Posts Tagged physical gold
Jon Paulson, Scott Minerd, David Walker, Victor Sperandeo. 4 Financial Visionaries Who See Disaster ahead for America and Great Value in the Future of Gold
(Vocus/PRWEB) November 22, 2010
As recently as October, Goldman Sachs upgraded its 12 month outlook on gold to 1650/oz. That’s about a 20% increase over today’s price of 1350/oz. Yet, the average American investor continues to shy away from investing in physical gold because they think it’s too late to get in. The name Goldman Sachs may not carry enough credibility on Main Street America regarding gold’s future trajectory, but if you take into account the many financial heavyweights who are also bullish on gold, perhaps this will compel Americans to take action and diversify in this asset.
Jon Paulson is a legendary hedge fund manager and the topic of the bestselling book "THE GREATEST TRADE EVER". Having forecasted the housing difficulties to come, he cashed in a whopping 4 billion dollars after his hedge fund shorted the mortgage market in 2006. What is Jon Paulson up too now? He created a new 6 billion dollar Gold hedge fund in late 2009. More importantly, he personally invested 250 million dollars into the fund, which is up more than 20% since January. Bottom line is Paulson certainly isn’t an investor America should bet against, and folks out there who think it is unwise to buy gold because it is in a bubble might want to take another look.
Scott Minerd is the chief investment officer at Guggenheim Partners, an asset management firm with 100 billion dollars under management. As recently as October he released a 3-5 year price target on gold for it to hit 5000/oz. Like Paulson, he’s betting on inflation getting much worse. As he sees it, gold prices are still undervalued when correlated to the Dow Jones Industrial average. Historically spot gold has been priced at 16% of the Dow Jones industrial average during relatively good economic times. With the Dow currently hovering around 11,000, a 16% average should give you gold prices around 1800/oz. So it still maybe undervalued according to this logic. More interestingly though is that in times of uncertainty like the Great Depression, spot gold has had an average value of 50% of the Dow. This data should certainly make one think about where prices could go and about potentially buying gold as preparation in case another crisis hits America. Even a Dow of 6,000 could produce gold prices of 3,000/oz under such circumstances. When it comes to an impending future crisis, nobody has a clearer vision about the challenges ahead for the US than the next person on the list.
David Walker is the former Comptroller General who served under the Clinton Administration and Bush Administration. During his tenure as the head of the Government Accountability Office (GAO), he discovered that America’s fiscal problems were much deeper than reported and or publically known. Current populist policy makers in Washington won’t address the issue because it won’t earn them any votes. So who will address this unpopular issue? Much like Winston Churchill or Paul Revere warning citizens of the impending doomsday scenario, David Walker is traveling the countryside on a Fiscal Wake up Tour, warning Americans that a Debt Bomb will go off by 2012 if immediate action isn’t taken. As he sees it, without serious austerity measures put into effect and a moratorium on government spending being enacted, hyperinflation will inevitably result. Meanwhile countries like China, who own large amounts of our sovereign debt, will come to collect through whatever means necessary, leading to a whole new set of problems. For those readers who still think the reality of a future like this a bit extreme, maybe a legendary trader’s perspective on the matter will convince you otherwise.
Victor Sperandeo is a legendary global-macro trader, as well as the former portfolio manager of the Quantum Commodity Fund, a creation of Jim Rogers and George Soros. The fund managed over a trillion dollars and showed investors more than 4,500% returns since its inception. Mr. Sperandeo was recently interviewed on CNBC’s Fast Money noting that the pretext for Hyperinflation is upon America. From his research, he claims there have been 30 bouts of hyperinflation in world history. More importantly, he’s narrowed down specific economic ‘H’ factors that were universal in all of those previous 30 bouts. Unfortunately, ‘Trader Vic’ as he’s known, has concluded that every single ‘H’ factor exists in the American Economy today. As he sees it, without the saving grace of an exogenous shock to the world economy such as an invention of similar magnitude to the internet, the growth of our debt will continue to outgrow the expansion of our economy. The bottom line is that America can only bail water so long before the ship sinks, and what foreign country will want to buy US debt if the promise of repayment can no longer be trusted?
To sum it all up, the 2-5 year outlook for America appears quite bleak according to these individuals. For those who remember the late 70′s and early 80′s, it isn’t a question of ‘can hyperinflation possibly occur’, it a question of when might it occur again. The problem this time around is America doesn’t have a surplus in social security to tap, nor does it have more debt to leverage in our already over-leveraged economy. There is no trillion dollar foreign government loan program out there that’ll bail us out of this time around. A time of reckoning is upon America, and decisive action is a must. Whether or not you believe the doomsday scenario will occur is irrelevant. Americans who practice prudent portfolio theory should have 10-20% of assets allocated in precious metals like gold coins. This way America can be at peace knowing their wealth is protected in the same manner as the wizards on Wall Street.
