Posts Tagged ‘Investing in Gold’

How a Gold IRA Improves your Retirement Account

Monday, May 22nd, 2017

Not a whole lot of people know you can invest in gold, nonetheless, invest in gold with a gold IRA. But you can and for some retirement savers, it’s the answer they’ve been waiting for. If you’re the type that likes to invest in commodities or hard assets, then a gold IRA might have what you’re looking for. Here are a few examples of how a precious metal IRA benefits everyday savers like you and me.

Hedging against U.S. dollar

A lot of investors, in times of economic instability, turn to commodities as an investment. The reason for this is that generally, hard assets like gold, oil and natural gas retain their value when the dollar does not.
Usually, gold’s price per ounce rises during inflationary periods, or as consumer prices go up. So as the cost of day-to-day living increase, so in turn does gold’s value. This is how you help protect your purchasing power.

Portfolio diversification

Precious metals historically have a weak correlation to price movements in the financial markets. Especially the stock market, which give you the advantage of avoiding market volatility. Best advice is to get your retirement account solely out of the stock market, with a gold IRA. To place your bets on only one investment type can be dangerous. With foresight and a trusted investment advisor, you can carefully diversify and avoid a potential crisis.

Steadfastness

One of the biggest reasons that investors choose gold and other precious metals is stability. Precious metals get a reputation for being a “doomsday” investment, the type of investments that you make if you’re uncertain of the economic future. There’s a great reason for this. Number one would be that gold has been around for as long as anything else on earth, and it’s still used in our everyday life. Number two might be that there’s a finite amount available, thus making it valuable, just by its existence.

 

A Beginner’s Guide to Investing in Gold

Monday, January 18th, 2016

beginning gold - square

Only 18 days into 2016, and we can already say that it’s been a rocky year. The world is going through rough times in many ways; the second episode of the Chinese stock market crash last week has spooked stock investors across the globe. Bond yield spreads are rising, adding to investors’ fears of bigger defaults in the bond markets. And at the same time, leaving cash idle in the bank isn’t earning savers anything. With interest rates under one percent and inflation close to two percent, investors who are stashing cash stand to lose all of its worth in real terms.

In times like these, gold bullion might be looking like the next best alternative for your investment portfolio.

Bullion investing is basically gaining financial exposure to precious metals—primarily, gold, silver, platinum, and palladium. Of these, gold offers the most liquidity.

1. Physical Gold

The simplest and most direct form of gold investing is in buying gold jewelry, gold bars, with an IRA, or gold coins—jewelry from a jewelry store, bars from a bank or a dealer, through your self-directed IRA administrator, or coins from a dealer.

Coins are the most commonly held form of physical gold, after, of course, jewelry. The best options are the American Eagle, American Buffalo, and Canadian Gold Maple Leaf coins.

When looking for a coin dealer, always seek one who offers the best bargain value. Albeit small, dealers charge premiums on coins above the spot gold price, meaning that you’ll be buying these coins at a price higher than the current market price of gold. In order for you to make money on your investment, the spot price of gold must increase enough to cover the premium you paid. This is why you should look for a dealer who is selling coins for the lowest premium.

2. Gold ETFs

If you don’t want to buy physical gold, you may gain indirect exposure to gold through exchange-traded funds (ETFs).

ETFs indirectly track the price of a basket of assets. Gold ETFs, in particular, come in three forms: 1) those backed by physical gold, meaning they track gold’s spot price; 2) those backed by gold miners’ stocks, such that they track the stock prices of a handful of prominent gold mining companies; and 3) those backed by gold futures, meaning they track the prices of derivative contracts that speculate the future price of gold.

3. Gold Stocks

The third possible way to add gold to your investment portfolio is to buy gold stocks. By “gold stocks,” I mean companies that are involved in the mining, exploration, development, and production of gold.

The risk involved here is that like any other listed company, gold stocks are exposed to stock market fluctuations. The same rules of investment will apply here that apply to any stock on the stock market, in that you’ll have to weigh the financials and fundamentals before jumping into any of these stocks.

4. Gold Derivatives

Finally, gold options and gold futures contracts are an indirect way to invest in gold—but a very risky one. Experts say that gold derivatives should be the last investment resort for any novice investor.

Unlike the spot gold market, where the prices are listed as they are, the futures market trades contracts on future price speculations. Because of the risks involved and the level of sophistication required, investors should strike this option off their radar if they’re not a seasoned trader.

To wrap it all up, gold derivatives, gold stocks, and gold ETFs that are not physically backed by gold are some of the riskier investments. On the other end of the risk spectrum, there’s physical gold and gold-backed ETFs, which are relatively simpler, safer investments.

Self Directed IRA Inflation Reality Check

Sunday, June 3rd, 2012

We’ve discussed the fact the government uses completely misleading and bogus numbers for their economic metrics (e.g. unemployment, inflation, etc.). We have specifically commented on how the inflation figures that the White and the Fed tout are not representative of reality and what people feel or experience on a daily basis.

