Gold/Silver Bullion Investment

[explod]

Having a perusal of the thread this morning, the "Gold Price Where is it Heading", I noticed that out of the last nine posts, eight where off topic and involved questions on how best to invest in bullion.

At this stage I will not post a view but let the thread develope, in the hope that it may fill the need of a growing number of ASF members seeking the right answers in acquiring exposure to the steadily rising prices of gold and silver.

I have held bullion for some years as part of my investment portfolio.

cheers explod

 

[explod]

From Sinclair's Minesite

On Wednesday, the BBC reported that millions of dollars in gold at the central bank of Ethiopia has turned out to be fake: What were supposed to be bars of solid gold turned out to be nothing more than gold-plated steel. They tried to sell the stuff to South Africa and it was sent back when the South Africans noticed this little problem.

This is an amazing story for two reasons. First, that an institution like a central bank could get ripped off this way, and second that the people responsible used such a lousy excuse for fake gold.

I consider myself something of an expert on fake gold (I’m not really, I just think I am) ever since I was asked to give advice on the subject to the author Damien Lewis for his recent thriller, Cobra Gold. I worked out in detail for him how you could make really convincing fake gold, and ended up as a minor character in the novel, where I am known as "Goldfinger Gus".

The problem with making good-quality fake gold is that gold is remarkably dense. It’s almost twice the density of lead, and two-and-a-half times more dense than steel. You don’t usually notice this because small gold rings and the like don’t weigh enough to make it obvious, but if you’ve ever held a larger bar of gold, it’s absolutely unmistakable: The stuff is very, very heavy.

The standard gold bar for bank-to-bank trade, known as a "London good delivery bar" weighs 400 troy ounces (over thirty-three pounds), yet is no bigger than a paperback novel. A bar of steel the same size would weigh only thirteen and a half pounds.

According to the news, the authorities have arrested pretty much everyone involved, from the people who sold the bank the gold, to bank officials, to the chemists responsible for testing and approving it on receipt.

The problem is, anyone who so much as picked up one of these bars should have known immediately that they were fake, no fancy test required. The weight alone is an instant dead giveaway. Even a forklift operator lifting a palette full of them should have noticed that his machine wasn’t working hard enough. I think they must have been swapped out while in storage: Someone walked in each day with a new fake gold bar and walked out with a real one. If they were fake on arrival then everyone who handled them in any way must have either had no experience with gold or been in on the scam.

Now, for me the more interesting question is, how do you make a fake gold bar that at least passes the pick-it-up test? The problem is that there are very few metals that are as dense as gold, and with only two exceptions they all cost as much or more than gold.

Rumours have circulated some time on the real amount of gold in various storages. The ASX listed GOLD has from memory its bullion stored in the UK. There is no reason to doubt this one, in fact I have traded it, but for me, in the hand takes all the possible risk away.

 

[Ageo]

Hehe there always has to be 1 nation that gives it a go.

Although i agree with what this guy is saying in terms of the people should have known due to the weight, the problem is most people that are handling the gold actually have no idea on what the weight is supposed to be as they are amazed at the actual bullion itself.

I have seen many many fake bullion bars over the yrs and they have become very very clever also.

1 ounce gold bars from ABC that came up anywhere from not gold to 95%.

Usually they make a alloy which includes zinc and or nickel mixed with a smaller amount of gold, copper etc... so when you cut it open you still see the gold tinge. Then they thick plate (usually electroplate) and stamp it.

The zinc and nickel weigh alot which in turn substitutes the supposedly weight for gold.

Without a machine i use to test gold i would never ever have known. (Acid tests and scrap tests are a waste due to they only tell you whats on the surface but not inside).

To give you another example i had a customer come over yesterday showing me some silver jewellery which is supposed to be .925 silver which means (92.5% silver) but when i tested it it actually showed mainly copper and zinc and 2% silver (plated). He bought 3kgs and they were all stamped .925.

Buyer beware

 

[vincent191]

Another common rip-off is gold coins especially American Eagles. There are plenty of counterfeits in the market and it is actually made out of REAL gold.

The Eagle is worth more than the gold content because it is also a collectable item. Counterfeiters have produced these coins with real gold to take advantage of the margin between the value of the gold and the collectable value.

