Help a Reader: Buying Gold Coins

Here's a question I recently received from a reader:

I'm a young professional doing pretty good. I'm 26 and still single and my only debt is about 1000 grand of student loan. Anyways, I am trying to start my life right and do everything right.
 
My question is I want to buy some gold coins. I don't know if you ever bought some before. If so, can tell me where you bought it from so I can buy it from the same reputable source.

A few comments:

1. I'm sure he doesn't mean that his debt is "1000 grand." I'm assuming it's either $1,000 or $10,000 since he sounds like it isn't much.

2. I told him that I have never bought gold coins.

3. I'm sure many of you can advise on where/how to buy gold coins as well as the potential pros and cons of doing so. Have at it.

Comments

[Scott]

Purchasing gold coins can be an expensive plus you'll have to store the darn things. Redeeming them eventually is a whole another issue.

If investing in gold is your goal why not purchase the gold ETF "GLD" thru a discount stock broker. No storage issues and you can liquidate your position any day.

PS: At your young age...the greatest asset you have is time. I would open a Roth IRA and put together a diversified equity portfolio. Gold could be a small percentage of your overall portfolio (say 10%)

[Servius]

I did well ordering from CMI http://www.cmi-gold-silver.com/

I've also purchased from ebay (was nervous for days until they arrived) and local stores.

Buy bullion coins in gold and silver, not collectibles. You're looking for Gold and Silver Eagles. ( http://www.usmint.gov/mint_programs/american_eagles/index.cfm?flash=no&action=American_Eagle_Gold ).

When you buy, evaluate the net cost including any sales taxes and shipping against current spot prices to evaluate various dealers. http://www.kitco.com/ is a good place to look for current prices.

As far as storing them, keep them in a safe place in your house and don't tell anyone you have them. Make sure its somewhere a random break-in wouldn't find. When you've acquired alot you can consider a safety deposit box. http://livesafely.org/home-security/hide-cash/

[Matt G]

Okay, come on. It sounds like the next email from this guy is going to be one where he'll send you a check, you buy the gold coins, ship them to him and you forward him some money, because he accidentally sent you too much.

[Dan Holt: Laid Off]

Use the money you would buy coins with to pay down your debt. You'll feel better, free up income, and probably get a greater return than gold.

[Jim]

Personally I don't think gold is a very good investment. Its volatile and hasn't outperformed stocks in the longrun. In my opinion gold prices have been booming due to fear caused by the recession and its likely to bust soon.

If you want to add some gold to diversify and hedge then I'd limit it to 5-10% of your assets and use an ETF like Scott suggested.

[Terry]

I've used the following to buy and sell gold-silver.

GLD,SLV - Stock,need brokerage account
apmex.com - Sells gold and silver coins
goldmoney.com - Stores gold and silver in Switzerland,in your name

Gold is a hedge against inflation,low this year but looking out 5 years anyone guess.
At this time I'm invested in high-quality US corporate bonds. (VFSTX)

[Bad_Brad]

Gold is not a good investment. As others have pointed out, it is actually pretty volatile, and furthermore in the last 150 years the annual return of gold has been about 1%.

If you must have gold, I agree with others - about 5% of your portfolio, 10% tops, in an ETF.

[Jeremy]

You are too young to invest in gold. Invest in equities or pay off debt. You will be happy that you did this in the long run. A roth IRA isn't a bad idea, but it is more important that the money is put into equities so that it can keep compounding throughout your life. Broad market index funds like those that tracks S&P 500 are great.

[praveen]

I have a different opinion on gold. Others have said Gold is not a good investment because of its poor returns in past. But past performance is not indication of future. Gold will go up because of massive printing of dollars by Federal government. Thats my case to say gold will go up. I'm a swing trader and I trade gold. Gold is acting very good technically. Once it crosses $1000, the next target might be $1250-$1300.

You can buy gold coins from www.ajpm.com
www.learcapital.com

I had good experience with later one.

[mbhunter]

Oh, by all means get some. Congratulations on your foresight. You're not at all too young to invest in gold.

I disagree with most gold detractors. Gold won't make you rich, but it could well keep you from getting poor. With the S&P P/E ratio well over 100, do folks really think it's going to recover anytime soon? There are more kinds of assets to own than stocks and bonds. Ignoring or pooh-poohing precious metals shows a rather narrow view of investing.