Because of the critical nature that inflation plays in Fed and government policy and the impact that it has on our economic environment, we wanted to give you  little more due diligence on the CPI and inflation. Before we go into too much detail we need to give credit where credit is due. Much of the information that we gathered was from http://www.hsdent.com. If you are not familiar with their work or their newsletter, we encourage you to check them out. Now, on with our discussion..

The Consumer Price index (CPI)

This is the generally recognized number that the government uses to tell us what things cost. The government clearly does some manipulation of the figures. One key item that they leave in is your housing cost. Since a large percentage of Americans own their home (65%), and since the home owner has no option of not paying their house payment, and that payments does not usually fluctuate much, if any, and it is a large percent of the monthly outlay, it tends to mask price movements of daily items (food, gas, entertainment, etc.). So, the folks at HS Dent have removed this value from the CPI.

One of the other interesting things the people at HS Dent have done is to take consumer spending and break it down by the age demographic. This type of break down helps deal with life style difference between the different age groups.

The findings

  • Finding 1 – The rises in tuition costs have increased by 114% since 2000. That hits people under 25 the hardest and stays with them for many years.
  • Finding 2 – Energy costs are up more than 110%. This impacts all demographics.
  • Finding 3 – Medical care costs are up 67% since 2000. This clearly impacts people 55 and older the most.
  • Finding 4 – When you compare the BLS’s numbers for these same categories over the same period, with their methodology, you find that the age related inflation rates are about 35% versus the HS Dent method which shows something like 37-42%. That is a major disconnect!

The importance of showing these age related inflation rates

What this analysis shows is that different consumers expenditures impact age groups differently. Depending on the group and the nature of the next government stimulus program you will see differing results and impacts which effects how people live and feel about the economy. What these values show is that the government QE programs and fiscal irresponsibility is really hitting the young and the old very hard. These two groups have very little economic resources to mitigate these inflationary impacts.

So, the likely outcome is that as a result of politics, you will see more programs targeting the middle age groups. More pressure will likely be placed on buffering the young and old at the expense of the more economically vibrant producers in the middle. So, rather than let the markets do their part, get government spending and programs under control, lets take more from the producers and successful people.

What does this mean for my self directed IRA portfolio?

For one, its clear that the government will not get out the business of telling us what to do. Secondly, its clear that due to a complete lack of political will on the part of career politicians, they will engage in more government programs designed to redistribute wealth in the most ignorant, politically motivated manner. This will likely lead to, more government, more government spending and more printing of money.

Ultimately , we are talking about a stagnant economy, with weak growth and high inflation. Its not a matter of if, but when. So, its best to be prepared by holding precious metals and real estate in your self directed IRA.

Disclaimer

The information provided is for educational purposes only and are not a solicitation or offering of an investment, investment advice, or tax advice. You should consult with your tax, legal or financial advisor to determine the suitability of any investments made with a self directed IRA account.

Self Directed IRA Economic Update – How About That Jobs Number!

Sunday, June 3rd, 2012

This past week we saw one of the fingers of instability give away in the form of a very poor jobs numbers. To be specific, there were only 69,000 new jobs added last month. This number came in at about 1/2 of the recent average and expectations. As you can see from the chart below, the monthly change numbers are showing a trend to the down side.

This weak jobs number is confirmed by Economic Cycle Research Institute’s “Weekly Leading Indicator” or WLI index. The index turned down from being slightly positive to a neutral and heading negative. This indicator measures future economic activity over the next 2 months. The last time this number turned negative was April 2011 when we had another major sell off in the markets.

Since the supposed recovery has been fueled by quantitative easing (QE2 a/k/a printing money), a continued weakness in the WLI suggests that the effects of printing are wearing off. This was inevitable. And now that we have a really poor jobs number, we are seeing correlation and confirmation of the weakness signals that the economy has been and is slowing.

What Does This Mean?

For one, it means that the Fed is going to continue to scrutinize this jobs figure along with other metrics. The White House was probably caught with their pants down around their ankles on this jobs numbers and rest assured that there will be corresponding pressure placed upon the Fed to take action. The Fed is not likely to knee jerk over this number. They will most likely continue to watch over the next 1-2 months. If the WLI and jobs related data continue to bear out what we are currently seeing, then they are most likely to engage in QE3 (print some more money).

What Does This Mean Regarding My Self Directed IRA?

First of all if you have a self directed IRA, you’ve  made a wise decision to properly diversify your portfolio. In regards to this new data, it would seem that metals would be a wise choice for the next several months to a year until we start seeing readings that would indicate a new direction. Even though we don’t see real estate prices coming back any time soon, real estate can be a very good choice in many markets for the right type of investor. We don’t necessarily think you will see price appreciation in your real estate portfolio anytime soon, but we do believe that you will continue to see strong rental demand and good cash flow on the right properties.

