Too late to buy PM?

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poisonivy113's picture
poisonivy113
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Too late to buy PM?

Just wondering. I bought a very small amount over the summer based on what I could afford. With hours being cut back on my job and the debt I have to pay, I really don't have much extra. Watching PM prices go pretty much straight up gives me a little bit of a sickening feeling that I missed the boat on this and now have no way to protect myself. 

For those of you who didn't have the information and/or ability to buy some PM when prices were good, what are you doing now? 

 

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Re: Too late to buy PM?

Poisonivy,

That sickening feeling that you mentioned is the reason that you shouldn't buy gold at this time. Putting aside all the other reasons to buy or sell gold at this point, the best thing you could do for yourself as an investor is to not act on this emotion. Once you do, this emotion will compound on itself, laying a foundation for poor investing down the road.

There will come a point in the future when you have no reason or urgency to buy gold, that will be the time to make additional purchases. 

Your patience and emotional discipline will be rewarded in many ways.

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Re: Too late to buy PM?

INTERVIEW-Euro Pacific's Schiff says $5,000/oz gold "likely"

http://www.forbes.com/feeds/reuters/2009/11/30/2009-11-30T190403Z_01_N30457029_RTRIDST_0_LS-GOLD-SCHIFF-INTERVIEW.html

 

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Re: Too late to buy PM?

Remember, India bought 200 tons of gold at about $1040/ounce. So there is a big support level there. The other 200 tons are still yet to be sold, which will lead to another support level.

I would like to buy more gold myself, but am uncomfortable doing so at this level. However, if you are buying for the long term, then it makes sense to buy gold, no matter what the price nowadays. If gold does not pull back soon, then I will be buying more gold. I fully expect gold to go much, much higher in the long run. And that is my rapidly depreciating .02 opinon!

 

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Re: Too late to buy PM?

I started buying gold at around $900/oz and I'm still buying, but that's only because my salary is enough (though more importantly we've reduced our expenses) to where we can do both that and pay off my remaining student loan debt more quickly.  And for me, I'm buying for the long term and I'm not getting too nervous about the prices going up.  Having a little gold is nice, but if you have substantial debt I would think that would be a higher priority.  If you have existing savings that you want to put in gold then that is your call, but with regards to your regular income you're probably better off paying the debt first.  You may feel like you're missing the boat, but really getting out of debt and buying things you know you'll need (food and essential household goods for example) are actually better investments than buying gold now.  Once you've got that taken care of, then go for the gold so to speak Tongue out.  Jeff has it right... don't let that sinking feeling let you lose sight of your priorities.

- Nickbert

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Re: Too late to buy PM?
poisonivy113 wrote:

Watching PM prices go pretty much straight up gives me a little bit of a sickening feeling that I missed the boat on this and now have no way to protect myself. 

Make sure you get your brain around the distinction between 'investing' in gold and purchasing gold as a wealth preservation method.  Now is not the time to purchase gold for investment purposes - at least not until there is a pull-back to the $1040 level joemanc talked about.

That said, it is always time to buy gold - using dollars that will one day be worthless - for wealth preservation and a stock of an exchange medium that has always held some value above $0.  Even if you bought gold at $1200/oz and it drops to $300/oz you will be able to exchange it for things you need.  Try using those worthless FRNs and see how many eggs and how much milk you can buy with them.

And don't forget silver.....

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Re: Too late to buy PM?
Dogs_In_A_Pile wrote:
poisonivy113 wrote:

Watching PM prices go pretty much straight up gives me a little bit of a sickening feeling that I missed the boat on this and now have no way to protect myself. 

Make sure you get your brain around the distinction between 'investing' in gold and purchasing gold as a wealth preservation method.  Now is not the time to purchase gold for investment purposes - at least not until there is a pull-back to the $1040 level joemanc talked about.

That said, it is always time to buy gold - using dollars that will one day be worthless - for wealth preservation and a stock of an exchange medium that has always held some value above $0.  Even if you bought gold at $1200/oz and it drops to $300/oz you will be able to exchange it for things you need.  Try using those worthless FRNs and see how many eggs and how much milk you can buy with them.

