Gold — Time to Buy? Part III

Last week, using my Simple Simon buy/sell system, I answered your question, “using your charting system is it time to buy gold?” I explained why my system was not signaling a buy signal and MAY be close to a take-profit signal. An update-Gold has dropped $50 since this time last week and looks like it has more downside ahead.

Today, I focus on sources for buying physical gold and gold securities traded on the US exchanges. I will not go into the advantages and disadvantages of each in this column. When it comes to investing in precious metals (long term), I prefer the physical. I like paper ETFs for (short term) trading.

One of your first decisions is whether or not you want to actually take possession of Gold. If actually taking possession is important, then physical gold is for you.

You can find numerous sources for where to buy gold. When choosing a source the most important factors to focus on are repurchase policies, authenticity/trust and education. Many dealers say they will buy back your gold. However, I only buy from dealers who actually publish prices on what they are currently paying. This shows their markup. I don’t mind a business making money, but I just do not want them making it all on me.

If purchasing small amounts, shop your local dealers and compare their inventory and premiums (the markup) from the spot price of the metal. See if they are interested in educating you before selling. If they do not, take the time to discover how much you know about precious metals, then turn around and walk. If they take a genuine interest in answering your questions and do not rush-that shouts volumes as well.

Per education, it does not take long to discover if the gold dealer is interested in educating you on precious metals or is there just for the sale. Prudent dealers are in it for the long run and want an educated customer. They realize that maximum profitability focuses on repeat sales for as many years as possible.

When buying larger quantities, I compare prices and availability with online sources that cover shipping and handling and insurance. Many online suppliers have a minimum purchase of 6-8 thousand dollars to cover these expenses. I like to give our local dealers the opportunity to match the availability and prices from the online suppliers.

Next, I research how long the dealer has been in business and how long their employees have been with them. I like to see employees with greying or thinning hair like mine.

If buying in volume, my favorite online dealer is California Numismatic Institute located in Los Angeles, CA. When you go to their website (golddealer.com) you see they have been in business over thirty years. In addition, their buy back prices are on their web page front and center. The icing on the cake for me is that they have a very low minimum ($2,000) to forgo insurance and shipping and handling charges.

Per paper Gold, I like GOLD Exchange Traded Funds, ETFs that can be bought and sold daily with zero early redemption fees. The two most popular GOLD ETFS (by volume) the SPDR Gold Trust, symbol GLD and iShares Gold Trust ETF symbol IAU.

Both funds are designed to track the spot price of bullion and can be traded easily through discount brokers with minimum commissions (less than $18 per round trip).

Finally, no matter if you buy physical or paper, take time to research what you buy and from whom you buy. Do not rush this process!

Plan you work, work your plan and learn to share your harvest!

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