For example the gold content may be worth $1,000 but the coin is selling for $1500 thus the counterfeiter makes a $500 profit.

Gold sovereigns also fall into this category but is less common. The South African and Canadian Maple also attract it's fair share of scams and counterfeits.

The counterfeits are very well made and it takes an expert to tell the difference. Well, where there is money you will find plenty of crooks.

 

[radioham6]

Interesting last post. It's made me more aware as I've been looking at gold bullion myself.

So for what I understand coin may not be as safe as it sounds.

Would actual bars be a better choice?

I have heard jewellery can be poor?

Comments?

 

[Ageo]

Interesting last post. It's made me more aware as I've been looking at gold bullion myself.

So for what I understand coin may not be as safe as it sounds.

Would actual bars be a better choice?

I have heard jewellery can be poor?

Comments?

The difference between bullion and jewellery is that bullion will fetch near the spot (less the spread) and jewellery would be sold as scrap (much below spot).

If the intent is for investment/hedging only then bullion and/or coins would be the go.

 

[explod]

BUYERS SPURN GOLD FOR SILVER

investors are looking to silver as an alternative to gold with a leading dealer reporting that one-ounce silver rounds are outselling anything else by a factor of 10 to one.

"Silver rounds" – which look like coins but are not legal tender – are selling well at the moment, according to Alex Baird of Baird & Co, the bullion dealer. "One-ounce silver rounds at £14.50 with a box are outselling anything else by a factor of 10 to one," he said. "They are significantly cheaper than silver coins."


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Gold to rise for eighth consecutive yearSilver has the potential to grow in value as it is both a precious metal and an industrial one. It is used in photographic equipment, as an antibacterial agent in water filters and has the highest electrical and thermal conductivity of any element.

Fresnillo, a silver mining company, is second best performer in All-share this year with an increase of 490pc, according to DigitalLook. Meanwhile, the iShares Silver Trust has returned 55pc this year according to Morningstar.

Evy Hambro, co fund manager of the BlackRock Gold and General Fund, said: “Fresnillo is very strong. It has good management, world-class silver mines and an exceptional exploration portfolio, and is forecasting considerable growth in production. That is why it is one of the top ten holdings in the Gold and General fund.

“Many investors take the view that the silver price is linked to the gold price, but we look at silver on its own fundamentals. Over the near term we think the environment is positive for silver”.

StockMarketsReview, state that while silver may be more vulnerable to financial shocks than gold- it also has further to grow in the future.

It added: "Silver prices fell by 56pc from the high of $20.75 in early March 2008 as compared to 29pc decline in the yellow metal. We firmly believe that a good amount of steam is left in the ongoing rally in silver and it would continue to outperform gold in returns.

"Silver prices are seen to be taking support from the weakness in the dollar in the recent past, underscoring its monetary value. Going by the weak outlook for the dollar in the coming quarter, silver is likely to surge higher."

But Pau Morilla-Giner, head of alternative investments at London and Capital, said: "Silver is not the new gold. Silver is a hybrid of gold and industrial base metals such as zinc- and its performance is split 50-50 between the two."

Mr Morilla-Giner warned that silver will not have the same impressive returns as gold, but that it will offer a similar safe haven in times of market turmoil, inflation or if there is a loss in banking confidence. It also benefits if industry grows- which gold does not.

By Emma Wall, 17th December


Compliments of the season to all

explod

 

[arae]

I'm in Sydney and looking to buy some physical gold bars locally. So far, I've some across these which seem to fit the bill;

http://jaggards.com.au/shop/viewproduct.asp?productid=1985&categoryid=69

Being Perth Mint stamped they seem a safe bet for legtimacy to my novice eye. Does anyone have an opinion or previous dealings with Jaggards? What are the odds of these not being 99.99% pure gold?

Cheers

 

[GumbyLearner]

I went to Knox Shopping Centre today and had a great time. While the missus was browsing the "bargains" I came across a gold buying market stall.

They handed me a brochure that states:

1. Bring any item of GOLD to one of our locations.
2. Our "Consultants" will test and value your gold items.
3. We will give you CASH (it really was in bigger font by the way) on the spot (and yes that part was also in bold)

It's so simple!

