The Sun's Financial Diary » Alternative

What Is Going on with Gold?

Sun — Wed, 29 Oct 2008 02:31:04 +0000

Original Post on The Sun's Financial Diary

The stock markets are pretty volatile these days with huge up-and-down swings happening almost on a daily basis (the past month has produced 5 of the 10 largest drops of the Dow). At the same time, gold, which I follow quite closely, also had some roller coaster rides lately, but the general trend of gold is the same as that of the stock market: down. The bullion has traded around $690 an ounce just a couple of days ago. That’s the low of the year!

So what happened to gold? Has it bottomed out, as this article on Goldprice.org indicated? If you are interested, here’s a free video presentation from INO TV explaining the movement of gold price recently. The analyst in the video also says gold is currently oversold and due for a rebound. A rebound seems to be a sure thing, in short term at least, as it happened following some significant drops before. For the long term, I am still looking at gold as an alternative investment that provides diversification to my portfolio, though I don’t exactly use gold as a hedge against inflation.

Is Gold a Good Choice to Hedge against Inflation?

Sun — Fri, 03 Oct 2008 14:08:28 +0000

Original Post on The Sun's Financial Diary

Is Gold a Good Choice to Hedge against Inflation?

Early last month, I had a post on gold when the bullion recorded its biggest one-day increase ever in price. If you follow this blog long enough, then you know I have talked a lot about good. My investment in gold is not the metal itself, though I bought a couple of pieces of hardware. I invest in gold through a mutual fund, Tocqueville Gold Fund (TGLDX), which mainly invests in precious metal miners (a better choice to invest in gold without physically owning the metal is via gold ETFs such as SPDR Gold Shares (GLD)). When I first bought TGLDX, it was in 2002 when gold was somewhere around $300 an ounce. I never imagined gold could go over $1,000 back then (otherwise, I could have bought a few more gold coins ). The reason for me to have gold in my investments was, well, I need some exposure to the precious metal sector as a diversification.

I never bought gold because I want to hedge against inflation and I didn’t buy gold coins because I want to have them as an investment (I could have better returns if the money was invested in stocks). But there are many traders do use gold as a hedge, against inflation, falling U.S. dollar, geopolitical tensions, etc. And there are always demands for gold jewellery from countries like China and India.

After I posted then entry, long-time reader Tim gave his take on using gold as a hedge:

gold is in a bubble. there is no underlying fundamental that justifies the high price. just like in the early 80s, gold with precipitously drop like two tons of cement, and hopefully Guido didn’t cement your feet in when it does. we are no longer on the gold standard, yet people have this antiquated notion that gold is a hedge against inflation. well since the last bubble and precipitous drop, gold remained flat and declined, so how good is that hedge? that’s right, terrible.

moreover, gold is traded like stocks now, unless you actually buy gold bullion, which most people these days do not. since you don’t own the hard gold asset, it isn’t worth anything because you can’t trade it if the world goes belly up. the premise behind gold being inflationary precaution is because the antiquated notion that you can trade gold as currency. well, with investment shares, you don’t have the physical commodity. so tell me how you own gold? that’s right, you don’t.

even if you did physically own gold, it isn’t worth the bullion or share price, it is worth scrap price which is far less than market price. again, unless gold by weight is being valuated to exchange for goods and services, it isn’t worth the share trade price or even the true bullion price.

people were very happy when gold was dramatically rising past $1k/oz, i’m sure those people were sad when it precipitously fell towards $700/oz. again, diversification and look at the fundamentals. you can ride the wave now, but gold will go back down to $300-$500 eventually and there won’t be any warning when it does in the current euphoria over gold. again mitigate your risk on gold as well.

What do you think of gold? Is it a good choice to hedge against inflation? If not, what can be the choice?

Gold Saw Biggest Jump in History

Sun — Thu, 18 Sep 2008 02:09:53 +0000

Original Post on The Sun's Financial Diary

Gold Saw Biggest Jump in History

Remember this chart because you won’t see it very often, if again at all.

Today, gold price jumped the most in its history, rocketing up $84.50 to close at $864.10 an ounce. Last week this time, gold just touched a 11-month low of $742.

