Monday, May 24, 2010

How to invest in gold? - Alpha

This is a question I get often these days, and my suggestion for a vehicle depends on how extreme your views on the current situation are. See my previous thoughts on gold below:
Merits of gold investing (Dec. 9, 2009)
Gold as an asset class (May 5, 2010)

Liquid paper holdings of gold: If you just want liquid, tradable exposure to gold, go for the largest ETFs: GLD and IAU.

Audited liquid paper holdings of gold, with realistic redemption rights: If you're worried about their audited holdings and sub-custodian risk and want a slightly less liquid ETF with better audited reports and the right to redeem paper units for gold bars, go with SGOL in Switzerland or PHYS in Canada.

Hard, physical gold:
If you're worried about government expropriation or gold controls (which the US and most countries did in 1933), then you want to physically own gold coins, and I would suggest American Eagles for small amounts and
gold bars for larger amounts: (points to

I personally like the 10-ounce silver bars from here: (I receive no commission or kickback in recommending this - do your own diligence!).

I'm not a fan of gold mining stocks or ETFs. Too much operations and fraud risk.

At this stage I'm comfortable with GLD and IAU. If a collapse happens and banks start failing left and right, I'll want to redeem from a gold ETF or in general have coins. One scary thing is that the US Mint has stopped producing gold and silver coins, despite a statute that requires them to do so...

From the US Mint:
"American Eagle Gold Uncirculated Coins

Production of United States Mint American Eagle Gold Proof and
Uncirculated Coins has been temporarily suspended because of
unprecedented demand for American Eagle Gold Bullion Coins. Currently,
all available 22-karat gold blanks are being allocated to the American
Eagle Gold Bullion Coin Program, as the United States Mint is required by Public Law 99-185 to produce these coins "in quantities sufficient to meet public demand . . . ."

The United States Mint will resume the American Eagle Gold Proof and
Uncirculated Coin Programs once sufficient inventories of gold bullion
blanks can be acquired to meet market demand for all three American
Eagle Gold Coin products. Additionally, as a result of the recent
numismatic product portfolio analysis, fractional sizes of American
Eagle Gold Uncirculated Coins will no longer be produced.

Update: Due to the continued, sustained demand for American Eagle Gold
Bullion Coins, 2009-dated American Eagle Gold Uncirculated Coins will
not be produced."

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