I just rewatched this podcast again. In the podcast, you mention a 3 to 7% markup when buying a coin. When I go to Google today April 6, 2023, and search price of gold per ounce, I see Monex live showing $2,020.00. If I go to Apmex.com and look at a Buffalo coin, I see a price of $2,226.39, so closer to a 10% markup.
Assuming I have the above right, I wonder about holding the metal versus the GLD fund you mention later in the podcast. Following my first listen to your podcast, I did make a purchase of shares in that fund. I recall that you said that fees in the fund over time eat into profit and therefore you recommend holding the metal rather than the shares, though you sometimes temporarily buy the shares to lock in a price. Presumably the fund, though, doesn't have the 10% initial markup? Or do I have that wrong?
Then my related question would be on the sell-side. The podcast discusses how to buy, but if one later wanted to sell, the GLD fund would be easy and presumably there are no transaction costs other than taxes. When selling the physical gold, would one encounter fees?
Put differently, I understand your point when you talk about gold being HIGHLY liquid. I interpret that in the context of being accepted as a thing of value in every country for the last 4,000 years. Amazing! But on the other hand, the GLD fund shares can be liquidated by pressing buttons on a computer. By contrast, I wonder how long it takes, and what fees are involved, with the physical gold.
I just rewatched this podcast again. In the podcast, you mention a 3 to 7% markup when buying a coin. When I go to Google today April 6, 2023, and search price of gold per ounce, I see Monex live showing $2,020.00. If I go to Apmex.com and look at a Buffalo coin, I see a price of $2,226.39, so closer to a 10% markup.
Assuming I have the above right, I wonder about holding the metal versus the GLD fund you mention later in the podcast. Following my first listen to your podcast, I did make a purchase of shares in that fund. I recall that you said that fees in the fund over time eat into profit and therefore you recommend holding the metal rather than the shares, though you sometimes temporarily buy the shares to lock in a price. Presumably the fund, though, doesn't have the 10% initial markup? Or do I have that wrong? [YOU HAVE IT RIGHT. FIRST, COMMODITIES ARE ALL "DEALER" MARKETS, MEANING THERE IS A BID PRICE AND AN ASK PRICE. THE DIFFERENCE IS NOT A "MARKUP," JUST THE PRICE A BUYER OR SELLER IS WILLING TO PAY. THERE ARE INSTITUTIONAL DEALERS, WHO OPERATE WITH LOW UNIT COSTS AND DEAL MOSTLY IN BULLION, WHO ARE THE SOURCE OF THE GOLD HELD BY GLD. THEREFORE, YOU WILL SEE PRICE CHANGES CLOSER TO THE QUOTED BULLION EXCHANGE PRICES BECAUSE THEY ARE MORE EFFICIENT. WHEN YOU BUY IN SMALL AMOUNTS, YOU ARE WORKING WITH A SECONDARY DEALER, WHO HAS TO MARK UP THE "ASK" PRICE EVEN MORE TO COVER HIS COSTS. IT IS JUST LIKE BUYING RETAIL AS OPPOSED TO WHOLESALE. YOU CANNOT AVOID THIS ENTIRELY, I THINK YOU JUST HAVE TO SHOP AROUND TO GET THE LOWEST MARKUP CONSISTENT WITH RELIABILITY. ]
Then my related question would be on the sell-side. The podcast discusses how to buy, but if one later wanted to sell, the GLD fund would be easy and presumably there are no transaction costs other than taxes. When selling the physical gold, would one encounter fees? [I CAN ONLY SPEAK FOR THE COMPANY I AM AFFILIATED WITH, BUT I SUSPECT MOST ARE LIKE US. IF YOUR GOLD IS IN THE VAULT WE USE, THEN YOU WANT TO SELL OR EXCHANGE FOR ANOTHER METAL LIKE SILVER OR PLATINUM, WE GIVE YOU A BID PRICE NET TO YOU. WE THEN SELL IT AND KEEP THE SPREAD, BUT IT IS A SMALL SPREAD. IF YOU WANT DETAILS I CAN PUT YOU IN TOUCH WITH A REP WHO DOES THIS.]