Gold has been under a lot of pressure lately. As the U.S. economy slows, the demands for commodities are down, so is the appeal of gold as a hedge. At the same time, the U.S. dollar gained a lot of ground against the Euro in recent months. All these events together pushed gold price lower and lower. But that course was reversed today, amid fear of systemic risk of U.S. banks as I mentioned earlier. Investors returned to safe heaven in precious metals such gold and silver, which also jumped $1.73 an ounce to $12.34. Of course, the surge in oil price today, after briefly breaking the $90 mark yesterday, also fueled the rally.

Can this trend continue? As long as the uncertainty in the stock market continue, investors are still nervous, it could.

American Eagle Gold Coin in Short Supply?

Sun — Fri, 22 Aug 2008 04:14:51 +0000

Original Post on The Sun's Financial Diary

American Eagle Gold Coin in Short Supply?

Did you buy any gold coin recently? I didn’t, but it looks like there’s some kind of shortage of gold coins.

Gold has gone through a volatile period lately as the U.S. dollar rebounded strongly against the Euro and commodities, including oil and precious metals, posted sharp decline. Traders abandoned gold as a hedge against the dollar, causing the bullion to reach a 8-month low of $786 an ounce on August 15th. However, gold didn’t stay in the sub-$800 territory for long. After a government data released on August 19th showed U.S. wholesale inflation jumped 1.2% in June due to soaring energy cost, the fastest pace in 27 years, gold started to recover. In two days, gold gained more than $45 to close at $833.85 today.

Though we don’t know whether this is a temporary bounce or the signal of a real recovery (gold reached $1,011/ounce on March 17th), the big drop in gold price last week did generate strong demands for the bullion. In fact, the demand was so strong that the U.S. Mint has temporarily suspended shipment of the popular American Eagle gold coins to bullion dealers, according to a Reuters story today.

Well, I didn’t take advantage of the drop. Maybe I should have. No, I am going to buy another gold coin. I am thinking of buy some extra shares of Tocqueville Gold Fund [[TGLDX]], my investment in the precious metal.

Bought another Piece of Gold from Bullion Direct

Sun — Sat, 26 Apr 2008 03:13:20 +0000

Original Post on The Sun's Financial Diary

Bought another Piece of Gold from Bullion Direct

A little over one year ago, I bought a Buffalo gold coin from Bullion Direct (my review of Bullion Direct) when the price was around $640 an ounce. Somehow, I never considered that as an investment, though gold has gained a lot in the past year. Currently at $885, gold actually made a good investment

Since then, I have always been thinking of getting another one, again not because of the rising gold price. We have two daughters, so we want to have two pieces. After watching gold went all the way to $1030/ounce then pulled back to under $900, I did what I have been waiting to do: I bought another piece of gold yesterday at $908 from Bullion Direct! This time I didn’t buy the coin. It’s a 1-ounce gold bar.

Will I buy another one? Probably not, at least not before it drops to under $640 if it can go down that much. I certainly hope it won’t return to that level

Ladies and Gentlemen, Here’s the $1,000 Gold!

Sun — Sat, 15 Mar 2008 03:44:30 +0000

Original Post on The Sun's Financial Diary

Ladies and Gentlemen, Here’s the $1,000 Gold!

Just when you think the stock markets might have turned the corner (stocks gained the most in five years on Tuesday and S&P issued a statement yesterday saying the end is near for subprime related writedowns), another bomb dropped on the Wall Street today: Bear Stearns, one iconic company on the Street, needs emergency funding from JPMorgan Chase and the Federal Reserve Bank of New York to stay alive!

That news didn’t do any good to the stock markets which gained a little at the open after a mild inflation report from the government. Stocks dropped more than 300 points at one point and eventually closed almost 200 points down, giving up all the gains of the week.

As stocks got pounded, commodities surged and spot gold broke the $1,000 mark for the first in history (BTW, oil also reached a record $110 a barrel)! It was just six months ago, when gold was around $750, the manager of Tocqueville Gold Fund (TGLDX), that fund that I own, predicted $1,000 gold. And now, here we are, $1,000 gold!

*Photo from Goldinvestingsource.com

Record Gold Price, Again

Sun — Thu, 21 Feb 2008 04:28:55 +0000

Original Post on The Sun's Financial Diary

Record Gold Price, Again

US stocks reversed course Wednesday, making a 240+ points swing from down 154 points to close the session up 90 points.