And don't forget silver.....

I'm with Dogs for the points I emboldened. And if the amounts are too large as regards gold then silver, especially  pre 1964 coins is a good option. Small amounts done over time result in an exponential growth curve which in this case is a good thing!

Coop

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Re: Too late to buy PM?

DIAP took the words out of my mouth.  If you can't afford gold, silver is much more affordable, ~$20 for a 1 ounce coin.  In fact, I've read that Chinese citizens have been encouraged to buy silver recently, I believe because they had the same problem (they were first encouraged to buy gold, but I'm guessing many were not able to afford it).  I've also read that silver may have even a larger potential for growth right now than gold.  If I understand it correctly, silver is currently undervalued relative to .[its historic ratio to?]  gold.  Plus the writers point out that silver is used in industry, so it has that demand as well.

Now, I don't know how the value of silver would be affected if the dollar was devalued relative to a basket of currencies and some % of gold.  Would silver maintain its ratio with gold, and thus "increase in value" relative to the dollar?  Maybe someone with a better understanding of PMs and currencies could speculate on that for us.  I bring that up because I don't know if that is a case where an investment in silver may not be as good an investment as gold.

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Re: Too late to buy PM?

This is my 2 cents. (See disclaimer below). 

I myself am waiting for it to retrace, or correct that is. I feel that it's jumped a wee bit too much as of late. 

Then I'll buy more. 

*Disclaimer: I am not an investment advisor so if you listen to me and lose your shirt then it's your fault, not mine. Hee hee hee. Disclosure: Gold, Silver, $CAD, Mining, water, agri stocks. 

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Re: Too late to buy PM?

I have faith in 4 things. G(* religious edit)d, Gold, Guns, and the Government only knows how to [email protected] things up.

We are insolvent. www.usdebtclock.org 106 trillion in unfunded liabilities, and 12 trillion in debt.

CM pointed out in his fine CC that all Fiat currencies revert to a value of 0. I'd say this time is now upon the USD.

I don't think gold goes up in price, I think as it was pointed out above, gold holds value. The difficult thing to see is that the dollar is tanking, since it is tanking with the rest of the currencies (except gold) it is a very masked event.

Silver will probably do okay, if price is the issue I'd consider it instead. Anything but Bernake's counterfeit. Also, food, clothes and things you will be trading in silver or gold to purchase later on may be equally good purchases. 

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Re: Too late to buy PM?

Well... I feel qualified to comment here, because I bought a 10 oz roll of 1/4 eagles TODAY from one of the brokers listed elsewhere on Chris' site.  

Why did I do this? 

A.  As insurance against a looming financial catastrophe.  I have lots of 401K savings that I cannot get at... and honestly, I would be very happy if my now 30 oz turns out to be the worst investment ever, since that will mean all has turned out OK with the dollar.  Not likely though.

B.  I bought again today because, much like the way Chris is an avid watcher of the equity and T-bill markets (and who knows what else)... I have been watching the websites for Tulving and other gold dealers for quite some time now... and they are all RUNNING OUT OF PRODUCT all of the sudden.  As you know, the US stopped making gold Eagles again.  Over the last two weeks, Tulving and others have raised their premiums, then started running out.  Good luck finding 1 oz eagles anywhere right now.  To me, this is a leading edge event that potentially signals a parabolic phase for gold and silver. 

If you want more gold or silver, and understand and accept the possibility that it could go down in value before going up more (in the event of the dollar strengthening and stock market dumping for instance) you should buy more now.  If it does go parabolic, I can guarantee that you (or I) won't have the you-know-whats to buy in at that point.  That will be the point when the truly wealthy are piling in........ an event Chris has already talked about. 

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Re: Too late to buy PM?
hannah_351 wrote:

Good luck finding 1 oz eagles anywhere right now.  To me, this is a leading edge event that potentially signals a parabolic phase for gold and silver. 