To find your nearest location phone 1300 344 044
or
visit goldbuyersaustralia.com.au

I asked them how much for pure 24K 1 or 5 troy ounce ingots and they responded. WE PAY HALF!

I was offered $600 Aus for an ounce.

They really are dreaming!

Finally, can anyone on ASF provide me with an ASX code of any companies connected with this mob so I can profit from this piece-of-cake wealth creating machine?

 

[Dowdy]

Another common rip-off is gold coins especially American Eagles. There are plenty of counterfeits in the market and it is actually made out of REAL gold.

The Eagle is worth more than the gold content because it is also a collectable item. Counterfeiters have produced these coins with real gold to take advantage of the margin between the value of the gold and the collectable value.

For example the gold content may be worth $1,000 but the coin is selling for $1500 thus the counterfeiter makes a $500 profit.

Gold sovereigns also fall into this category but is less common. The South African and Canadian Maple also attract it's fair share of scams and counterfeits.

The counterfeits are very well made and it takes an expert to tell the difference. Well, where there is money you will find plenty of crooks.

Do you have any source to suggest there have been counterfeits?

 

[explod]

Suggestion that central banks/governments may move to control gold to back currencies:-

http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2010/4/14_Jim_Rickards.html

 

[Ageo]

Suggestion that central banks/governments may move to control gold to back currencies:-

http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2010/4/14_Jim_Rickards.html

Very interesting interview explod. Never heard of Jim Rickards before but the more and more im listening to him the more and more i find he knows his ****. Very good credentials indeed.

The best i heard was "people say there isnt enough gold to back the money supply which is nonsense. Take gold to $5000 p/o and all of a sudden you now have a gold backed system"

Another good interview http://www.youtube.com/watch?v=St7TF8q0T18

His take on china and other central banks trying to increase their gold holdings could be another reason the price is bound to move higher.

 

[Johnkitty]

For me, Silver Coins and Gold Coins are safe and basic to put money into. And also they are easy to be traded and stored with stable security. But I think pawn shop and Gold parties are not the good places to deal with.

 

[explod]

Have just found a very good explanation of the severance of the gold standard from legal tender. In understanding gold's distinct difference to that of a pure commodity, I suggest this article may help those interested.

cheers explod

http://www.bullionbullscanada.com/i...-and-gold&catid=48:gold-commentary&Itemid=131

 

[iced earth]

GOLD-27 April 2010

Bullish Head&Shoulders with goal around $ 1230

 

[explod]

GOLD-27 April 2010

Bullish Head&Shoulders with goal around $ 1230

Suggest this would be better in "The Gold Price Where is it Heading" thread

cheers ex....

 

[iced earth]

Suggest this would be better in "The Gold Price Where is it Heading" thread

cheers ex....

Thanks a lot explod, I've done that.

Best
Mohsen

 

[jayhfd]

So I was surprised to see that the Perth Mint charges a 2% buy fee on all purchases under $50k. I was only planning on buying a few small bars and I wonder if its worth it now. Say you buy $5k worth, thats $175 to buy and store it for the first year, another $75 to store there each year after. If gold went sideways for 5 years that's almost $500 in fees, gone. I obviously think it'll go up, but just thought I'd discuss as I fill out the application forms and such. Any thoughts? Is a <50k investment considered too small or not?

 

[explod]

So I was surprised to see that the Perth Mint charges a 2% buy fee on all purchases under $50k. I was only planning on buying a few small bars and I wonder if its worth it now. Say you buy $5k worth, thats $175 to buy and store it for the first year, another $75 to store there each year after. If gold went sideways for 5 years that's almost $500 in fees, gone. I obviously think it'll go up, but just thought I'd discuss as I fill out the application forms and such. Any thoughts? Is a <50k investment considered too small or not?

Size is up to your investment criteria, but for me I store it in my own personal bank vault. Heard too many stories (although Perth Mint should be differeent one would think) about the physical not being in place to back all the paper holdings.

Nothing like the peace of mind in having it in the hand so to speak. Could be worth a p/m to Ageo who often posts on this thread for his views.

 

[subasurf]

Any thoughts? Is a <50k investment considered too small or not?

Store it yourself.