Gold, invest, investment, inflation, hedge, Obama, health care, national debt?
December 25, 2010 by
Filed under Silver Investment FAQ
I heard this gentleman on the radio yesterday, Sunday. He talked about gold as a hedge against inflation.
The example he gave was that in 1920 if you had a $20 gold coin and a $20 bill, back then you could buy a nice suit with that.
Fast forward, today, that gold coin is now worth nearly $1,000 and can still get you a nice suit.
But the $20 bill today won’t even get you a nice tie and lunch.
I see his point.
I’m scared of the Obama health care plan. I’m scared of the size of our national debt. I’m scared when already they’re talking that Social Security is going to be running deficits possibly next year!
http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/social-security-crunch-coming-fast.aspx?page=1
Then there’s the Medicare problem.
And then there’s our country printing more money. Aye yi, yi.
And to top all of that off, Russia, China, and many other nations are calling for an end to Petrodollars!
a.) So what do you all think about owning gold on paper?
b.) Owning physical gold? If you recommend physical gold, where in the heck would you store it?
c.) What percentage of a person’s portfolio should have gold? Silver? or other precious metals?
Please keep in mind, I AM NOT LOOKING FOR AN INVESTMENT! I’m just trying to preserve what little I have.
Thanks!
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Gold is one of the few substances that will retain all of its value, or rather wont LOSE its value over time, in fact in most cases it increases in value as paper money becomes worth less. there are many ways to go about buying gold.
a simple google search and you should find many places that can help you.
such as goldline. http://www.goldline.com/
Owning gold bullion is cumbersome and expensive. If you have a decent amount of it you need to store it and insure it. Also the transactional costs can be a bit steep. Spreads, commissions, shipping, etc. I prefer to own gold stocks. May favorites are Kinross Gold (KGC) and Goldcorp (GG). Another good inflation hedge is oil stocks. My favorite is Marathon Oil (MRO).
And what percentage of your portfolio should be in gold? Normally no more than 10%. But if you want to be aggressive and you believe the Obama government is setting the stage for hyperinflation, maybe as much as 25-30%. Good luck.
a) go for gold – Cash is Trash
b) you don’t store it – it stays with the bank
c) 10% minimum in gold.
Awesome question – I’m with you! The current state of the US Economy is absolutely frightening. As a general disclaimer, I’m not a licensed investment adviser. However, I do have some very strong opinions about gold that I hope will help provoke some ideas with you
I’m a big proponent of physical gold bullion as opposed to paper. There are two types of gold accounts: allocated and unallocated. GLD, the exchange traded fund that tracks the price of gold, is a great example of unallocated gold. You own paper that says the gold is there stored in their vaults, but it’s not separated out and specially “allocated” just for you. While I think GLD is a good way to go, you will never be sure there is gold to back it up in a time of crisis. My opinion: it’s ok to own GLD but make sure to also own allocated gold bullion.
For someone paranoid like myself, I much prefer the allocated gold route. There are a few options. First and foremost, why not buy some gold coins and hold them on your person and hide them in your house? These days, thieves are not looking for gold – it’s just not that common. Whereas many people used to own gold, now it’s the minority. I have linked to an article below that I wrote about hiding gold. Of course, I also like to sleep at night so I never recommend hiding too much gold in your house, car, person – you need to be comfortable with what you’re doing.
The next step is buying gold coins and placing them in your safe deposit box. I wrote another article about this and link to it below. Yes, there are concerns that the government could confiscate gold, but I think this is a lot less likely than GLD (or other unallocated options) not being able to back up the gold in their reserves. If you’re concerned and your gold position is large enough, you can always spread your gold amongst several safe deposit boxes at different banks (in different cities or even states).
As a next step, you can buy “Perth Mint Certificates”. The Perth Mint of Southern Australia is a government-backed allocated gold program. They will store your gold coins in their vault in a special “allocated” space that’s just yours and in turn you get a certificate. I link below to The Perth Mint.
Last, there’s a cool program called Bullion Vault where you can again store gold overseas in a secure vault and manage everything online. they offer an opportunity to own allocated gold and also store it outside the US in case the US government confiscates gold like they did in 1933.
In terms of your final question, I’m gold bug at heart and personally believe a good 20-40% of one’s portfolio can be in gold and other precious metals. I link below to a great article all about the gold portfolio pyramid and the different ways in which you can think about structuring your gold and precious metals portfolio.
A long answer to your question (and could go on and on about this topic I love). Hope it helps you out!