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Posts Tagged ‘Gold Purchase’

Gold, Nonferrous Metal

March 24, 2010

Good Ways to Help You Buy Gold

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gold-barsHas the glitter of gold caught your eye? As the price of the precious metal surges to levels it hasn’t seen in 25 years, investors who might not ordinarily dabble in such things are wondering if gold should be in their portfolio. Some investment advisers tout gold as a way to diversify a portfolio and protect against inflation and a decline in the value of the dollar.

What is the best way to buy gold I am often asked. There is no big secret to this but probably the best way to buy gold is summed up in the word consistency. This means that, regardless of the price of gold at any one time, one continues to buy gold on a regular basis month after month, week after week, regardless of the price.

The cost of your gold is spread out evenly over time this way and, if the price of gold dropped say, at one time for a period, it would not matter particularly as eventually it will rise again and the average value of your gold holdings will remain the same, if not increase. Share investors understand this principle of consistency in buying regular packets of shares and the value and cost of the shares tends to even out.

One aspect that is not understood well is the idea that the value of gold can be too high. In actuality the value of gold remains fairly steady and it is the decreasing value of the currency that gives the illusion of gold being more expensive. The currency is not linked to gold and rides a roller coaster of its own when it comes to inflation and recession. The chart shown gives some understanding of the inflation linked gold price.

So the consistent buying of gold on a regular basis month after month, week after week, will even out the peaks and troughs and the asset value would not be affected by inflation.

In short, saving ones assets in gold is a far better deal than sticking money in the bank.

With gold then, it becomes a matter of choosing what gold one buys, keeping in mind the mark up or premium placed on various gold products.

Some gold coins for example, especially newly minted ones, attract a premium, such as the cost of packaging, shipping, insurance etc, which can be quite costly. Small gold bars can suffer the same costs also.

As in many other products, the more gold you buy in one purchase the smaller the premium you pay. The mark up and costs associated with buying gold in the form of a one kilo bar are far less, per ounce, than buying one ounce bars. Of course you have to pay the price for one kilo of gold and not very many people can afford to do so. How much gold you can buy at one time will depend on how much you wish to salt away for a rainy day on a consistent basis.

There are many places one can buy gold coins and small bars without incurring some of the heavy mark up you have with newly minted gold coins and bars. There is no investment opportunity in buying gold coins in a wooden box which one has had to pay for so provided the coins are sealed in their original plastic containers, a presentation box, although it ‘looks ‘ nice, is really superfluous to an investor.

Coin dealers selling proof coins, auctions and private sales are good look places to look. Join or belong to a coin club or association is a worth while activity since many club members sell coins to each other and there is usually plenty to buy. Scouring the auctions, such as eBay and the like can be time well spent. Spending some time studying the various gold coins and the value is time well spent also. Understanding the values of rare gold coins can net you some good deals also

Basically, applying just a bit of due diligence and some consistency in buying gold coins and bars on a regular basis is really the best way to buy gold!

Gold, Nonferrous Metal, Nonferrous Metals Prices

March 22, 2010

Live Spot Gold for 22 Mar 2010

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Bid/Ask 1107.70 1108.70
Low/High 1104.60 1109.80
Change -0.20 -0.02%
30daychg -10.00 -0.90%
1yearchg +154.50 +16.22%

Gold, Nonferrous Metal, Nonferrous Metals Prices

February 20, 2010

IMF Announced to Block the Gold Bullion

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It was reported that the International Monetary Fund sold 200 metric tons of gold to India last year for about $6.7 billion. All told, the IMF has sold some 212 metric tons of gold to central banks since September 2009 out of a total authorized 403.3 metric tons. That is about one-eighth of the IMF’s total gold holdings.

The IMF has announced that it would sell the remaining 191.3 metric tons on the open market. The sales will be phased to avoid disrupting the gold market. The announcement caused a sharp dip in spot gold prices this morning, to under $1,100 per ounce on the London market. Prices have recovered since then to about $1,119 per ounce.

The IMF is selling the gold to accomplish two goals. First, the IMF is using the proceeds of the sales to establish an endowment that it will use to produce income to cover its administrative expenses. Second, to generate more resources to fund a $17 billion loan fund for low-income countries, primarily Africa, that have suffered the most from the global financial crisis.

The World Gold Council has reported that demand for gold fell by 11% worldwide in 2009, while prices were up 12%. In the fourth quarter of 2009, gold averaged $1,099.63 per ounce, up 38% from the same period a year ago.

The growth in gold demand came mainly from ETFs like SPDR Gold Shares (GLD), iShares Comex Gold Trust (IAU) and PowerShares DB Gold (DGL). ETF demand for gold in 2009 topped 594 metric tons, up 85% from 2008. Almost half that growth came in the first quarter, when everyone thought the world was going to hell in a handbasket and piled into gold. By the fourth quarter, demand from the ETFs had fallen to just 31.6 metric tons.