As stocks turned around, gold also got a boost to reach a new record of $945.80 an ounce. The precious metal rallied after a government report showed that inflation picked up stem in January with CPI rising 0.40% and core CPI 0.30%, both exceeded expectations. Year-to-date, bullion has gained more than $100. Gold based exchange-traded funds (ETFs) are the bright spots in a disappointing market so far. Among gold ETFs, streetTRACKS Gold Shares (GLD) has returned 13.07% in 2008 and iShares COMEX Gold Trust (IAU) gained 11.16%. It’s obvious that gold is quite hot these days. However, if you look at platinum, you will know what’s hotter. Platinum price has risen $532 an ounce since the beginning of 2008, that’s equivalent to a gain of nearly 35%.

BTW, crude oil also made a run to close above $100 a barrel for second day in a row. Pretty soon, we are going to feel the pain at the pump

Record Gold Price, Countrywide Bankruptcy Rumor, and Live 14 Years Longer

Sun — Wed, 09 Jan 2008 03:08:58 +0000

Original Post on The Sun's Financial Diary

Record Gold Price, Countrywide Bankruptcy Rumor, and Live 14 Years Longer

The last time that gold was at $875 an ounce level was 28 years ago on January 21, 1980. Since them, gold has been in an extended bear market in almost 20 years until the current upward trend started in 2001. Today, gold contract reached a new all time high at $883.89/ounce before easing a little bit to close the session at $880.30 on NYMEX. Spot gold, meanwhile, also reached a record of $877 an ounce. Factors behind the surging gold price, which gained, include geopolitical uncertainties, inflation worries, and credit risks.

In the nominal dollar amount, today’s close is a record. However, if inflations in the past 28 years are considered, gold price has to up to nearly $2,200 per ounce today to surpass the $875 price in 1980 (picture from goldprice.org). I don’t know if that’s possible, but $1,000 gold is certainly within reach

US stocks took another hard hit today with the Dow losing 238 points as fears of a economic slowdown kept growing after AT&T CEO cited “softness” in its customers. Another big story today is the bankruptcy rumor of the nation’s largest mortgage lender, Countrywide Financial. Though the company denied it’s seeking protection, that didn’t prevent its stock from losing 28% of its value in one trading session. I am wondering what will happen to our mortgage if CFC does file Chapter 11.

Finally, want to live 14 years longer? According to a study by a group of British scientists, you could if you develop the following healthy habits:

Don’t smoke
Exercise regularly
Eat lots of fruits and vegetables
Drink moderately

Prices of Gold Coins: How are They Determined?

Sun — Thu, 06 Dec 2007 16:00:08 +0000

Original Post on The Sun's Financial Diary

Prices of Gold Coins: How are They Determined?

Did you ever wonder why the prices of bullion coins containing the same amount of gold are different and how they are determined?

Yesterday, I read an article on GoodSeek.com (I also subscribe to their free daily Gold Seeker Report, which provides a nice summary of the precious market) that explains the prices discrepancy among gold coins and how they are priced. For example, the spot gold price right now (December 5, 11:00 pm) is $792.10 an ounce according to GoldPrice.org. Some popular gold coins at BullionDirect.com, where I bought my Amerian Buffalo Coin, are priced as following:

1 oz American Eagle Gold Coin: $827.75, 91.6% pure gold;
1 oz S. African Krugerrand Gold Coin: $811.75, 91.6% pure gold;
1 oz American Buffalo Gold Coin 2007: $831.75, 99.99% pure gold;
1 oz Austrian Philharmonic Gold Coin: $816.74, 99.99% pure gold;
1 oz Canadian Maple Gold Coin: $816.75, 99.9+% pure gold;

So even with the same content, the price difference between the high and the low from the same dealer is about $15, and the prices are all much higher than the value of spot gold. But we are buying the same amount of gold, right?

Well, in addition to the rule of supply and demand, the price of gold coin is determined by a number of factors, including, according to the article

Production cost
Distribution and administration cost
Purity of the coin
Condition of the coin
Deal mark-up

Just like any other goods we consume. All these additional costs is summarized as one term gold coin premium, which is defined in the article as

the additional cost of a bullion coin above and beyond the market value of the precious metal commodity it contains.

If you are interested in investing in gold/gold coin, check out the article, Bullion Coin Pricing, by Michael Clark, for some background information on what affects the price of gold coin.

