'm not sure if that's a problem, but something that's on my mind.

Perhaps a more educated investor could advise.

i work in the industry and am absolutely not a goldbug. cant stand the rubbish - its nonproductive for a start, so 100% of returns are from capital appreciation.
how can you determine if there still is upside for capital appreciation? well in my view, you cant. because its just a lump of metal that does nothing (jewellery use aside), there are no good valuation metrics for the thing (aside supply/demand). the reason prices have been going up are as someone said before: effectively 'hope' that at some point people will value the stuff more than they do currently. that, plus real interest rates are negative throughout the world, it reduces the opportunity cost from not having income generated by the metal. it could be argued that theres still some upside: looking on an inflation adjusted basis, it would be around $2400 (versus around $1600 now).

but of course, just as the rise has been pretty quick, it can be pretty fast on the way down too.

one thing to worry about for you guys is currency. gold is denominated in dollars so whatever position you take, you will effectively be taking USD exposure too. if everything goes back to normal (ie greece is fine, US debt ceiling gets lifted and republicans/democrats go hand in hand into the sun, the UK finds an extra 2% of GDP etc) then a) gold will sell off; b) dollar will sell off, so you will face a double whammy of losses.

for my money, you should plant your £5k in diversified investments (how diversified depends on your risk tolerance and ability/willingness to invest). to me, putting it all into gold would be mania - hugely risky, massively uncertain upside, more currency risk than you want: effectively a massive punt (like buying a tiny penny stock). DONT DO IT!

 

[pcg79]

also, technically, you dont need to buy a gold bar. there are funds where you can effectively buy a share where the price is linked to the price of gold. each share is only worth a very small amount of gold, but you can buy one share if you want (although you will have to pay trading comission, probs around 10-20 quid).
if you have enough shares you can take physical delivery (although technically the gold will remain in the COMEX network, so the gold will be stored in a vault somewhere, with your name attached and a bill for storage costs sent to your house).

 

[cHodAX]

one thing to worry about for you guys is currency. gold is denominated in dollars so whatever position you take, you will effectively be taking USD exposure too. if everything goes back to normal (ie greece is fine, US debt ceiling gets lifted and republicans/democrats go hand in hand into the sun, the UK finds an extra 2% of GDP etc) then a) gold will sell off; b) dollar will sell off, so you will face a double whammy of losses.

for my money, you should plant your £5k in diversified investments (how diversified depends on your risk tolerance and ability/willingness to invest). to me, putting it all into gold would be mania - hugely risky, massively uncertain upside, more currency risk than you want: effectively a massive punt (like buying a tiny penny stock). DONT DO IT!

Is all of that likely to happen in the next 12 months though? The U.S. debt ceiling will go one way or the other very soon, Greece is more medium term and U.K. GDP growth isn't looking like gaining an extra 2% in anything like the short term.

 

[pcg79]

Is all of that likely to happen in the next 12 months though? The U.S. debt ceiling will go one way or the other very soon, Greece is more medium term and U.K. GDP growth isn't looking like gaining an extra 2% in anything like the short term.

oh god no; the point really was just to indicate the problems with 'investing' in gold and that it could unwind quite quickly.

thing is, there could be a few good bits of data out: a nice surprise in UK GDP next week (ofc not anywhere near a +2% surprise, but QoQ growth above like 0.7%) plus some good news from the US and people might decide everything is fine. and that stuff could happen in the next few months (doubtful, i know)

 

[Laddey]

I like this thread!


Good idea from a quick glanse cho. Cheers !

 

[rynnor]

Much of the rise in the price of gold reflects the weakness of the dollar.

As the spending power of the dollar falls are you really gaining much?

Only way you could really make much is if the pound crashes.

It was a good idea a couple of years back - now maybe not - buy swiss francs?

 

[inactionman]

I bought some bullion coins a few years ago as a hedge against inflation, which has currently nearly doubled when valued in sterling since then. You really need to look at gold as a store of value, as it gives you no income, just capital appreciation (compared to paper currency).

