Should you
Invest in gold?


Buying physical or Ďput in your pocketí gold shows you donít trust the government and so, if you have a revolutionary inclination, buying a bit of gold will tell the government you donít trust them. Also, looking at the financial difficulties the government is in, it might be advantageous to invest a portion of your money in gold.

What should you buy?

Gold coins are much more tradable than gold ingots and, as they both usually cost the same, gold coins such as sovereigns, krugerrands, maple leaves and Britannias may well prove to be a better buy.

How much should you pay?

Normally when buying gold coins or ingots you pay the spot price plus a dealer percentage. To find the spot price you can go to kitco.com and on the bottom of the home page you will see the current price of gold in several different currencies, including British pounds. That is a per ounce price and if you are buying a one ounce coin or ingot you should expect to pay that price plus a premium of about six percent. Seven percent is possible but donít pay any more and if you hunt around you may be able to find a dealer who is over-stocked and wants to sell off some of their gold and you will then be charged a lower than normal premium. To find the cost of a gold sovereign you simply take the spot price for an ounce and multiply it by .2354. (Point two three five four.) That will give you the gold content of the coin and then you can just add six percent to get an idea of what you should pay. (Note: the gold sovereigns are reputed to be the worldís most forged coin, so stick to a reputable dealer when buying them. Also remember that most gold sovereigns are bullion coins so donít be fooled by people who tell you that you are buying a rare date. Almost all the rare sovereigns are already in the hands of collectors so you are very unlikely to find one that is worth more than its gold content. Ebay dealers are always offering Ďrareí sovereigns but thatís just hype which is safely ignored. Itís also wise to ignore all those glossy brochures from The Royal Mint and other gold companies which advertise extensively in the media because they usually charge much, much more than any of the regular dealers for what is essentially the same product.)

How should you pay for your gold?

Many people like to use electronic payments for their purchases but remembering that one of the first things F. D. Roosevelt did when he was elected in 1933 was to confiscate all the gold bullion held by private individuals. I think, seeing as I donít trust this government, that paying in cash is probably be the wisest way to go.

When the time comes, how should you sell your gold?

Recently a large number of people have advertised Ďcash for goldí and it is important to be careful when selling gold. For gold coins and ingots you can expect to get spot or slightly less from any reputable dealer but jewellery and other gold bits and pieces can be difficult to sell for a fair price. If you have an amount of it you will find it advantageous to take it to Hatton Garden in London as the smelters there pay 97% of spot and they also pay cash. But if you canít travel to London, donít be tempted to sell your old jewellery to anyone for less than 80% of spot. (A previous article in this blog explains how to work out the worth of your gold jewellery.) (You may notice that although the Royal Mint is keen to sell you gold coins, they are not interested in buying them back from you. Reputable dealers will always offer to buy your coins back at a price relative to the price of gold at the time you want to sell. They may for example say they'll buy them back at spot or spot minus one percent. However never accept spot minus four or more percent because you can always get spot minus three percent from the smelters in Hatton Garden.)


---June 19, 2009---

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