Put differently, I understand your point when you talk about gold being HIGHLY liquid. I interpret that in the context of being accepted as a thing of value in every country for the last 4,000 years. Amazing! But on the other hand, the GLD fund shares can be liquidated by pressing buttons on a computer. By contrast, I wonder how long it takes, and what fees are involved, with the physical gold. [INSTEAD OF "HIGHLY LIQUID" PERHAPS I SHOULD HAVE SAID "HIGHLY MARKETABLE." ONE MEASURE OF LIQUIDITY IS THE SPREAD BETWEEN BID AND ASK. THE TIGHTER THE SPREAD, THE MORE LIQUID. IN TIMES LIKE NOW, WHEN THERE IS A LOT OF INTEREST IN GOLD, YOU SHOULD EXPECT THE RETAIL MARKUPS ON COINS TO BE HIGH. IT IS JUST A MATTER OF SCARCITY COMPARED TO DEMAND. THIS IS ANOTHER GOOD REASON TO TAKE YOUR INITIAL POSITION IN GLD. JUST BE PATIENT UNLESS YOU NEED TO BUY THE PHYSICAL NOW FOR SOME NON-ECONOMIC REASON, LIKE YOU WANT TO GIVE A PRESENT. BUT WHEN YOU OWN GLD YOU CAN ALWAYS SELL IT AND BUY PHYSICAL ON THE SAME DAY, SO YOU KNOW THE BASIC PRICE. I HAVE DONE THIS AND WAITED TO BUY MOST OF MY COINS WITH A 3-4% MARKUP WHEN THE MARKET FOR COINS WAS NOT SO HOT. YOU CAN ALSO PERUSE THE WEBSITES FOR SPECIAL DEALS ON COINS. MAYBE KRUGERRANDS ARE CHEAP RELATIVE TO BRITISH SOVEREIGNS FOR POLITICAL REASONS, THAT KIND OF THING.]
Very helpful info. Thank you! I guess the flip-side on the ease of pushing buttons to buy/sell the GLD shares is that governments, courts and creditors can press those same buttons to take the shares from you, but with the physical gold, it ain't so easy.
Great podcast! A couple questions: (1) When you mention a target like 10% in gold, are you referencing 10% of net worth or 10% of investment portfolio? (For people like me with expensive houses that they live in as their residence, these can be wildly different numbers.) (2) It was interesting to me that you suggested coins as the entry point because buying the etf gld (one of your other recs) seems WAY EASIER. My assumption is you encourage the former rather than the latter because it's "outside of the system" and thus less subject to seizure by governments, creditors, etc. Do I have that right?
Thanks, Tom. My suggested initial target is 10% of "savings." To me, "savings" and "investment" are almost but not quite interchangeable. Savings are just what you hold back from present consumption for investment and future consumption. Most savings are invested, but some people keep some savings in the form of cash in in a safe place. So I am saying if you save, say, $10,000 per year, put at least 10% of that into a gold investment. Yes, you can buy GLD and I think it is pretty safe. But there is a fee to hold it that eats principal slowly. Also, there is always counter-party risk (potential fraud and so on) in owning any paper claim to an asset. To take full advantage of gold's independence, I prefer physical ownership. Yes, physical gold (bullion and common coin) s a bit more "outside the system." BTW, I still use ETFs as a short-term holding tank before I convert it to physical, as described in the podcast. BTW, buying gold from a reputable dealer is actually very easy, nothing like buying a car for example. Make the deal, wire the money, USPS ships and insures for very low cost, and it only takes a few minutes.
Turns out my problem wasn't listening to you and buying gold, but not buying more! My initial tranche was 3% of portfolio and since then it's shot way up in a very short time. Of course, none of could have predicted the timing of SVB debacle. Curious... would you say that "Gold should be no more than ___ of a person's investment portfolio"?
Hi Tom. I caution you against harboring regrets about what you could have bought or sold. Regrets generate FOMO, which usually ends badly. When I recommended gold a few weeks ago I had no idea gold was about to spike in price. It has done so in the past and will do so again, but I have no idea when, and I never try to time it. On your "percentage" question, I'll tell a story. When I started out as a baby stock broker in 1984, the memory of the record 1980 spike in gold to $800 per ounce was still fresh in everyone's mind. Mother Merrill Lynch used to tell us: put 10% of your client's investable assets in gold, then hope gold performs poorly (because that means the financial world is stable). That is still reasonably good advice, in my opinion. The proportion varies with individual judgement and relative to your other investment assets. There are too many other risks in other assets to list here, but they include country risk, inflation risk, interest rate risk, credit risk, business risk, time horizon risk, and so on. The amount of gold you put in your portfolio depends in part on your assessment of these risks. As a fairly extreme example, I know someone with a very long time horizon (he's almost as old as me) who long ago allocated 50% of his portfolio to passive stocks and 50% to physical gold held in a secure venue. He has done very well and sleeps well. That is not my recommendation for you, just illustrative of the range of reasonable allocations.
