How to Buy and Own Gold - The Layman's Guide to Escaping the Dollar

For nearly 40 years, the government and Federal Reserve has been destroying the value of your money. If you're like me, you don't support any bailout plans which effectively give money to criminals at the expense of a worse dollar and higher cost-of-living.

This post is not meant to discuss those issues - it's here to discuss one solution for your personal savings - how to hedge on some gold (and silver) to preserve personal net worth in the case that the dollar gets further devalued. Having followed gold for a while, but not knowing many ways to actually own good bullion, I finally did some research.

Here's how you can buy and own gold and silver:

• BullionVault.com. This is a service that will store gold for you in your choice of three vaults in three different countries (US, UK, and Switzerland [my preferred choice]). It is similar to the popular GoldMoney.com but with better rates and an easier application process. You can purchase the gold from others and will get commissions for selling as well.

  There are many free ways of putting money into BullionVault, such as using their BillPay system, but if you are in a hurry, you can wire it in with a fee.

  • CEF or GTU (I like CEF). These are Canadian Gold Royalty Trusts, which means that they give big dividends (Canadian energy trusts don't have to pay taxes if they redistribute their income... for now until 2011). With these, you have some new tax forms to do and it can get complicated. See this link for a bit more on these trusts: http://www.dividenddetective.com/canadian_royalty_trusts.htm

  Now here's the trick when buying CEF or GTU: Around last week, there was a 7% premium (ie http://www.centralfund.com/Nav%20Form.htm - they own $1.446B of assets [mostly gold/silver bullion], but the market cap for the fund is $1.56B. Just take 1.446 and divide by 1.56. The good days to buy are when this premium is less than 10%). If the premium is over 10%, then there are too many shares outstanding for the amount of gold they have, and you are buying into an overbought situation.

  You cannot get physical gold delivery from CEF. You can only sell the fund back for dollars.

  • GoldMoney.com - Open an account here, buy gold or silver at a premium, and they keep it safe in France and Switzerland. They charge you fees for wiring money in and out, and also fees for storage. I haven't seen a bad review out there on them, so long as you know the fees and premiums you're going to be paying. I don't see any free way to transfer money into GoldMoney like BullionVault (above) -- you must wire it in at a fee.

  • Perth Mint Certificates (Australian Mint) - They'll hold your gold too - www.perthmint.com.au/investment_certificate.aspx - I'm just not so sure I trust the Australian Government with my gold.

  • Buy coins and lock em up in your gun safe - These guys are reputable and right here in Inglewood, CA - GoldDealer.com. Tulving.com is also well-known. Risks include robbery and US Government confiscating it (google "Gold Confiscation Act"). See also Friday's news: http://biz.yahoo.com/ap/080926/mint_gold_coins.html ... wtf?

  • Everbank Gold Select - www.everbank.com/001Metals.aspx - I have done very little research on this one, but it sounds quite interesting. Anyone have any thoughts? It might compare better to #2 and #3

  • ETFs, such as GLD, DGP, and a billion others. GLD is 10% backed by REAL metal gold. This is why I'm not as huge on it - when the shit hits the fan, will they be able to keep up?

  • Added a new one - Gold Mining Companies' stocks. Often times, the mining companies own a lot of gold too, which you will then indirectly own. You, of course, will not be able to get physical delivery.

Please post any comments, links to reviews of the stores/funds, and other ideas. Gold and silver are only ONE way of getting into precious metals, it's still rather speculative, and there are many other commodities that you should research as well.

Archived Comments