Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

How Much Gold and Silver and Which Assets Should You Own?

Commodities / Gold and Silver 2011 May 15, 2011 - 07:32 AM GMT

By: Lorimer_Wilson

Commodities

Best Financial Markets Analysis ArticleIt is no longer a matter of whether or not you should buy gold and/or silver but, rather, which type of investment(s) and how much. You don’t need a lot but you do need some – and here is a primer on just what type of investment vehicles are available and recommendations on just how much you should buy.&


Gold is the best hedge against uncertainty there is and it is also a useful thing to have in your portfolio if inflation is rising, as some foresee, or if the U.S. dollar were to decline further, as expected. Don’t take my word for it but instead read this1 article identifying 87 gold analysts who think the environment is such that the price of gold will go parabolic to $5,000 or more!

How Much Gold Do You Need?

The U.S. firm Ibbotson Associates, in a study for Canada’s Bullion Management Group, found investors can potentially improve their balance of risk and reward with a precious metals weighting of 7.1 per cent in conservative accounts, 12.5 per cent in moderate accounts and 15.7 per cent in aggressive accounts. Precious metals can include silver and platinum, but it’s a term that primarily means gold.

Another U.S. firm, Wainwright & Co. Economics Inc., looked at the need for gold in one’s portfolio from an inflation protection point of view and concluded from their research (see here2) that “a U.S. equities portfolio in which 15% of the assets are diverted to gold bullion would be effectively immune from damage due to a rising gold price and that is, we believe, equivalent to immunity from inflation.”

Which Vehicle Should You Choose?

a) Physical Gold and Silver

Gold in bars or coins makes sense if you are concerned about the complete breakdown of society but you will have an asset that needs to be securely stored. Read this3 article with suggestions on how to go about buying and storing physical gold and this4 article on why silver looks to have even greater upside potential than gold.

b) Individual Gold and Silver Stocks and/or Their Long-term Warrants

Gold and silver stocks have an added degree of risk because you not only need gold prices to rise (and gold stocks and gold bullion don’t always move in unison) but you also need your precious metals company to be a well-run business. For greater leverage on your invested dollars consideration should be given to an investment in commodity-related long-term warrants. This5 article spells out the details on currently available warrants that warrant your consideration.

c) Precious Metals Mining Mutual Funds

PM funds hold the stocks and/or warrants of gold, silver and platinum companies involved in the producing, developing, exploring or buying (via royalty payment arrangements) of such metals. While they are among the most expensive in terms of the fees they charge they have a long history of bringing the benefit of rising gold prices to individual investors (and the opposite, of course).  Go here6 for specific stock and mutual fund recommendations.

d) Exchange-traded Funds

There are two kinds of gold ETFs:

1. One tracks the price of gold bullion and is thus a clean, convenient proxy for holding physical gold. Go here7 for a primer on these types of ETFs offered for sale in Canada and the U.S.

2. The other tracks an index of gold mining stocks such as those in the S&P/TSX Global Gold Index and the large-cap and mid-cap producers in the AMEX Gold Miners Index. For more information read this8 article.

e) Closed-end Funds

Closed-end funds are conventional mutual funds that trade like a stock and thus can be bought or sold any time during the trading day (mutual funds can only be sold at end-of-day prices). Closed-end funds differ from ETFs in that they can trade at significant discounts or premiums to the net asset value, whereas ETFs will veer away from their net asset value only temporarily and mildly. Some closed end funds invest in the stocks of precious metals mining companies while others offer a way to hold actual gold. For more details on this subject read this article9.

Two key questions to ask:

1. Am I investing in gold stocks or gold bullion?

2. Am I exposed to Canada-U.S. currency fluctuations?

Remember, gold is priced in U.S. dollars and a rising Canadian dollar will undercut your gains. This won’t be a problem if you own a precious metals fund that holds TSX-listed gold stocks, but it might be if you have a fund tracking gold bullion prices.

f) Gold and Silver Coins

Owning gold and silver coins are another alternative to consider and this10 article advises you of the pros and cons of doing so and the types of coins available and preferred.

Conclusion

Gold’s rise to $1,500 per ozt. and beyond (For an excellent article on the significance of the designation of ozt. go here11) has created a lot of excitement and raised expectations of more gains to come but the reason why gold’s a legitimate asset class for investors today is its potential to shine when all else is bleak.

 In conclusion, how much gold and/or silver do you have in your portfolio?

 Original Source: http://www.munknee.com/2011/05/which-gold-investment-should-you-buy-and-how-much/

End Notes:

[1] Take Note: These Analysts Believe Gold Will Go to $5,000 – or More!
http://www.munknee.com/2011/04/take-note-these-analysts-believe-gold-will-go-to-5000-or-more/
[2] How Much Gold Bullion Should You Have In Your Portfolio?
http://www.munknee.com/2010/09/how-much-gold-bullion-should-you-have-in-your-portfolio/
[3] Rules to Follow When Buying Physical Gold
http://www.munknee.com/2010/09/how-to-buy-gold-and-safeguard-your-money/
[4] Why Silver at $398.52 is a Realistic Parabolic Peak Price
http://www.munknee.com/2011/05/silver/
[5] The “Secret” World of Gold & Silver Company Warrants
http://www.munknee.com/2011/05/the-secret-world-of-gold-silver-company-warrants/
[6] Why Gold Could Go To $5,000 – and How To Capitalize On It!
http://www.munknee.com/2010/09/why-gold-could-go-to-5000-and-heres-how-to-capitalize-on-it/
[7] Gold Bullion ETFs: A Primer
http://www.munknee.com/2010/09/gold-bullion-etfs-a-primer/
[8] GDXJ: A Small-Cap Gold Miner ETF With Big Potential
http://www.munknee.com/2010/09/gdxj-a-small-cap-gold-miner-etf-with-big-potential/
[9] Buying gold: An investor's guide
http://www.theglobeandmail.com/globe-investor/e-zines/trade-by-numbers/buying-gold-an-investors-guide/article1348909/
[10] The Pros and Cons of Buying Gold Bars, Ingots and Coins
http://www.munknee.com/2011/03/the-pros-and-cons-of-buying-gold-bars-ingots-and-coins/
[11] What’s the Difference Between 1 Gold Karat, 1 Diamond Carat and 1 Troy Ounce?
http://www.munknee.com/2011/03/whats-the-difference-between-1-gold-karat-1-diamond-carat-and-1-troy-ounce/

    Lorimer Wilson is Editor of www.FinancialArticleSummariesToday.com (F.A.S.T.) and www.MunKnee.com (Money, Monnee, Munknee!) and an economic analyst and financial writer. He is also a frequent contributor to this site and can be reached at editor@munknee.com."

    © 2011 Copyright Lorimer Wilson- All Rights Reserved
    Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

    Lorimer Wilson Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in