Random News: Value of My Buffalo Gold Coin, Supermodel Refusing US Dollars, and China’s Diversification Plan

Sun — Wed, 07 Nov 2007 15:00:56 +0000

Original Post on The Sun's Financial Diary

Random News: Value of My Buffalo Gold Coin, Supermodel Refusing US Dollars, and China’s Diversification Plan

Eight months ago, I bought an American Buffalo gold coin from Bullion Direct (take a look at why I chose Bullion Direct) when the price of spot gold was around $650 an ounce. With gold price reaches 27-year high, the appreciation of my gold coin is also significant. The total cost of the coin back in March was $685.14 and on Bullion Direct, the same coin was quoted at $865.30 before shipping and handling. Even at the spot gold price which could be the price if I sell the coin, my profit could be $150, or a gain of nearly 22%. But I am not selling it

Early this week, Bloomberg.com reported (thanks Erica Hawksworth from CRC Public Relations for pointing me to the source) that Gisele Bundchen, the world’s richest model, refuses to accept US dollars as payments as the value of the dollar continues to drop:

When Bundchen, 27, signed a contract in August to represent Pantene hair products for Cincinnati-based Procter & Gamble Co., she demanded payment in euros, according to Veja, Brazil’s biggest weekly magazine. She’ll also get euros for the deal she reached last October with Dolce & Gabbana SpA in Milan to promote the Italian designer’s new fragrance, The One, Veja reported. Bundchen earned $33 million in the year through June, Forbes reported in July.

The weakening dollar, which reached record low against euro, actually fueled the demand for the precious metal as investors seek safe heaven to hedge against further decline of the dollar.

Meanwhile, news just came out (Bloomberg.com) that China, which holds the world’s largest foreign reserves at $1.4 trillion mainly in dollar based assets such as Treasury bonds, may diversify its reserves to favor “stronger currencies.” If such diversification is indeed implemented, it could further pressure the dollar.
As an investor, do you hedge against the falling dollar?

Gold: Is $1000 an Ounce in the Offering?

Sun — Mon, 08 Oct 2007 16:18:24 +0000

Original Post on The Sun's Financial Diary

Gold: Is $1000 an Ounce in the Offering?

Gold price has risen sharply in the past month, going up from $680 an ounce on September 5, to $741 on October 5. One of the reasons that pushed gold to 28-year high was the recent Fed rate cut and speculations that there will be one more reduction in federal funds rate before the year end. A lower federal fund rate will make the US dollars less attractive compared with other major currencies and investors will use hard assets such as gold to hedge against falling US dollars.

I have been investing in gold via a mutual fund since early 2002 when the price for spot gold was below $300 an ounce. In the past 5+ years, gold price has more than doubled. For me, gold is an important piece in my diversified portfolio. Though I probably started investing in gold at the best time I could have and have made some nice profits, I feel gold still has room to go even higher because demands from developing countries like China, India remain strong. Then how high the price of gold can go?

Last week, Barron’s online published an interview with John Hathaway, Senior Managing Director and Portfolio Manager of Tocqueville Asset Management. Hathaway is managing the Tocqueville Gold Fund (TGLDX), the fund that I chose for my taxable accounts. In the interview, Hathaway offered his view on a range of issues related to gold, from gold production to the relation between US dollars and gold, and outlooks of gold mining companies. There are several items in the interview that interest me, particularly inflation and gold and future price of gold. Following are excerpts from the interview.

A recent article in the Economist mentioned a study that concluded gold hasn’t been a reliable hedge against risk or inflation. What do you make of that?

Gold has been among the best-performing asset classes since 1999, when it bottomed out. Also, gold is forward-looking. In the last several years, it has discounted a widening of credit spreads and a shift in the market to a more risk-averse posture and lower asset valuations.

But gold, as you point out, has also risen during a time of rising stock and bond markets.

There have been an anomalous couple of years where gold was viewed as a subset of hard assets and hard assets were sought after. We had a period where gold actually tracked very closely with things it normally doesn’t. Maybe it is noncorrelated.

I wouldn’t try to pigeon-hole gold too much, because if you look at the last four to five weeks, gold has definitely taken off because of concerns about the relaxation of the Fed’s monetary policy and the expectation there will be more of that. Of course, we’ve seen that not just in the gold price, but in the breakdown of the dollar on a trade-weighted basis.