If you are looking at buying, you want physical gold, so coins are your best bet. I'd suggest buying sovereigns or britannias (but these are in short supply due to demand) as they are CGT exempt (legal tender), else pretty much any 1oz coins are good (I bought Austrian as they were the best deal at the time, but the Canadian Maples have good collectors value due to the higher purity of gold).

If you are looking at £5000 you'll need to spit your purchase, as that's the point they inform HMRC about purchases (£5k in one go or £10k annually). Here's a good site I've used in the past, else there's always Bairds.

I'm not sure it's a good time to buy currently, either we're in a gold bubble, or gold is returning to historic values despite the efforts of central banks (they don't want it competing with paper currency). I'd have it as a part of a portfolio. Mine has gold, AUS$ and CAN$, together with GBP in an ISA. All of these have done pretty well, apart from the ISA which is doing shockingly.

Silver would be a better buy if it wasn't VATable as it's used industrially and in medical products. Similar with Platinum, if it wasn't so expensive!

 

[DocWolfe]

You're probably better buying gold futures than having an actual gold bar Where are you actually going to get the gold bar from? I doubt you'll be able to get into touch with a gold wholesaler to get anywhere near a decent price.

 

[Raven]

Gold sold like chocolate from German vending machines - Telegraph

 

[DocWolfe]

Just looked up some COMEX futures... the prices at the moment are:

The July 2011 future which expires at the end of this month is $1,592/troy oz.
The prices on that coininvestdirect are $1,658/troy oz.

Gold

At the moment traders are predicting the Gold prices for July 2017 will be $1,841/troy oz so assuming the predicted prices are correct after 6 years you will have made ~$190/troy oz.

So 10% over 6 years, which is pretty shit, subjective considering period of time though. Over a year it looks like you will only make 1% on your investment.

 

[Mey]

Problems I see with Gold is storage. Have you thought about where you are going to keep it?

 

[inactionman]

You don't want to touch paper precious metals. There's rumors that a lot of it is basically being sold on a fractional reserve basis, but it's the same with most futures.

 

[GReaper]

I'm certainly not a financial expert, but is it really a good time to buy it?

You say that you're looking at it as a long term investment, yet the price of it has been increasing over the past 7 years or so to the current high values. It just looks like a huge bubble waiting to burst. It may continue to go up for a bit longer, but will people start to get nervous that the price of gold is becoming too high?

I'd be concerned at buying into it as a long term investment if the current high price is likely to drop eventually.

 

[ECA]

The amount of fail in this thread is high.

 

[GimmlyThe3rd]

Best investment now is property, currency and shares in failing banks / oil companys. I'm going to buy some condo units i'm hoping in next couple months, only small studios, 24 and 26sqm. I'm hoping at least 2-3, only a £400 deposit on each and a 10-15 year mortgage, I should rent them quite easy (it's my job ;p) and will make about £60 on each a month.

It's fuck all profit, but the area is only going to get more expensive, I don't have any maintenance fees and in 10 years they will pay for them self. And if I choose to sell they will be about 200k, the market won't crash here in the capital and this area ...

Want in? ;p

 

[Ono]

I was really urged to get into gold only about 3 years ago by 2 friends. Think it sat at below $1000 per ounce then.

 

[Zenith.UK]

Silver would be a better buy if it wasn't VATable as it's used industrially and in medical products. Similar with Platinum, if it wasn't so expensive!

I remember platinum being £15 per gram back in the early 90's. It was used as the liner for huge crucibles for glass melting at Pilkington Glass and was slightly thicker than tin foil. It was so valuable that the company never bought it, only rented it.

I just checked and the price is about $62.40 per gram right now so it's approximately doubled in value over the last 20 years.

 

[Chilly]

The US will obviously raise their debt ceiling - what else can they do? The world would end if they didnt.

 

[rynnor]

I just checked and the price is about $62.40 per gram right now so it's approximately doubled in value over the last 20 years.

Isnt that just tracking inflation though - it sounds nice but if you remove inflation from that you'd probably find it was a really awful investment.