Now, the powers that be are against your gold investment. Voting for gold is voting against fiat currency, and governments don't like this. They will manipulate it and call you a hoarder. They don't call people who have a lot of stocks hoarders, do they?

Folks I've talked to about getting gold coins recommend:

1) The smallest denomination bullion coins of your home country (for the US, this would be 1/10 ounce eagles), up to about $10,000.
2) More in an offshore depository (like goldmoney.com).
3) Invest in GLD if you just want to play price moves.

Camino Coin or BullionDirect.com can sell you coins for delivery.

[Mike]

Gold is a commodity, and as such, generally speaking, it's value moves with changes in the global economy and the value of our dollar. Since it's priced like it's liquid black version, oil, in this same dollar, it will protect your wealth from weakness in said dollar, and like previously mentioned, with all this massive, unprecedented in the history of the world spending by our current gov't attempting to perpetuate it's global military/economic empire, the dollar will eventually collapse.

All empires, throughout the history of mankind eventually fall. Why?, because they spread themselves out too thin in a vain attempt to control the world. Our government, tragically for all of us, is on the same path.

Study history, open your eyes, pray for the best but be prepared for the worst. It won't hurt anyone to own some precious metal coinage. The amount you choose to hold will be in relation to how much faith you have in your gov't.

[MonkeyMonk]

I agree with what some other people are saying. Gold is experiencing a bit of a bubble right now and people should be thinking about selling some of their gold . . . not buying more gold. Don't be tempted by the run-up in prices . . . you should have gotten in when the prices were low. You're basically setting yourself up for a buy high/sell low situation.

[Mike Hunt]

Did the original poster say they have school debt of 1000 grand? That's a million dollars buddy so you should pay off that debt before buying gold...!

-Mike

[Servius]

One other thing. You'll pay a small premium over spot to acquire your coins and you'll get spot prices when you sell your coins.

Smaller coins have higher premiums so buy coins and bars that are as large as you can afford. For gold 1 oz coins is minimum. For silver 1 oz coins is ok and more liquid but 10 oz and 100 oz bars are available.

I don't look at gold as an investment but an insurance policy against runaway inflation and believe people should keep 10 - 20% of net worth in gold. When gold prices go down acquire more. It's always the right time to buy gold if you're buying it for the right reasons.

[Gus P.]

Mike Hunt: Read FMF's first comment, "I'm sure he doesn't mean that his debt is '1000 grand.' I'm assuming it's either $1,000 or $10,000 since he sounds like it isn't much"

Thanks

[A_Muslim]

I'm the one who sent this email. I wasn't expecting this to be published. I'm so embarrassed now. *nervously blush* I meant to say 10 grands, not 1000 grands. Since I sent the email, I reduced by debt to about 8300USD. I could pay it off in two months if I lived on Ramen Noodles for those months. Just can't find the courage to do it. I'm going to be done in six months to one year for sure. I hope. It's not that I can't pay it off. I just can't bring myself to pay it off. Weird!

I just wanted to buy some gold so I could have something solid. All the "buy gold here" looks so shoddy and like scam. Moreso than the "sell gold here" sites. I also wanted to be able to give a coin of gold here and there to people I care about on special occations. Like to my fiancé, to sisters, to my brother, to my newphews and cousins on their birthday, etc.

I want to spend about 2500USD. Notthing more. Thanks for all the comments and suggestions.

[Richard]

I think we need more information from the reader. How much are you wanting to invest in gold? If you can't afford to pay off the $1,000 in student loans AND still have money left to invest in gold...then you shouldn't be investing in gold.

Regardless, you should probably adhere to the principles that most of us live by:

(1) Invest up to the company match in your 401(k)
(2) With additional money, fully fund your Roth IRA.
(3) If you still have money left over, invest the full $15,500 into your 401(k).
(4) If you still have money left over, invest in the things that seem to be your interest (ie: gold coins).

If you're 26 and socking away $20,500 free/clear w/o blinking an eye -- then you're ready to go buy some gold coins to put into your personal safe.

...and when you do buy gold coins, don't put them in your safety deposit box!!

RCP

[Jim]

mbhunter said: "With the S&P P/E ratio well over 100, do folks really think it's going to recover anytime soon?"

The PE of the S&P 500 is around 13 right now.

[A_Muslim]

@Richard: I'd like to invest 2500USD now and possibliy more later in gold.