Hannah,

I just did a quick check and found gold eagles, maples leaves, krugerrands, and philharmonics all available in the 1 oz.  You're paying an excessive premium buying 1/4 oz. eagles.  This same phenomenon occurred at almost exact the same time last year.  The shortage resolved itself quickly.  Also, the mint will be making a new batch of 1 oz. eagles next month.  Don't give in to fear and you'll get the best price. 

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Re: Too late to buy PM?
Davos wrote:

I have faith in 4 things. G(* religious edit)d, Gold, Guns, and the Government only knows how to [email protected] things up.

Don't forget Gardens and Grub.Wink

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Re: Too late to buy PM?

I appreciate your reply ao... and I understand that fear is not a driver of good investment decisions.  There is always more premium for the fractionals as you point out... but I figure where gold is going, the fractionals will be a useful increment of value.

 

If you think about this time last year.. the equity markets were in turmoil.  This year the equity markets are flying... and by all rights the bond market, AND gold (though not maybe other commoditie metals with industrial use) should not be... .but they are.  

 

I got the best price when I bought five or six weeks ago at 1053 gold and 17.50 silver...   The mint will certainly make more eagles.. the only question will be at what price point when they do?  I believe it will be higher yet, and I believe the shortages now are a sign of rapidly increasing demand.  Again... six weeks ago Tulving had all kinds of silver eagles... mixed dates, 2009 mint tubes, boxes of 500 from the mint.. all at $1.79 - $1.89 per coin premium.... then two weeks ago premiums started going up... ending up at $2.69.. and he sold out of all US silver.  He has some Canadian coming in next week.  

I personally think that patience in this case will get you priced out of the market...  I could of course be wrong. 

 

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Re: Too late to buy PM?
hannah_351 wrote:

I appreciate your reply ao... and I understand that fear is not a driver of good investment decisions.  There is always more premium for the fractionals as you point out... but I figure where gold is going, the fractionals will be a useful increment of value.

 

If you think about this time last year.. the equity markets were in turmoil.  This year the equity markets are flying... and by all rights the bond market, AND gold (though not maybe other commoditie metals with industrial use) should not be... .but they are.  

 

I got the best price when I bought five or six weeks ago at 1053 gold and 17.50 silver...   The mint will certainly make more eagles.. the only question will be at what price point when they do?  I believe it will be higher yet, and I believe the shortages now are a sign of rapidly increasing demand.  Again... six weeks ago Tulving had all kinds of silver eagles... mixed dates, 2009 mint tubes, boxes of 500 from the mint.. all at $1.79 - $1.89 per coin premium.... then two weeks ago premiums started going up... ending up at $2.69.. and he sold out of all US silver.  He has some Canadian coming in next week.  

I personally think that patience in this case will get you priced out of the market...  I could of course be wrong. 

 

Hi hannah,

For increments of value below that of 1 oz. of gold, I think you'll find silver will give you more bang for your buck than the fractionals.

The equity markets may be flying in nominal value but in real value, they are sinking due to quantitative easing.  They are, in general, underpacing gold and especially, silver. 

Those coin shortages and premium escalations tend to be cyclical.

I don't see anything wrong with some silver eagles but you'll get more for your money with junk silver.  If your silver is in a retirement account, bars might be a consideration over eagles.  If TSHTF, you probably won't get your value back for the premium paid on the silver eagles.

I got my best deal when I bet the ranch on gold at $300 and silver at $4+ in 2001.  If a commodity drops to or below production cost secondary to a temporary market distortion, that's when you'll get your absolutely best price.  Gold will probably pull back from 1224 and you may get another buying opportunity ... but, I could of course be wrong.Wink

 

Last year, a similar situation was occurring in the gun market.  For example, you couldn't find AK-47s.  They were going for up to $600-700 and disappearing as soon as they came up for sale.  You can pick them up for half that now.  I find that if I feel like I have to pull the trigger on a buy right now, I'm usually wrong.  That's emotion talking. 

 

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Re: Too late to buy PM?

Poisonivy, I wouldn't worry about missing out on a rise in gold if you don't have much extra$ anyway.  I look at PMs as more of a way to preserve the value of $ you already have, not an investment. 