Hathaway didn’t really answer the question about gold and inflation, but it seems he doesn’t agree that gold is an effective tool against inflation. Then on the perspectives of $1,000 gold.

What gets us to the magic number of a $1,000 an ounce?

I don’t think it will take much. Let’s not forget, in 1980 dollars, gold is less than half of its nominal price today.

The disparity between the amount of paper that has been created since 1980 and the amount of gold that has been produced since then is just enormous. The ratio of financial assets to physical gold is at the low end of a historical range. If you were to mark all the gold to market that has ever been mined, which is a very conservative approach, and then take the valuation of all the global stock markets and all the global bond markets, gold represents about 3%, compared with a figure in the mid-20% range in 1980, which was the top of the bull market in gold and the beginning of the bull market in financial assets.

Gold is a good value, certainly, at these prices, just based on the considerations we’ve discussed. Even if you don’t think worst-case outcomes are in the cards, gold is still rare and hard to find, and believe me, these companies are having the toughest times trying to maintain production, much less build it.

For investors who want to profit from the rising gold price, which one makes a better choice, physical gold, precious metal mutual funds, or ETFs? In my opinion, gold ETFs such as streetTRACKS Gold Shares (GLD) would make the most flexible choice to invest in gold. Unlike mutual funds which invest in gold mining stocks, GLD is backed by bullion. Thus, the price of GLD is directly derived from the price of gold.

Gold Price Climbs Back to $700/Ounce

Sun — Fri, 07 Sep 2007 14:19:19 +0000

Original Post on The Sun's Financial Diary

Gold Price Climbs Back to $700/Ounce

This stock market in the past month didn’t offer investors much of joy as major indexes gave back a big chunk of their gains after peaked later July. At the same time, gold has made a quite come back to close at a six-month high of $694 an ounce yesterday. It could go over $700 today thanks to the weak employment data. Actually, gold has been quite lately. Since breaking through the $700/ounce mark in early 2006, the bullion has been traded in a tight range between $650 and $700 since the beginning of the year. The rally of the metal in the past couple of days seems having something to do with European Central Bank’s decision to hold interest rate steady two days ago while a rate cut by the Federal Reserve two weeks from now is very likely.

Now that gold is getting close to the $700 per ounce mark, does it make gold a good investment for the long term?

I have been investing in good through a mutual fund (Tocqueville Gold Fund, TGLDX) since 2002 when spot gold was traded at less than $300 an ounce. Since then, gold really took off and the mutual fund TGLDX has been benefiting from the rise of gold price as well as the booming stock markets. As a diversifier, gold so far has worked quite well for me, at least for the short period of time. For long term, however, gold may not provide much boost for investment portfolio. Yesterday, there is an article on USAToday with the title Gold glitters, but it’s a bust as an investment, by Matt Krantz, arguing that from the historical return point of view, gold would be a terrible long term investment. The author analyzed gold price from 1933 and concluded that

Gold generated average annual price appreciation of 4.7% a year on average. That pales next to the 11.8% average return of stocks, measured by the Standard & Poor’s 500.

The problem for such a conclusion, of course, is that nobody is probably going to hold gold for 70 years just to get some 4% return. To me, 20 years seems to be a reasonable investment period.

Though when talking about investing in gold, there many gold expert suggest that the only way is told the bullion. However, when buying physical gold, there are plenty of extra fees, such as dealer markups, shipping and handling, and insurance. To profit, gold price sometimes has to go up a lot depending on the fees paid at purchase as when a deal buys back a piece of gold, the price paid is the price of spot gold (check out my posts in buying gold). For example, I bought a Buffalo coin back in March for $669 from Bullion Direct. After shipping and handling (insurance was included), the final cost is $685. Since then spot gold price has gone up from $647 to today’s $705. If I sell it today, I can only make $20 profit instead of $60. Not a good investment.

However, investing in gold doesn’t mean that intestors have to buy and hold the metal itself because of the liqudition problems. There are many alternativs such as mutual funds and ETFs to give investors the exposure to the precious metal category. Available ETF options include

streetTRACKS Gold Shares (GLD)
iShares COMEX Gold Trust (IAU)
PowerShares DB Gold (DGL)
Market Vectors Gold Miners (GDX)
PowerShares DB Precious Metals (DBP)
PowerShares DB Silver (DBS)
iShares Silver Trust (SLV)

My own study has shown that adding even a small portion of precious metal in the portfolio can reduce the risk and improve returns. I am not bothered by the mediocre 4% return as suggested by the article.

