If you listen to the talking heads on T.V. long enough, gold is the panacea for your financial troubles. It's immune to everything and provides you the best long-term rate of return - besting even the stock market. Once you leave this golden fantasy land, you start to get the impression that the only people who are perma-bulls are people selling gold or those wearing tinfoil hats.
That doesn't mean that gold is a bad buy. It's like everything else though - there's a time and place for it in your portfolio. Also, there are strict rules about how to own it. Most people make at least one of these mistakes their first time out. Here's how to cut your learning curve:
Don't Buy Too Much
It seems incredible that you could buy too much of "the invincible investment," but therein lies the faulty assumption. Gold isn't invincible. There's a time and a place for it. Look for Gold IRA company reviews that are even-handed, either. They're typically written by companies with an incentive to sell you gold - lots of it.
That doesn't mean that all reviews are just thinly-veiled sales pitches. The best ones out there will take a more balanced view. Remember, gold is not money, it's a commodity. Organizations that base their recommendation to buy gold on fear and hysteria should not be taken seriously. For example, some gold sellers will tell you that the U.S. is in imminent danger of falling off a financial cliff - not true.
It is true that the country is facing serious deficits, out of control spending, and that our debt-to-income ratio is climbing to dangerous proportions, but it's nothing the country hasn't faced before.
Also, keep in mind that gold isn't the perfect inflation hedge that most gold dealers want you to believe. It correlates more closely with assumed or perceived disaster or uncertainty than it does with actual inflation.
Also, don't forget that all financial contracts are payable in dollars, not gold. So, your mortgage, your groceries, and even your stocks, bonds, mutual funds, and bank CDs are all payable in dollars. Everyone's is. That means everyone will have to liquidate their gold to pay off debts or invest more money. There's no yield on gold, so there's still a reason to hold dollars for everyday transactions and even long-term financial goals.
Don't Buy Scrap Gold
Don't just go out and by anything made of gold. A ring or some other piece of jewelry isn't like a gold coin. Scrap metals are not investments. Few people will want to buy them from you and, if you do happen to stockpile them, you'll have to melt them down and purify them. That's because jewelry-grade metal is often cut with other metals to make them more durable. To get salable gold that's worth investing in, you'll need to know how to melt, fabricate, and then assay the gold - not an easy or inexpensive task.
Not Checking Purity
It's easy to get a deal on gold - just buy something very impure. Buying alloy metals, however, isn't how you stock up on gold that will be worth something in the future. Some gold coins are 90 percent pure. Others are 99 percent. Still others are 99.99. The higher the purity, the softer the end-product (gold is a soft metal) and the more valuable it is. Buy the highest purity you can afford.
Not Paying Attention To Spot
Not paying attention to the spot price of gold is an easy way to get ripped off. While most dealers will at least tell you how much the spot price of gold is (if you ask them), not all of them will and not all of them will fully disclose their commission or spread on the sale.
Really, when you walk into a gold dealer's place of business, you're on your own, even if the salesperson seems friendly enough. Remember, they are there to sell you gold, not be your friend. They are selling metals with a high value, and they only make money on the spread or commission they charge you.
On average, you should expect to pay between 2 and 5 percent over spot. Any more than that, and you're going to have a harder time recouping your costs.
Not Shopping Around
Gold is a commodity, so why shop around? It's all the same metal, right? Well, sort of. Checking the spot price of gold right before you buy is part of protecting yourself from getting a raw deal, but shopping different dealers is the other half of that equation.
Not all dealers charge the same commission or have the same spread on transactions. Plus, not all dealers sell the same purity of gold. Some dealers will only or primarily sell 90 percent purity. Others deal in 99 percent purity. Still others will only deal in Turkish coins, which require you to understand how those coins are made.
Call up 20 different dealers and ask about what they charge per transaction, the type of gold they deal in, their buy-back terms, and their opinion about other dealers in the area. You may be surprised by what you discover.
By Paul Shaefer
http://www.goldirainvestingoptions.com/
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