Precious Metals Brokerage Group (PMBG) believes that the best way to diversify in precious metals is by taking physical delivery (Get them in your possession) as opposed to diversification in paper assets, such as ETF’s, stocks, etc. We provide physical delivery of gold and Silver at Wholesale Prices. Our Retirement Account Department will also help with setting up gold IRA accounts. Call us toll free anytime at (866) 775-3131 and we’ll send you a free gold investment kit.
You could very well be amazed to realize that a large number of people don’t analyze the various ways to invest in gold before they make an investment. The differing ways to invest in gold are rarely pondered when people inquire about gold investment advice. Regrettably this causes almost all people investing in gold to pass up potential returns. In this article I offer exactly this sort of gold investment advice to make sure that readers don’t miss this important component of investing. My first word of advice is that you should get a better understanding of the thinking behind my guidance, so I invite you to do more research when you are finished with this article. Now that we’ve dealt with that, I’ve assembled a brief version of my gold investment advice below. Paper gold is something I recommend strongly against. Each one of these investments has too much going against it without having the reliability and safety that physical gold guarantees. IRAs and other tax-advantaged accounts usually are not able to hold physical gold, however you shouldn’t be lured into buying paper gold inside your Individual Retirement Account just because of that. It isn’t that nobody has ever profited on paper gold, it’s that in modern times you are capable of having the added benefits of paper gold while still owning physical through bullion vaults. It maintained a role when it was an easily distinguished offering from physical gold, but that is actually no longer the case. In practically all cases I argue against purchasing gold coins. Unless of course you are a coins value authority, this is not the right strategy for you. You could get trapped paying for a much higher premium over spot for the collectible value, but selling to another person that is solely interested in the weight value. The sole cause for paying the premium is if you suspect the collectible value of that particular coin will increase, and that is definitely an area of knowledge separate from investing in gold. If you can find them, South African Krugerrands trade purely for their gold weight and can be treated as gold rounds instead of coins. Gold bars and gold rounds are the superior medium for investing in gold. It’s hard to find a better deal than that of gold bars and rounds, which can be purchased online directly from mints or from larger dealers. Heavier gold bars and rounds will have a lower premium while the lighter ones are easier to sell. You are going to get a better deal and improved liquidity from a trustworthy online mint or dealer versus town pawn stores. You will want to stick to gold rounds and gold bars that have a recognizable brand such as Credit Suisse or the identity of the mint stamped onto them. I definitely recommend that investors try bullion vaults. If instant physical access to your gold is not an issue, then bullion vaults have plenty of positive aspects. Bullion vaults can not compete with gold rounds and gold bars in the case of a genuine monetary disaster, although they do provide the lowest premium over spot and exceptional ease of use. As I mentioned at the beginning, this was a really condensed version of my advice. Remember, the 1st rule to investing in gold wisely is to identify goals that you can compare the alternatives against. If you keep this guidance in mind you’ll be sure to keep clear of the common pitfalls encountered when investing in gold.
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What do we say about investing in physical gold vs. investing in a gold ETF? We say “Ain’t nothin’ like the real thing, man!” Of the four ways to invest in precious metals today, the one that, to us, easily makes the most sense is investing directly in the physical asset. This can be achieved by purchasing physical gold bullion coins and bars or rare gold coins and junk silver bags.
There are three other primary ways to get involved with precious metals, the first is a silver or gold ETF (exchange traded fund), the second is to invest in shares of stock in precious metals mining companies, and the third is to invest in precious metals futures contracts. We’ll be brief and clear on two of these three choices. First, we don’t recommend futures investing to anyone who has not already proven themselves a master futures investor–and that applies to most people. Futures contracts can give amazingly high returns in an astonishingly short period of time, but the risks of loss are equally high. Avoid gold futures. Second, if you invest in a mining company stock, you are not investing in physical gold and silver–you are still investing in paper. You may assume that gold and silver will be rising so much that the companies’ stocks will inevitably rise with it, but despite the very sharp rise in the prices of gold and silver over the last decade, many of the gains in mining company stocks have underperformed the physical asset. With stocks, not only are you investing in a mining company, but also the company’s management, equipment, mine assets, and so forth. The bottom line is that it’s not physical gold, nor physical silver.
But with a gold ETF, aren’t you investing in physical gold? No, you’re still not.