Thanks for the question. Not sure my first reply was posted. I actually do own a modest amoount of silver and silver mining. I concentrate on gold because it is the purest monetary metal, and because of limited time to keep up with competing metals. That doesn't mean I don't like silver! I'm very aware of the gold-silver ratio and the fact that silver looks historically undervalued. The link below takes you to an expert opinion on this topic from Keith Weiner, CEO of Monetary Metals & Co. Good luck, I think you're on the right track.
Thanks for the question! I'm aware of the potential for silver and the fact that according to its historical value ratio it looks undervalued relative to gold. As I mentioned in my podcast, I stick to gold because it is the purest monetary metal. That does not mean silver is not a great way to save, nor does it mean I don't like silver. It is just my preference based on the time I have to keep up with it. Here is a link to someone who has an expert opinion on your question: Keith Weiner of Monetary Metals and Co. The article will guide you to some specific commentary and a specific outlook. Good luck, you are on the right track.
Jim, it seems like dealer price relative to spot price is much more favorable on bars relative to coins, especially as the bar sizes get to 10 ounces and higher. Are there disadvantages of bars relative to coins and higher ounces relative to lower ounces, e.g., when it comes to resale? Is the best strategy on these gold sites to sort to find whatever item is closest to spot value?
When one buys/sells physical gold, is there any kind of registration process with the government, as there is with buying a firearm? Or is it more akin to buying a watch, where you pay for it, get a receipt and that's the end of it? What prompts this question is one of confiscation by government, court, creditor, etc.
PS I asked ChatGPT4, and it tells me that in the USA:
"buying and selling physical gold is more similar to buying a watch, where you pay for it, get a receipt, and that's the end of it. Generally, there is no registration process involved in buying or selling physical gold, and ownership of physical gold is not typically tracked by the government."
Hi Tom. In this case, my experience is in line with ChatGPT's reply. I have bought gold in both coin and bullion form online, in person, and through a dealer who placed it directly in a boded depository. In every case, I simply paid by cash or wire transfer. No paperwork other than a receipt and a statement (certificate) from the seller that the metal was authentic ever changed hands.
I just rewatched this podcast again. In the podcast, you mention a 3 to 7% markup when buying a coin. When I go to Google today April 6, 2023, and search price of gold per ounce, I see Monex live showing $2,020.00. If I go to Apmex.com and look at a Buffalo coin, I see a price of $2,226.39, so closer to a 10% markup.
Assuming I have the above right, I wonder about holding the metal versus the GLD fund you mention later in the podcast. Following my first listen to your podcast, I did make a purchase of shares in that fund. I recall that you said that fees in the fund over time eat into profit and therefore you recommend holding the metal rather than the shares, though you sometimes temporarily buy the shares to lock in a price. Presumably the fund, though, doesn't have the 10% initial markup? Or do I have that wrong?
Then my related question would be on the sell-side. The podcast discusses how to buy, but if one later wanted to sell, the GLD fund would be easy and presumably there are no transaction costs other than taxes. When selling the physical gold, would one encounter fees?
Put differently, I understand your point when you talk about gold being HIGHLY liquid. I interpret that in the context of being accepted as a thing of value in every country for the last 4,000 years. Amazing! But on the other hand, the GLD fund shares can be liquidated by pressing buttons on a computer. By contrast, I wonder how long it takes, and what fees are involved, with the physical gold.
Thank you much!
Hey Tom, my comments are in bold:
I just rewatched this podcast again. In the podcast, you mention a 3 to 7% markup when buying a coin. When I go to Google today April 6, 2023, and search price of gold per ounce, I see Monex live showing $2,020.00. If I go to Apmex.com and look at a Buffalo coin, I see a price of $2,226.39, so closer to a 10% markup.