Things were like this a year ago, with shortages in gold and silver bullion that apparently turned out to be due to a limit in the capacity of themints to produce coins not a limit in the supply of the metals themselves.  Availability came back and premiums went back down.  Will that happen again, I don't know, but I think the average person still doesn't believe gold or silver are "must haves" yet.

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Re: Too late to buy PM?
Woodman wrote:

....I don't know, but I think the average person still doesn't believe gold or silver are "must haves" yet.

Tom -

That's because the "average person" still thinks it's more important to know who won "Dancing With the Stars"

 

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Re: Too late to buy PM?

My understanding of gold has come down to this. It's my take on it, and of course I'd like to hear criticism and feedback.

You can't truly consider PMs to be an "investment" in the classical sense, because they are non productive in and of themselves. There is no dividend and they don't multiply on their own. So in that sense, PMs would be a lot different than owning stocks, bonds, or even solar panels or farmland. Gold has relatively few industrial applications, so it's difficult to even consider it as a raw input into productive capital. Silver is somewhat different in this respect, but not entirely.

In my opinion, gold can be utilized in one (or all) of 3 ways:

1) As an insurance policy - against currency collapse, bad government, shtf type stuff. Unlike all other asset classes, there is no liability attached to gold.

2) As a trade - to be bought with the explicit intention of selling at a higher price.

3) As a store of value that hedges against inflation and/or deflation. Of course this relationship can be shaky for even long periods, but to the extent that gold has always kept some value regardless of other factors, it can serve this purpose at times.

Right now, I think #1 and #2 are strong reasons to own or consider purchasing PMs.

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Re: Too late to buy PM?

I've never been too clear on how gold hedges against deflation.

Maybe this is a simplistic view, but, if there is less currency in circulation, and you have a desireable currency (i.e. the international base currency) then surely since gold being effectively of "fixed" value because of it's limited and finite nature, currencies vary against it (rather than gold increasing in cost, the international buying power of that currency falls and vice-versa), then surely if deflationary pressures hit a currency then the cost of gold for that currency would fall (simple supply and demand, low supply of currency leads to higher perceived and actual market value of that currency).

Now if the forces are inflationary or hyper-inflationary, then gold will increase for the same reasons listed above, the international buying power of that currency is falling.

Am I missing something?

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Re: Too late to buy PM?
Gungnir wrote:

I've never been too clear on how gold hedges against deflation.

Maybe this is a simplistic view, but, if there is less currency in circulation, and you have a desireable currency (i.e. the international base currency) then surely since gold being effectively of "fixed" value because of it's limited and finite nature, currencies vary against it (rather than gold increasing in cost, the international buying power of that currency falls and vice-versa), then surely if deflationary pressures hit a currency then the cost of gold for that currency would fall (simple supply and demand, low supply of currency leads to higher perceived and actual market value of that currency).

Now if the forces are inflationary or hyper-inflationary, then gold will increase for the same reasons listed above, the international buying power of that currency is falling.

Am I missing something?

Deflation?

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Re: Too late to buy PM?

Yeah, point 3 in Mike Pilat's list...

Mike Pilat wrote:

3) As a store of value that hedges against inflation and/or deflation. Of course this relationship can be shaky for even long periods, but to the extent that gold has always kept some value regardless of other factors, it can serve this purpose at times.

I've heard similar things from others, yet never understood why. .

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Re: Too late to buy PM?

Thanks for info, y"all. 

One problem I have is that I won't be debt free for several years, even it I put every extra penny I make towards paying it off (it's primarily student loan debt from an advanced degree). So while I understand that paying off debt would be great, if the dollar becomes completely devalued before I pay off the debt and I have no PM to help tide me over...I'm not sure that's the best course of action.

I haven't overlooked silver, and that's actually more in line with my budget, but it's gone up a lot lately too. 

I don't fully understand the technical aspects of reading a chart or even know if that really applies here. 

This is all part of my dilemma. 

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Re: Too late to buy PM?