So How’s My American Buffalo Gold Coin Doing?

Sun — Tue, 10 Apr 2007 20:02:26 +0000

Original Post on The Sun's Financial Diary

So How’s My American Buffalo Gold Coin Doing?

It has been more than a month since I bought one (and only one) American Buffalo gold coin from Bullion Direct. The coin was received about two weeks after the order was placed (the hold period that they require to clear the check and release the coin for shipment) in excellent shape. The price I paid for the coin was $669.70 when the spot gold was about $646 an ounce. Including shipping and handling (insurance was free though), I paid $685.14 in total.

Since then, gold price has seen a nice upward run, gaining nearly $30 per ounce (currently at $676.40 an ounce). The latest price for 1 ounce American Buffalo Gold Coin (2007) at Bullion Direct is $708.10, almost $40 higher than the price I paid. In addition, I also bought two silver coins last month: one 1 ounce American Eagle silver coin for $14.91 and one 1 ounce Canadian Maple Leaf silver coin for $14.36. Their current prices are $15.43 and $14.88, respectively.

Is this a good investment? It won’t be if I don’t sell it. And even if I sell, I still won’t make any profit as the dealer will only buy it back at a price same as spot gold. There’s no markups when they buy.

It’s better for me to just keep it :)).

Invest in Gold (II) — GoldMoney: Buy Gold and Use it as a Checking Account

Sun — Mon, 05 Mar 2007 19:02:41 +0000

Original Post on The Sun's Financial Diary

Invest in Gold (II) — GoldMoney: Buy Gold and Use it as a Checking Account

This is the second part of the Invest in Gold series. In the first part, I compared several gold dealers, mainly from the angle of price (price of the gold, shipping fees, and insurance charges), and the direct outcome of that research was the purchase of a gold coin myself last week from Bullion Direct.

During the research, while I was more interested in finding a reputable dealer that can sell me physical gold (coin or bar) at a good price and get it delivered to my hands at a low cost, I also looked at other alternatives to buy gold and one of them is GoldMoney. With gold dealers, you can buy gold coins or bars, which are usually fabricated into fixed amount such as 0.1 oz, 0.25 oz, 0.5 oz, and 1 oz, then have the products delivered to you. In my opinion, there are two big concerns with taking possession of physical gold: safeguard of the medal and liquidation. Nobody wants to throw a $650 gold coin in a drawer and forget about it. If you have a larger quantity of gold, the easiest way to make sure the medal is safe is to rent a safe deposit box at your bank. However, getting a safe deposit box adds to the overall costs of owning gold. On the other hand, while owning the metal (as there are suggestions that the only way to invest in gold is owning the physical metal than paper gold) represents wealth, cashing it in case you need the money is not that straightforward. The conversion will be relatively easy if you can find a trustworthy local gold dealer to sell your coins. Otherwise, selling the metal to dealers you can only find online is more likely to involve other fees (not include the shipping and insurance charges you have to pay out of your own pocket).

With GoldMoney, however, the hassle of buying and selling gold is much reduced and the price is very competitive as compared to other dealers.

The way that GoldMoney operates is totally different from all the dealers mentioned in the first part. Instead of being a bullion dealer that sells coins and bars, GoldMoney is more like a bank account, though you still have the option to receive physical gold with some additional delivery costs. By default, the gold purchased from GoldMoney will not be delivered to the buyer, but is stored in an insured vault in London. The following picture illustrates how GoldMoney works:

That is, buyers don’t automatically receive physical gold, but have a recorder of how much they own in their accounts with GoldMoney, which charges a monthly fee equivalent to 1/10th a gram of gold ($2.05) to store the gold. As of prices, the gold price quoted at GoldMoney is the price of the spot gold plus an exchange fee, ranging from 0.98% to 3.74% above the spot gold price. At one time this morning, when I checked prices at different dealers against the spot gold, I found the price of one ounce gold at GoldMoney is very competitive:

Spot: $641.30, GoldMoney: $664.61, Bullion Direct: $671.10, Kitco: $678.89

Besides the pricing (here’s the full fee schedule), GoldMoney also offers:

Flexible purchase: Gold can be purchased in the quantity of goldgrams (one goldgram in weight is equal to one gram of gold and there are 31.103 grams per troy ounce) instead of the fixed amounts with coins and bars;
Direct funding: Purchases of gold at GoldMoney can be directly funded by a bank account in US with a maximum of 500 goldgram (special procedure needed for larger purchases);
Easy conversion: There’s no fee in converting goldgrams into cash, which will be deposited right into the bank account connected to the GoldMoney account;

Another key feature of GoldMoney is that users can actually use their GoldMoney account as a checking account to make payments. Anyone having an account at GoldMoney (free to sign up) can receive payment made by GoldMoney in goldgrams, though there’s no physical gold changing hands. In addition, after converting gold into some major currencies, goldgram can also be used to pay bills, a feature that’s not available at any other dealers.

If you enjoyed reading this post, subscribe to the RSS feed or get it via email delivery.

Finally, I Bought an American Buffalo Gold Coin

Sun — Fri, 02 Mar 2007 22:32:57 +0000

Original Post on The Sun's Financial Diary

Finally, I Bought an American Buffalo Gold Coin

I finally did today what I have long been considering doing: Buy gold. Today the waiting is officially over after I bought an one ounce American Buffalo gold coin from Bullion Direct, at the time when recent selling pressure has pushed the spot gold price from a nine-month high of $689 reached early this week down to about $640 this morning when I placed the order.

The reason for me to choose Bullion Direct over other bullion dealers after my recent study is mainly for their price, price of the metal and additional charges related to shipping and insurance. Between Bullion Direct and Kitco (there are plenty of gold dealers, but I didn’t go through them all and concentrated only on Bullion Direct and Kitco instead), it seems Bullion Direct offers better value. As of now, one ounce American Buffalo gold coin is listed at $670.20 while Kitco has a quoted price of $677.63. Other key differences include:

Waiting period after payment is received: Kitco - 3 weeks; Bullion Direct - 7 days
Shipping & handling: Kitco - $30 flat; Bullion Direct - $5.95 handling plus $9.49 and up shipping
Insurance: Kitco - $4 per $1000; Bullion Direct - free

Actually, after I posted the article on buying gold early last month, I was approached by Bullion Direct, pointing out, for example, that the 4% handling fee is only for credit card payment, not for check or wire.

So I eventually decided to go with Bullion Direct and the whole shopping experience was very smooth. The account opening process only took a couple of minutes to complete (information required include name, address, phone number, date of birth, and credit card information for authentication, won’t be charged if not selected as payment method). When I first put the coin in the shopping cart, the price was quoted at $673.50. As I was reviewing the order before submitting it, I was warned that I have two minutes to confirm the order, otherwise a new real time price will be quoted. It took me longer than two minutes before I hit the submit button and a new quote was displayed on my order: $669.70. Even better! At that time, the spot gold price was around $646 an ounce and the difference between quoted price and spot price is the premium that dealer charges. Including shipping and handling, the final cost of the American Buffalo gold coin is $685.14. I bought the coin through their catalog service. Though it is possible that I can get a better price through their auction style services, I chose catalog just for simplicity.

This is the first time I have bought a piece of gold, but I have no plan to make frequent investment into physical gold (my mutual fund TGLDX provides me the diversification I need already).

Invest in Gold (I) — Where to Buy Gold, Kitco or Bullion Direct?

Sun — Tue, 06 Feb 2007 20:31:12 +0000

Original Post on The Sun's Financial Diary

Invest in Gold (I) — Where to Buy Gold, Kitco or Bullion Direct?

My first gold investment was made five years ago on February 8th, 2002, when I opened an account with Tocqueville Fund to buy $1,000 of their Tocqueville Gold Fund (TGLDX). At that time, the share price of TGLDX was $18.05. Since then, I bought TGLDX almost every month and have accumulated about 200 shares at the end of last year (I sold 50 shares in 2004). During the same period of time, prices of spot gold has risen from $287.40 an ounce on February 4, 2002 to $645.70 on February 2nd, 2007. And how did the fund do? At the close of last Friday, the fund is priced at $50.64. In fact, TGLDX was one of my top three performers in my mutual fund holdings.

Though so far I am very happy with the performance of TGLDX, which gives me an exposure to the precious metal sector and makes my portfolio more diversified, the fund mainly invests in mining stocks, instead of the physical bullion. Despite the outstanding performance of gold/precious metal mutual funds in recent years, I think when people are talking about gold, the interest is not really about the paper value of some mining stocks, but the stability and security of physical gold. If I want to use gold to hedge against inflation, the only way to go is owning the metal.