Assuming I have the above right, I wonder about holding the metal versus the GLD fund you mention later in the podcast. Following my first listen to your podcast, I did make a purchase of shares in that fund. I recall that you said that fees in the fund over time eat into profit and therefore you recommend holding the metal rather than the shares, though you sometimes temporarily buy the shares to lock in a price. Presumably the fund, though, doesn't have the 10% initial markup? Or do I have that wrong? [YOU HAVE IT RIGHT. FIRST, COMMODITIES ARE ALL "DEALER" MARKETS, MEANING THERE IS A BID PRICE AND AN ASK PRICE. THE DIFFERENCE IS NOT A "MARKUP," JUST THE PRICE A BUYER OR SELLER IS WILLING TO PAY. THERE ARE INSTITUTIONAL DEALERS, WHO OPERATE WITH LOW UNIT COSTS AND DEAL MOSTLY IN BULLION, WHO ARE THE SOURCE OF THE GOLD HELD BY GLD. THEREFORE, YOU WILL SEE PRICE CHANGES CLOSER TO THE QUOTED BULLION EXCHANGE PRICES BECAUSE THEY ARE MORE EFFICIENT. WHEN YOU BUY IN SMALL AMOUNTS, YOU ARE WORKING WITH A SECONDARY DEALER, WHO HAS TO MARK UP THE "ASK" PRICE EVEN MORE TO COVER HIS COSTS. IT IS JUST LIKE BUYING RETAIL AS OPPOSED TO WHOLESALE. YOU CANNOT AVOID THIS ENTIRELY, I THINK YOU JUST HAVE TO SHOP AROUND TO GET THE LOWEST MARKUP CONSISTENT WITH RELIABILITY. ]
Then my related question would be on the sell-side. The podcast discusses how to buy, but if one later wanted to sell, the GLD fund would be easy and presumably there are no transaction costs other than taxes. When selling the physical gold, would one encounter fees? [I CAN ONLY SPEAK FOR THE COMPANY I AM AFFILIATED WITH, BUT I SUSPECT MOST ARE LIKE US. IF YOUR GOLD IS IN THE VAULT WE USE, THEN YOU WANT TO SELL OR EXCHANGE FOR ANOTHER METAL LIKE SILVER OR PLATINUM, WE GIVE YOU A BID PRICE NET TO YOU. WE THEN SELL IT AND KEEP THE SPREAD, BUT IT IS A SMALL SPREAD. IF YOU WANT DETAILS I CAN PUT YOU IN TOUCH WITH A REP WHO DOES THIS.]
Put differently, I understand your point when you talk about gold being HIGHLY liquid. I interpret that in the context of being accepted as a thing of value in every country for the last 4,000 years. Amazing! But on the other hand, the GLD fund shares can be liquidated by pressing buttons on a computer. By contrast, I wonder how long it takes, and what fees are involved, with the physical gold. [INSTEAD OF "HIGHLY LIQUID" PERHAPS I SHOULD HAVE SAID "HIGHLY MARKETABLE." ONE MEASURE OF LIQUIDITY IS THE SPREAD BETWEEN BID AND ASK. THE TIGHTER THE SPREAD, THE MORE LIQUID. IN TIMES LIKE NOW, WHEN THERE IS A LOT OF INTEREST IN GOLD, YOU SHOULD EXPECT THE RETAIL MARKUPS ON COINS TO BE HIGH. IT IS JUST A MATTER OF SCARCITY COMPARED TO DEMAND. THIS IS ANOTHER GOOD REASON TO TAKE YOUR INITIAL POSITION IN GLD. JUST BE PATIENT UNLESS YOU NEED TO BUY THE PHYSICAL NOW FOR SOME NON-ECONOMIC REASON, LIKE YOU WANT TO GIVE A PRESENT. BUT WHEN YOU OWN GLD YOU CAN ALWAYS SELL IT AND BUY PHYSICAL ON THE SAME DAY, SO YOU KNOW THE BASIC PRICE. I HAVE DONE THIS AND WAITED TO BUY MOST OF MY COINS WITH A 3-4% MARKUP WHEN THE MARKET FOR COINS WAS NOT SO HOT. YOU CAN ALSO PERUSE THE WEBSITES FOR SPECIAL DEALS ON COINS. MAYBE KRUGERRANDS ARE CHEAP RELATIVE TO BRITISH SOVEREIGNS FOR POLITICAL REASONS, THAT KIND OF THING.]
Very helpful info. Thank you! I guess the flip-side on the ease of pushing buttons to buy/sell the GLD shares is that governments, courts and creditors can press those same buttons to take the shares from you, but with the physical gold, it ain't so easy.
Great podcast! A couple questions: (1) When you mention a target like 10% in gold, are you referencing 10% of net worth or 10% of investment portfolio? (For people like me with expensive houses that they live in as their residence, these can be wildly different numbers.) (2) It was interesting to me that you suggested coins as the entry point because buying the etf gld (one of your other recs) seems WAY EASIER. My assumption is you encourage the former rather than the latter because it's "outside of the system" and thus less subject to seizure by governments, creditors, etc. Do I have that right?
