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Precious Metals

Started by Orphan, September 21, 2018, 08:55:10 AM

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Orphan

Looking for a take on holding gold, silver and other precious metals as part of your overall portfolio?

Does one hold any and if you do what is your preference? Gold ? Silver ? Platinum?

Information greatly appreciated.


Jon Sharpe

The closest I ever got to owning precious metals was through the Vanguard Precious Metals And Mining Fund a few years ago. It did quite well, but I ultimately decided to slim my portfolio down to the basic low-cost index funds, e.g. domestic equity, int'l equity, bonds, and a REIT. I sleep better at night as the volatility on precious metals is quite high.

Hayden

I do not have much experience, but I think that I agree with Jon Sharpe. I think that the volatility is far too high to mess with. but it depends on your risk tolerance. It might be fun to add little to your portfolio. My wife's grandpa has about 200k in gold and swears that one day it is going to be the only currency we have. We will see.
Very Respectfully,
Hayden

Bonsai

The precious metals in my portfolio are small holdings (about $60k total) of just above bullion grade gold coins (St. Gauden double eagle and eagles), silver eagles (bullion basically), some Morgan silver dollars and some Walking Liberties.  I bought them back in 2004-2006 period and planned on making coin collecting an active hobby but got distracted by life.  I am considering collecting again now as I move into retirement but I don't really see coin collecting, at my level, an investment, more potential fun and diversion.  I also think that there is a 28% tax on gain.  Gold seems to have been in the $1200-1300 range (silver $14 to $17 an ounce) for the last several years so hard to make money through appreciation - maybe some money trading.  There is a hefty vigorish on both sides of the buy/sell transaction so hard to make a capital gain.  I am not certain how to make bullion more than a hobby and would be happy to hear ideas.

Orphan

Great information everyone. Thank you. This sheds some perspective on these type of assets...

PDXOregon

I have owned platinum, palladium, gold and silver in the physical form for over 15 years.  Some of my best returns have been from metals because I simply bought low and sold high while being patient over the last two decades.  The metals probably has consisted upward of 15% of my portfolio depending on the year and the value of the metal and how the rest of the market is doing.  I do find some comfort in being able to hold a physical asset in my possession that will always have something of value.   If i am ever wiped out financially and if a series of catastrophic events that are entirely beyond what I could ever imagine come,  I know that I can whip out a bar of gold and barter for resources and services on the street when the rest of world has little to nothing.   During the years around the Lehman collapse where a 1930's style banking collapse was on the radar,  I was almost hoping that Paulson/Bernanke and friends would not have flooded the banking system with all the cash they did because I would have been a millionaire multiple times over if the whole system had collapsed.  History can repeat itself.  If you learn one thing from history, it is that people don't learn from it and usually forget about it.  Metal ownership is the extreme side of the pendulum that is essentially financial system collapse insurance.  And indeed, it will most likely never happen in my lifetime.  I am happy to reduce the likelihood of being a causality of a failed financial system or otherwise if a black swan event ever comes again in my lifetime.

Bonsai

PDXOregon:
I am always looking to learn so two questions:
1.  What are the transaction costs and holding costs for the platinum, palladium and gold?  The holding cost may be zero if you take possession (then a safety issue arises) and do not use a safe deposit box (then an availability issue).  For bullion grade gold coins there is a bid/ask (posted in the Grey Sheets) and my local coin dealers want to buy at 10% below bid and sell at 10% above ask, easily a 30% spread, major vigorish IMHO.  I ran into transaction scheme at coin shows.  I only found "bargains" by "lurking" at the on-line auctions and submitting a bid right before the auction closed.  Considering the transactional cost financial picture of bullion, does it pencil out vis a vis other investments, e.g. s bond or equity.  To me it seems it does not (although I recognize every investment modality has negatives).

2.  How do you anticipate valuation and divisibility?  In the "end times" a loaf of bread go for one gold bar? 1/2 gold bar? 1 grain (480 grains in a troy once of gold) and worth about $2.50 currently.  It is pretty difficult for the average joe to divide a gold bar into grains.  Also, alas, when I talk to my gun toting friends they advise they don't need to store gold now.  Their guns will get them the gold they need when the time comes.

PDXOregon

1.  What are the transaction costs and holding costs for the platinum, palladium and gold?  The holding cost may be zero if you take possession (then a safety issue arises) and do not use a safe deposit box (then an availability issue).  For bullion grade gold coins there is a bid/ask (posted in the Grey Sheets) and my local coin dealers want to buy at 10% below bid and sell at 10% above ask, easily a 30% spread, major vigorish IMHO.  I ran into transaction scheme at coin shows.  I only found "bargains" by "lurking" at the on-line auctions and submitting a bid right before the auction closed.  Considering the transactional cost financial picture of bullion, does it pencil out vis a vis other investments, e.g. s bond or equity.  To me it seems it does not (although I recognize every investment modality has negatives). ----  MY COSTS ARE < $250.00/YEAR WITH SAFE DEPOSIT BOXES AND WHAT I KEPT OUTSIDE OF THE VAULT. TRANSACTION COSTS CAN BE HIGH.  TRANSACTION COSTS WERE CHEAPER AT THE TIME I DID MORE OF MY ACCUMULATION YEARS AGO AND DID LARGE VOLUME PURCHASES.  IF i DID BUYING TODAY, I WOULD LOOK INTO BUYING DIRECT FROM THE MINTS/MINES OF THE COUNTRIES IN WHICH COINS/BARS ARE FORGED;  IF YOU WANT TO GO SMALLER SCALE, CONSIDER PERSON-TO-PERSON BY JUST NETWORKING WITH FRIENDS THAT YOU ARE INTERESTED IN A FEW NUMISMATIC PIECES FOR SOME CASH.

2.  How do you anticipate valuation and divisibility?  In the "end times" a loaf of bread go for one gold bar? 1/2 gold bar? 1 grain (480 grains in a troy once of gold) and worth about $2.50 currently.  It is pretty difficult for the average joe to divide a gold bar into grains.  Also, alas, when I talk to my gun toting friends they advise they don't need to store gold now.  Their guns will get them the gold they need when the time comes.  VALUATION AT THE "END TIMES" -- NO IDEA REALLY . . . I'LL KNOW AT THAT TIME IF IT WAS WORTH THE PURCHASE . . . PERHAPS PEACE OF MIND ALONE FOR THE LAST NUMBER OF YEARS HAS BEEN WORTH SOMETHING THAT COULD ALL BE A WHITE ELEPHANT OF MY OWN MAKING AS WELL.  THERE ARE NO GUARANTEES. DIVISIBILITY IS SIMILAR TO A MONEY CLIP.  FOR ME, I KNOW I CAN BARTER BETTER WHEN I HAVE VARIOUS DENOMINATIONS AVAILABLE TO CLOSE A TRANSACTION. I DON'T HAVE AN INTEREST IN BARTERING FOR INDIVIDUAL RETAIL ITEMS WHEREAS TRYING TO GET A HOLD OF RESOURCES BY THE PALLET FROM BULK OWNERS WOULD BE OF GREATER INTEREST.  GUYS WITH GUNS NO ISSUE.

Bonsai