A gold ETF is an investment in a derivative of the value of an ounce of gold. Quite typically, a share in a gold ETF equals the market value of 1/10th of one ounce of physical gold. The fund is underpinned by real gold bullion-but that’s not what you are buying. And for you as an individual investor (as opposed to, say, an institutional money manager), that’s not really that good. And here’s why: Take a gander at this quote within the 10-K filing by the World Gold Council for the GLD ETF. It says “Each outstanding Share will represent a proportional interest in the gold held by the Trust. As the Trust will not generate any income and as the Trust will regularly sell gold over time to pay for its ongoing expenses, the amount of gold represented by each Share will gradually decline over time. This is true even if additional Shares are issued in exchange for additional deposits of gold into the Trust, as the amount of gold required to create Shares will proportionately reflect the amount of gold represented by the Shares outstanding at the time of creation. Assuming a constant gold price, the trading price of the Shares is expected to gradually decline relative to the price of gold as the amount of gold represented by the Shares gradually declines…”
You see…physical gold and silver always have intrinsic, real value. But a gold ETF will likely lose money unless the market value for gold goes up and up and up. It may be expected to do that right now, but can you predict the exact timeline? When will be the right time to redeem your shares? If you buy physical gold and silver coins, you’ll never need to worry about that, because the precious metals themselves will always have great value relative to how healthy all other financial investment instruments are at any time: stocks; bonds, futures contracts, and any given currency.
So once again, the bottom line is: own physical gold and silver. Everything else is, to one degree or another, mere speculation. And while speculation can make you even more money than owning precious metals coins, it can also cause you to lose your shirt. You can’t lose with physical precious metals.
Chicago, IL (PRWEB) March 30, 2012
An article outlining three key findings about gold’s price via a gold ETF, has been published on investment site Seeking Alpha. Christian Magoon, publisher of GoldETFs.biz, has analyzed the recent trading behavior and volatility of the largest gold ETF in the world and presents his outlook on the current valuation of gold. In the article, Magoon illustrates through several charts the divergence between the ETF’s recent price movements and the ETF’s 50 and 200 day moving averages. In addition he examines the gold ETF volatility index as well as the performance of the gold ETF. Together, these unique data points lead Magoon towards a negative short term outlook on gold and the ETFs that track it.
“In the short term it seems as though gold is weakening,” said Christian Magoon, Publisher of GoldETFs.biz. “The moving averages and volatility of the largest gold ETF raise my concerns about where the price of gold is going next. While I believe in gold ETF allocations over the long term, I believe there are significant technical and sentiment based headwinds for gold in the short term.”
Currently there are over $79 billion dollars invested in physical gold ETFs listed in the United States. Physical gold ETFs own bars of gold which are stored in vaults. These gold bars back the paper shares of the ETF. Leading gold ETF Sponsors in the United States include State Street, iShares and ETF Securities. ETF Securities is credited with launching the first physical gold ETF in the world in 2003.
GoldETFs.biz was designed to be a focused, convenient, educational and social source of gold market, ETF and ETN information for investors. The site provides a complete gold ETF list and data, consistent analysis and curated real time gold market sentiment through focused Twitter lists. Visitors to the site can subscribe to the free weekly Gold ETF Report email covering gold markets and the ETFs that track them. Content is also available via YouTube, Google+ or Twitter. Follow @GoldETFsBiz on Twitter.
Investors can also enter the market via futures exchanges, where people trade in contracts to buy or sell a particular commodity at a fixed price on a certain future date.
the COMEX division of the new York Mercantile Exchange is the world’s largest gold futures market in terms of trading volume. the Tokyo Commodity exchange, popularly known as TOCOM, is the most important futures market in Asia.
China launched its first gold futures contract on Jan. 9, 2008. Several other countries including India, Dubai and Turkey have also launched futures exchanges.
Media coverage of high gold prices has also attracted investments into exchange-traded funds (ETFs), which issue securities backed by physical metal and allow people to gain exposure to the underlying gold prices without taking delivery of the metal itself.
Gold held in new York’s SPDR Gold Trust, the world’s largest gold-backed ETF, rose to a record high of 1,320.436 tonnes in June 2010. the ETF’s holdings are equivalent to nearly half of global annual mine supply and are worth some $73.5 billion at today’s prices.
other gold ETFs include iShares COMEX Gold Trust, ETF Securities’ Gold Bullion Securities and ETFS Physical Gold and Zurich Cantonal Bank’s Physical Gold.
Retail investors can buy gold from metals traders selling bars and coins in specialist shops or on the Internet. They pay a premium for investment products of 5 to 20 percent above spot prices, depending on the size of the product and the weight of demand.
KEY PRICE DRIVERS:
Rising interest in commodities including gold from investment funds in recent years has been a major factor behind bullion’s rally to historic highs. Gold’s strong performance in recent years has attracted more players and increased inflows of money into the overall market.
FOREIGN EXCHANGE RATES
Gold is a popular hedge against currency market volatility. It has traditionally moved in the opposite direction to the US dollar as weakness in the US unit makes dollar-priced gold cheaper for holders of other currencies and vice versa.