Thanks, Tom. My suggested initial target is 10% of "savings." To me, "savings" and "investment" are almost but not quite interchangeable. Savings are just what you hold back from present consumption for investment and future consumption. Most savings are invested, but some people keep some savings in the form of cash in in a safe place. So I am saying if you save, say, $10,000 per year, put at least 10% of that into a gold investment. Yes, you can buy GLD and I think it is pretty safe. But there is a fee to hold it that eats principal slowly. Also, there is always counter-party risk (potential fraud and so on) in owning any paper claim to an asset. To take full advantage of gold's independence, I prefer physical ownership. Yes, physical gold (bullion and common coin) s a bit more "outside the system." BTW, I still use ETFs as a short-term holding tank before I convert it to physical, as described in the podcast. BTW, buying gold from a reputable dealer is actually very easy, nothing like buying a car for example. Make the deal, wire the money, USPS ships and insures for very low cost, and it only takes a few minutes.
Thank you so much. Is there a reputable dealer you would be comfortable recommending by name?
Turns out my problem wasn't listening to you and buying gold, but not buying more! My initial tranche was 3% of portfolio and since then it's shot way up in a very short time. Of course, none of could have predicted the timing of SVB debacle. Curious... would you say that "Gold should be no more than ___ of a person's investment portfolio"?
Hi Tom. I caution you against harboring regrets about what you could have bought or sold. Regrets generate FOMO, which usually ends badly. When I recommended gold a few weeks ago I had no idea gold was about to spike in price. It has done so in the past and will do so again, but I have no idea when, and I never try to time it. On your "percentage" question, I'll tell a story. When I started out as a baby stock broker in 1984, the memory of the record 1980 spike in gold to $800 per ounce was still fresh in everyone's mind. Mother Merrill Lynch used to tell us: put 10% of your client's investable assets in gold, then hope gold performs poorly (because that means the financial world is stable). That is still reasonably good advice, in my opinion. The proportion varies with individual judgement and relative to your other investment assets. There are too many other risks in other assets to list here, but they include country risk, inflation risk, interest rate risk, credit risk, business risk, time horizon risk, and so on. The amount of gold you put in your portfolio depends in part on your assessment of these risks. As a fairly extreme example, I know someone with a very long time horizon (he's almost as old as me) who long ago allocated 50% of his portfolio to passive stocks and 50% to physical gold held in a secure venue. He has done very well and sleeps well. That is not my recommendation for you, just illustrative of the range of reasonable allocations.
What about silver? Is it not underpriced relative to gold, at least based on historical relationships?
Thanks for the question. Not sure my first reply was posted. I actually do own a modest amoount of silver and silver mining. I concentrate on gold because it is the purest monetary metal, and because of limited time to keep up with competing metals. That doesn't mean I don't like silver! I'm very aware of the gold-silver ratio and the fact that silver looks historically undervalued. The link below takes you to an expert opinion on this topic from Keith Weiner, CEO of Monetary Metals & Co. Good luck, I think you're on the right track.
https://monetary-metals.com/silver-little-known-indicator/
Thanks for the question! I'm aware of the potential for silver and the fact that according to its historical value ratio it looks undervalued relative to gold. As I mentioned in my podcast, I stick to gold because it is the purest monetary metal. That does not mean silver is not a great way to save, nor does it mean I don't like silver. It is just my preference based on the time I have to keep up with it. Here is a link to someone who has an expert opinion on your question: Keith Weiner of Monetary Metals and Co. The article will guide you to some specific commentary and a specific outlook. Good luck, you are on the right track.
https://monetary-metals.com/silver-little-known-indicator/
Jim, it seems like dealer price relative to spot price is much more favorable on bars relative to coins, especially as the bar sizes get to 10 ounces and higher. Are there disadvantages of bars relative to coins and higher ounces relative to lower ounces, e.g., when it comes to resale? Is the best strategy on these gold sites to sort to find whatever item is closest to spot value?
When one buys/sells physical gold, is there any kind of registration process with the government, as there is with buying a firearm? Or is it more akin to buying a watch, where you pay for it, get a receipt and that's the end of it? What prompts this question is one of confiscation by government, court, creditor, etc.
PS I asked ChatGPT4, and it tells me that in the USA:
"buying and selling physical gold is more similar to buying a watch, where you pay for it, get a receipt, and that's the end of it. Generally, there is no registration process involved in buying or selling physical gold, and ownership of physical gold is not typically tracked by the government."
Hi Tom. In this case, my experience is in line with ChatGPT's reply. I have bought gold in both coin and bullion form online, in person, and through a dealer who placed it directly in a boded depository. In every case, I simply paid by cash or wire transfer. No paperwork other than a receipt and a statement (certificate) from the seller that the metal was authentic ever changed hands.