Terry's tips on how to buy gold
TERRY SAVAGE firstname.lastname@example.org Sep 24, 2009
Gold recently traded at $1,020 an ounce and closed Wednesday night at $1,014 an ounce. Gold prices reflect uncertainty over the value of the dollar.
Updated: May 3, 2013 12:15PM
You wrote a column about gold some time back, and now I see the price is more than $1,000. How do I buy gold?
A. The very fact that so many people are now asking how to buy gold has me a bit worried. After all, the idea of investing is to buy low and sell high! Back on March 2, with gold trading at $940 an ounce, I wrote my most recent column on gold. (You can find it in my archives at www.TerrySavage.com; go to "Read her columns" and search for gold.)
My views haven't changed, even though gold recently traded at $1,020 an ounce -- and closed Wednesday night at $1,014 an ounce. Gold prices reflect uncertainty over the value of the dollar.
There are many who say the role of gold is limited in our huge global economy. They point to the fact that during last fall's credit crisis, the world wanted dollars, not gold. In fact, there was so much demand for the safety of dollars a year ago that the price of gold fell to $725 an ounce in November.
But in the intervening months, the Federal Reserve and Congress have created so much credit, literally "printed" money out of thin air or legislative vote, that the world is having second thoughts about the future value of our money. The value of the dollar has been sliding, and the value of gold has been soaring.
Like any other market, there will be ups and downs, and sometimes wild changes of direction. So whether you buy gold bars, or coins, or stocks, or mutual funds, or futures contracts, you'll want to understand that there is some degree of risk when you buy gold.
That said, here are a few ways to buy gold:
The most popular gold coin currently minted by the United States is the American Eagle, currently being made only in 1-ounce coins. Several other countries mint gold coins, notably the Canadian Maple Leaf, Australian Kangaroo and Austrian Philharmonic.
The daily price of these coins changes, depending on the price of gold. On Wednesday, with gold trading at around $1,013, a 1-ounce American Eagle cost about $1,075.
There are some older U.S. gold coins, such as the $20 St. Gaudens, that also have a numismatic or collectors value, based on their rarity, priced at about $1,350, depending on condition.
If you buy gold coins or bars, make sure you store them in a safe place, such as a bank safe deposit box. Choose a reputable dealer at the American Numismatic Association Web site, www.money.org. In downtown Chicago, go to Harlan J. Berk Ltd., 31 N. Clark, (312) 609-0018.
Gold stocks or mutual funds
The advantage of buying stock in gold mining companies is that these companies typically pay dividends. And when the price of gold rises, they have more profits out of which to pay those dividends, since the cost of mining stays the same.
For a complete selection of gold stock mutual funds, go to www.Morningstar.com. Or go to www.usfunds.com, the Web site of U.S. Global Investors, which has several funds devoted to gold and precious minerals, as well as extensive and understandable explanations of the gold market. (Full disclosure: I have owned their no-load funds for years.)
Exchange traded funds
There are some stocks that reflect the price of gold because they hold their assets in actual gold. The NYSE-listed stocks SPDR Gold Trust (GLD) and Central Gold Trust (GTU) reflect daily price changes in gold. You are, in effect, buying a share of their bullion holdings.
Futures to jewelry
The gold in your jewelry box becomes more valuable as the price of gold rises, but beware of ripoffs and scams offering to buy your unused jewelry, which is probably only 18-karat gold and thus less valuable by the ounce.
You also can trade futures contracts on gold, and options on futures contracts, but this is the riskiest way to participate in the market.
Finally, while you hope to make money on your gold investments, you should hope not to make too much money. If gold soars in price, it means that the value of your dollars -- your buying power -- has diminished. That would have catastrophic consequences for the American standard of living.
Your purchases of gold might be treated as an investment, or a collection, or a speculation. But always keep in mind that your lifestyle will be purchased in dollars. And that's The Savage Truth.HOW YOU CAN PICK TERRY'S BRAIN
To celebrate the 20th anniversary of my Chicago Sun-Times column, I'll be responding to your most frequently asked questions on a regular basis. Of course, you always can submit individual questions on my Sun-Times blog reached on the home page at www.TerrySavage.com.