Disclaimer

The information provided is for educational purposes only and are not a solicitation or offering of an investment, investment advice, or tax advice. You should consult with your tax, legal or financial advisor to determine the suitability of any investments made with a self directed IRA account.

Precious Metals In Your Self Directed IRA – An Update

Sunday, May 27th, 2012

We know that people are concerned about precious metals investing in their self directed IRA due to the recent selloff in metals and commodities in general. Its easy to get concerned when you see corrections all the way day to mid 1500s for gold. But, you have to ask yourself why would gold suddenly just fall out of favor? We know the markets can be volatile, but the economy just does not take sudden turns, for the better, in just a matter of days. In fact, it takes months and years for noticable changes in the economy to be measurable and noticable. So, this sudden proclamation that gold is over, seems without sound basis and fact.

Let’s take a look at some basic global, economic fundamentals in order to make some sound decisions about precious metals in your self directed IRA.

  • The European Crisis continues. We can’t tell you how many times the media is on again and off again about what is happening in Europe. the situation has not gotten better since the first of the year, but all of the sudden, Greece and Spain are back in the news with the same problems that we say 6 months ago. These countries have serious, massive debt and deficit issue with a culture that is married to government care taking and support of its people. This attitude does not change in a month or two. It takes multiple years or even a generation. They are not going to make this problem go away anytime soon. They will continue to print money and prop up the system before they let everything crash. These countries have and are seeing shrinking consumer demand, lower imports, lower spending. This is going to aggravate the deficits and put more pressure to print.
  • Gold prices continue to hold at record highs. We know gold can be volatile and unnerving, but if you look at it in the context of where it was and has been it still relatively high. Let’s look at the gold mining stock Barrick Gold Corp. (ABX). This stock currently boasts a profit margin of over 30%, better than twice that of IBM and almost ten times that of Walmart. While ABX sells for just 1.6 times its book value, IBM sells for 10X. This has no logical basis or rationale. The point here is that the price of gold is still relatively high, and attractive for metal mining companies to the point that they are still very profitable, yet, the market has magically decided that profits and balance sheets are out the window.
  • Central banks continue to print. The Europeans are meeting, again,  in another attempt to fix the unfixable. The current consensus is that they will have to accelerate, not decelerate the money printing. The same is true here in the US, where a fiscal cliff is coming (see prior blog) due to the trifecta of the expiring Bush tax cuts, mandated cuts in government spending from the last debt-ceiling debacle and the new debacle soon to begin as the latest debt ceiling is approached. The problems in important economies such as China and Japan are as bad, and maybe even worse. We should mention that China is showing some serious cracks in their economic shell (we’ll cover that topic later).
  • Debts are still at all time historic highs! We’ve commented on this a couple of times in the last week or two. Total debt for the US, Europe and other countries has not changed. No one came in from another, fiscally sound, well run planet, and gifted the countries of  earth Trillions of whatever to get rid of their debt. Its still there!  to get an idea of the debt problem, look a recent article written by Standard & Poor’s titled,The Credit Overhang: Is a $46 Trillion Perfect Storm Brewing?

“Our study of corporate and bank balance sheets indicates that the bank loan and debt capital markets will need to finance an estimated $43 trillion to $46 trillion wall of corporate borrowings between 2012 and 2016 in the U.S., the eurozone, the U.K., China, and Japan (including both rated and unrated debt, and excluding securitized loans). This amount comprises outstanding debt of $30 trillion that will require refinancing (of which Standard & Poor’s rates about $4 trillion), plus $13 trillion to $16 trillion in incremental commercial debt financing over the next five years that we estimate companies will need to spur growth.”

So the point here, optimistically, is that corporations around the world are likely to see, at best, mediocre growth due to their voracious need for infusion of new capital to refinance debt. A more concerning impact is where will these companies and institutions be able to get such massive amounts of new capital in this economic environment? The answer is they are probably not going to be able to do this, hence the reason for very moderate growth over the next 3-5 years.

So, let’s wrap this up. What does all of this mean to you and holding precious metals in your self directed ira? It means EVERYTHING!

  1. We are looking at a national and global economic environment in which the major central banks of the world (including the USA) are printing money and stand at the ready to print more when needed;
  2. We have debt of corporations and countries at all  time highs with little ability to refinance that debt without default, or government assistance;
  3. You have metals and stocks being ignored and incorrectly valued relative to other assets classes;
  4. You have the world continuing to be in turmoil without any real solutions.

Bottom line we are still faced with incredible global economic problems, and uncertainty. We have central banks printing money at will. Holding precious metals in your self directed ira seems to be a very important component of your portfolio.

The information provided is for educational purposes only and are not a solicitation or offering of an investment, investment advice, or tax advice. You should consult with your tax, legal or financial advisor to determine the suitability of any investments made with a self directed IRA account.