Gold101

Here are a few resources to help you move some of your savings into gold.

Remember that gold is a form of cash, not an investment. It doesn't grow in value, create new jobs, earn profits, or generate income for you. It is simply a currency that no government can counterfeit or debase. You should hold it as a way to reduce the volatility of your portfolio, or for long term saving. Don't imagine that owning gold will make you rich: If gold doubles in price due to massive creation of fiat currency, most of the other things you need to buy will eventually double in price as well. Gold can preserve your wealth, but not really grow it. For that you need real investments and prudent speculations.

Gold is the King of Cash!

From safest to riskiest:

1) Physical bullion coins and bars – your main risk is physical security. You need a safe place to keep it where it won't be stolen. Bank safe deposit boxes are great – unless the bank is closed. In-home safes and backyard burial are some of the alternatives. Pros: no counter-party risk, it's in your own control. Cons: hard to find at decent a price these days. Track the spot price at Kitco's 24 hr Live Gold. My favorite way to buy is through my local coin dealer, Beaverton Coin and Stamp. I suggest you look in the yellow pages and make the acquaintance of your local coin shop; they can be very helpful, and may be the best place to sell your gold when the time comes to convert your savings in to local currency. Another dealer I have used for years, always with very good results is Camino Coins.

2) Goldmoney.com – stores your gold (and silver) in insured third-party vaults in London or Zurich, and allow you to buy and sell via wire transfer, very quickly and easily. This is a great service, very easy to set up and use, perfect for savings. Pros: Very low markup, low storage fees, very safe storage, online access to funds. Cons: no way to get the gold in your hands except to sell the Goldmoney and use the funds to purchase physical gold. It is one of the best forms of "paper gold", but not quite the same as real gold in your pocket.

3) The Gold ETF, symbol "GLD": This is a stock that you can buy and sell in your brokerage account. The fund's managers try to make the value of each share be the same as 1/10 ounce of gold. There are also options on it , as with many stocks. Pros: a great tool for trading and speculating. Quick and easy to buy and sell. Cons: it is a stock, not really gold itself. Brokerages, dealers, stock exchanges, and many other counter-parties all have to perform in order for you to realize value from this security. Best used for shorter term trades in times when the markets are functioning well.

The next two categories are really speculations, not cash positions. Used prudently, they can increase the gold value of your investments. Used carelessly, they can destroy your savings. Proceed with caution:

4) Numismatic gold coins – these are really collectible antiques, with gold playing only a minor role in their value. They can be a great speculation, but like gold stocks they can rise and fall much faster than gold itself. There are some that are available for close to bullion prices; these are attractive because they offer a numismatic "kicker" to the gold value. Circulated common date US gold coins were in this category until recently; now they are hard to find at reasonable prices. On the other hand, almost all rare gold coins are now trading at premiums to gold that are very low compared to historical averages, and many offer good values; but they are still mostly "premium" and only a little "gold". Do not buy numismatics unless you know what you are doing or have expert assistance. My favorite expert is Van Simmons, president of David Hall Rare Coins.

5) Gold stocks: These are companies that explore for and mine gold and other metals, finance gold mining and receive royalties from gold production. Very risky! Many are just "holes in the ground surrounded by liars". Some are excellent speculations that can rise much faster than gold itself (and fall faster, as well). Some generate very nice income streams. You need good research to find the best plays and avoid the deathtraps. The dean of resource investing is Rick Rule of Global Resource Investments. Highly recommended. Newsletters that have performed well for me in the past (for many investments, not just gold stocks) include Brent Cook's Exploration Insights, Agora Financial's Options Hotline, Stansberry and Associates' Extreme Value, True Wealth and Short Report letters. Doug Casey has several excellent newsletters including Big Gold.

I hope this is helpful!

Charles