You also suggested:

(1) Invest up to the company match in your 401(k)
---Done.
(2) With additional money, fully fund your Roth IRA.
---Haven't started this one yet.
(3) If you still have money left over, invest the full $15,500 into your 401(k).

Is that a good idea? I contribute the maximum for 401K that my employer matches. My uncle (doing pretty well) says I shouldn't do that. He suggested an IRA.

(4) If you still have money left over, invest in the things that seem to be your interest (ie: gold coins).

If I buckled up really, I could put at away about $25000 every year. That's my plan. I'm upto 20,000USD this year. I figure if I can do this 3 years while not incurring any debt (beside the 8000USD student loan I have now) I can buy a house by when I'm 29 or 30. Pay the house off in 5 years. Sooner if my wife-to-be works also and contributes to the earnings.

(Tangent: Since I'm Muslim you all might think my wife might not work. I told my fiance that she can work she wants. If she doesn't work at least until we have kids, her degree will go to waste. When we have kids, I would highly recommand that she takes 4/5 years off. I don't want my kids raised by Nintendo and Xbox360.)

I can possibly retired by 45. That would be wonderful. I can start travelling the world as I always dreamt and work lightly. By 60, I'll have my nice little 401K all poached and ready to be eatten. [day-dreams]

[David S]

AM:

As one or two others have said, tangible gold is a good inflation hedge but not much of an "investment" otherwise. That said, many, many people are concerned about hefty inflation in the near to mid term due to the current actions of the U.S. Federal Reserve and Treasury. Throwing out all the jargon to explain what these two bodies have been up to (QE, factional reserve, etc.), the U.S. is printing money now to purchase debt, and it appears as though printing much, much money may become the only way to pay back the debts being created. And because the more money there is, the more money there is to chase items, and so items cost more.

You said your real interest in gold was because of a desire to have something "tangible." While I don't suggest that you should necessarily start going to websites like chrismartenson.com or hording ammunition, you might consider accumulating a year's worth of food and supplies for your family instead of purchasing gold.

This should be food you actually eat, not MREs or expensive freeze dried camping meals. You then rotate your food just like a grocery store does: oldest to the front, newest to the back.

Doing so is one of the very best inflation hedges. It also means that you are prepared in an emergency to ride things out while waiting for help, or to last a long time if there is no help coming. The Mormon church has long advocated that its members have a one year supply of food. I mention this because there a various Mormon websites dedicated to helping you come up with how and what to actually store food without also hammering away at a person with doom & gloom, WTSHTF kind of talk.

[A_Muslim]

David S, are you serious? I'm not going to store a year of actual food supplies for my family. But there is Twinkies factory nearby I believe. I'm set. :)

[Mike]

I've purchased gold coins on Craigslist as well as eBay. As a tip, go to live (now bing.com) and do the cash back shopping so you can get a rebate on your gold purchases.

Had you invested $10,000 in gold bullion in 1999, your initial investment would have grown to $33,754 by 12/31/08 – an amazing 237.54% percent increase.

That same $10,000 investment in stocks of the S & P index would have lost $3,987. That’s a 39.87% loss.

[Bad_Brad]

A_Muslim - the argument for gold is that it is a hedge against inflation and/or a severe economic downturn. David S's point, and I agree, is that if inflation and/or the economy take a terrible turn for the worse, people won't be transacting in gold. They'll be transacting basic human goods and services, such as food. Take what happened in New Orleans right after Hurricane Katrina as an example. Everyone didn't suddenly break out their gold. What had value was tangible stuff like food, clean water, gasoline, kerosene, etc.

[Nakita P]

You are too young to buy a house..you should only buy it if you can afford it and I mean you can pay it cash otherwise you will be doing the very same thing that every one did that put us in this financial whole...CREDIT. You should pay your debt first and then you can think about investing in physical gold..you can go to www.gold-investment.info and get some history on gold..Do your research and talk to several companies if you want to invest big..but if you want to buy a coin here and there..read the website metioned above and visit Kitco.com for spot price then call a local dealer..there is always going to be a buy/sell spread and the percentage depends on the coins or bar you are buying...remember smaller denominations on coins have a higher premium

PS..401 & IRA are a joke on people..Money/Fiat is worthless and the government will have to do something to pay for this huge debt they have now by devaluing the dollar..unfortunately, it does not end there..the dollar might not be the world's currency in the very near future.