Gold is not a deflation hedge per se. Perhaps a did not choose my words carefully enough. But it can outperform most assets in deflation, save the dollar itself by definition. It can represent stability when bubbles collapse, so in that sense it hedges against other risks.

PoisonIvy: I certainly don't know your situation and don't mean to intrude, but I would consider a second part time job if that is at all feasible. It's a scary environment out there economically and I would not want any debt hanging over my head. I live near Washington D.C. and I know many recent grads that I would think are the high caliber sort who are in despair and unable to find jobs even here. I know one with a 4.0, a biology degree, and work experience that is now basically working as a nanny.

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Re: Too late to buy PM?

My third post.  A little ab PM and $.

The next spike will come from a monetary event...not industrial demand.

Were it not for silver, our life today would be impossible.  Petroleum has over 30,000 applications.  Silver is next in line with over 10,000 applications.  Silver is an element, not a compound.  It is the most reflective, most conductive natural material.  Most mined silver is now in landfills around the world.  Silver and gold, together, have formed a balancing act, monetarily, for many many years.  In the late 1880's, silver was de-monitized.

The normal ratio is somewhere between 12:1 and 16:1 silver to gold.  It is no where near that today.

Actually, there is less above ground silver than there is gold.  Most silver that has ever been produced is gone.  Most gold is still around.

The next spike will (again)  be monetary.

Personally, I buy 90% silver coin for several reasons: 1) the lowest premium, 2) recognized world-wide at face value without assay, 3) availability (currently).

1 ounce coins/bars will (probably) be too large if you need to use them for daily purchases.  Another issue:  just like the gold/tungsten issue with "salted" gold bars, a silver round from a private mint MAY have to be assayed for content...meaning: you will receive less than spot for your value.  In the 1980 spike, a lot of silver was purchased at less than spot...because the content could not be verified without being refined.  There was simply too much silver being offered for sale...and if your silver was not readily verifiable, you received a discount on your sale.  There was a lot of hybrid silver (e.g. flatware, jewellery, etc) that was in line at the refinery.

I agree with others:  unless you are a trader: able to read charts, current on world events, able to react with quick responses to changing world events...you may NOT want to invest in stocks at this time...

Investing, per se, is a longer term prospect.

I view PM as a hedge against the unknown.  Something with intrinsic value. 

Lets face it:  for the most part, as PM rise in value...the USD falls.  When the facts of this 1.5 million 400 oz "gold" bars are fully felt in the market, hold onto your seat.

Another issue:  this is NOT a sterile position.  Yes, you receive NO dividends or interest on your PM.  But there is another strategy:

Arbitrage between gold and silver.  They fluctuate in their value ratio.  I bought silver at 84:1.   Today it is around 60:1.  The current target is in the 50:1 range.  At that point, I will swap most of my silver for gold.

The goal:  increase the number of ounces of whatever PM I own.

The long term goal:  16:1 silver/gold.

At that time, I will swap into something else.  I have no idea what that is, currently.  But my guess is that it WON'T be the USD.

I buy my PM from www.the-moneychanger.com   I have a high level of trust with Franklin and his staff.  Low premuims, prompt delivery.  I have made over a dozen purchases with no issues whatsoever.

Regards,

T

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poisonivy113
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Re: Too late to buy PM?

Mike,

You are right, more money coming in would be a good thing! I wish I knew how to be taken seriously for a second job when my advanced degreee makes me overquailified for many/most jobs and employeers are being flooded with applications. I know  a number of people who are unemployed and looking desparately for "anything". It's not pretty! I consider myself fortunate- even though my current job is a per diem position, most months I get enough hours to more than cover my expenses and pay some extra on debt, but I feel compelled to hang on to some reserve in the event I have some leaner months.Allt hings considered, I am doing better than most people I know. Sadly, that's not saying much!

Events of late have certainly reframed my thinking about debt in general. Never again will I incur any debt! The long term risk isn't worth it. And I wish I had paid attention to investing matters much more closely. If I had even half a clue about what I know now just a year earlier, I'd be in a better position today. Even now I'm just at the begining of the learning curve.

Life always looks different when viewed through the retrospectoscope.

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