Investing in gold is a lot easier nowadays. In addition to gold/precious metal mutual funds and physical gold (coins and bars), there are several gold-backed ETFs launched in the past couple of years to help investors catch the gold fever. In addition to TGLDX, I am also looking for other alternatives to invest in gold, particularly in physical gold.

I have been interested in buy gold for some time, but never got into action. One reason was it is difficult to make a sizable commitment. When investing in mutual funds, I can contribute $50 or $100 at any time without additional costs and a $100 investment today could mean a lot 20 years later. However, with gold, it doesn’t make too much sense to buy only $100 and pay $30 fees. Besides, the gold bear market can be very long. As a matter of fact, gold prices hovered around $400 (the prices are not inflation adjusted) nearly twenty years before taking off in 2002. There’s a chance that the 700 some dollars I spend on a piece of gold today may worth less that 10 years later. Yet, I still want to own some pieces. Not a big amount, but a couple of ounces every year is what I can afford.

General information

It’s very easy to get real-time gold price. Unlike stock prices, which are always delayed for 20 minutes if you don’t use your own brokerage, prices of gold listed on various website are up-to-the-minute. The websites I use most often are Goldprice.org and Kitco.com. Goldprice.org also has an on-going series on how to buy gold as well as basic knowledge about gold, very educational.

Buy gold

There are many places to buy physical gold (coins and bar) and prices vary. While prices (price of the gold and commission, shipping charges, and insurances) are always important in selecting from which dealer to make a purchase, I also look at the dealer’s reputation, reliability, and customer service (the accuracy of the quotes, execution time, price lock, insurance, and return policy, etc). Since I don’t have personal experience with any dealer just yet, all I did was collecting information from people who have used them on various websites and compare these sites myself.

For price comparison, I used the close price of spot gold on February 2, 2007, $645.70, as a reference. The following are sites that I am interested in.

Kitco

Kitco provides comprehensive information on precious metals such as gold, silver, and platinum, in addition to being a bullion dealer. The bullion products from Kitco include American and Canadian gold coins and gold bar. Real-time prices are available online and purchases can be made online as well.

Price

American gold Buffalo 1 oz: $685.86
Canadian gold Maple 1 oz: $682.71

Payment

Certified check, postal money order, cashier’s check, teller’s check or bank wire
For personal check, a 3-week waiting period from when payment is received before the order is shipped
For orders less than $20,000, a credit card authorization is required for price confirmation

Fees & insurance

$30 flat shipping fees
$4 per $1000 insurance charges

Bullion Direct

Bullion Direct offers three different ways to purchase gold: Catalog, Nucleo Exchange, and Auction. For non-active trading, their Catalog service is a better choice and it is the one that I am interested in. Purchases can be made online by registering a free account. Real-time price is also available online.

Price

American gold Buffalo 1 oz: $686.50
Canadian gold Maple 1 oz: $686.50

Payment

In addition to bank wire, money orders, and checks, credit card payments are also acceptable for Catalog product purchase
7-day holding period for personal checks

Fees & insurance

$9.95 and up shipping fees (depends on destination) and $5.95 + 4% handling fees
Gold is insured by Lloyd’s of London and insurance charges are included

Tulving

For large amount purchase of gold coins, Tulving offers very competitive price. Most of their gold coin products, however, require a minimum of 20 coins and I guess that’s why they can keep their prices relatively low. However, they don’t have real-time price information online. Call (800) 995-1708 to obtain up-to-the-minute quotes and place order.

Price

American gold Buffalo 1 oz: $675.00
Canadian gold Maple 1 oz: $675.99
Prices are locked in when placing order over the phone and that’s the price you will pay

Payment

Bank wire or overnight check only

Fees & insurance

Free overnight shipping and insurance for all gold orders

USA Gold

In addition to contemporary gold bullion coins and bars, USA Gold also sells historical coins. Real-time price quotes are only available by calling their (800) 869-5115 number. The information on their website are not as complete as others and I wasn’t able to find payment information, shipping and handling fees, and insurance policy, though it’s a reputable company.

If you enjoyed reading this post, subscribe to the RSS feed.

*Photos from USA Gold and Kitco.