Going forward, if the economic recovery falters, gold will once again play its role as a safe haven. If the recovery strengthens, gold will assume its role as an inflation hedge. Either way, the demand for gold is likely to increase.

The IMF’s gold sales are not likely to have much impact, either long-term or short-term on the spot price of gold. The dollar value is just too small. Sure, 191 metric tons sounds like a lot, but it’s probably only around $6 billion worth of gold. That just isn’t enough to swing the gold market much one way or another.

Gold, Nonferrous Metal, Nonferrous Metals Prices

February 19, 2010

GOLD RISES WITH UNCERTAINTY

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Debt monsters of the past have tended to end in deflationary depressions, but it’s important to understand that gold can rise in this kind of environment. Remember, gold rises during economic uncertainty. In the early 1930s, for example, during the Great Depression, President Roosevelt raised the price of gold almost 70% from $20.65 to $35 an ounce in a struggle to bring back inflation.

Gold is money. It’s the currency of last resort when monetary times are difficult. So when gold rises in all currencies, as it’s been doing for several years, you know the rise is enduring and superior. So even though gold has no yield or earnings to measure like the other markets do, it has true value.

The central banks are flooding the markets with their own currencies, and competitive devaluations will continue to grow. Many countries depend on exports for economic survival. This means the best price in the current deflationary environment wins, which is what a cheaper currency does.

This situation originally started with globalization and it’s bullish for gold. The U.S. is still in a delicate situation. It needs a weaker dollar to compete and stimulus measures must continue, which are both ultimately bullish for gold.

This is one important reason why we do not think gold or commodities are in a bubble. We believe they are rising within a mega trend that could last several more years, perhaps a decade. Some say that China is in a bubble and if they are, the demand for commodities will fall. China may be overheated but we don’t think it’s in a bubble. Their growth, even if it’s only a part of what they claim, is solid.

Gold, Nonferrous Metal, Nonferrous Metals Prices

Gold Prices End Higher After Fed Rate Discount

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It was reported from NEW YORK that gold prices may have retested the $1,100 support zone after the Fed’s surprise discount rate hike announcement, but the market has stabilized and Kitco Metals analyst Jon Nadler says there are more pressing issues on the plate right now.

Although Nadler agrees that Thursday’s announcement was “psychologically beneficial for the dollar, but not so hot for gold,” he maintains that the impact has been small so far.

“By this morning the realization that the discount rate is not the Fed funds rate started to sink in among speculators,” Nadler explained. He adds that “it was a surprise announcement, but one shouldn’t read too much into it… The hike only affects $14 billion worth of borrowing.”

At the moment, Nadler, like many gold observers, is more focused on the IMF’s (International Monetary Fund) decision to sell 191.3 tonnes of gold from a previously planned sale of 403 tonnes of gold.

That move could indeed hurt gold prices. “This is a more critical situation because the market is already in surplus supply mode,” Nadler explains.

Nadler notes that he isn’t completely ignoring the Fed discount rate hike announcement, given that it forecasts a possibly more qualitatively important Fed funds hike between August and October. This signals that the dollar could rise against the Euro, putting pressure on gold prices.

On a long-term basis, Jon Nadler  is looking at lower gold prices as he sees continued dollar strength – as well as the Fed shift towards an exit strategy whereby it is less accommodative and more inclined to mop up excess liquidity. Still, Nadler argues that no downward spiral in gold prices is on the horizon.

In January, Nadler projected a price range of $880 to $1,280 an ounce for the next six months, taking volatility into account. It sees a price range of $970 to $1,170 in the short-term.

Nadler continues to encourage his investors to hold a 5% to 10% core allocation in gold, even if prices edge lower. “There’s no reason to shift out of that,” he said.

Gold futures for April delivery was falling $2.8 to $1,115.90 an ounce at the Comex division of the New York Mercantile Exchange Friday.

Gold, Nonferrous Metal, Nonferrous Metals Prices

How to Trade Gold?

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It’s hard to believe so when some of the smartest and wealthiest financial investors keep buying it. Gold being a tangible asset not a paper one is considered to be valuable in times of declining paper assets.

Exchange traded funds offer a way for investors to purchase shares without taking delivery on gold bullion.  There is no need to worry about storage.  You could sell these shares at another time back to the market place. Another way to invest in gold is to purchase call option contracts.  These financial instruments offer a tremendous amount of leverage with a limited risk.  Using the leverage is a way to maximize your returns.  Just like ETFS, there is no obligation to take delivery.  Acquiring a financial option specialist can help you trade gold option contracts.  HB Group can be very helpful with their experience and knowledge with these financial instruments.  You could visit them at www.hbgroupintl.com

Multibillion dollar investments are being made in gold today.  Only one could think that the prices are still relatively low.  Most investment portfolios do not have Gold in them.  With today’s investment gold rush, a shift of portfolio funds may cause prices to jump to $1300.

Gold, Nonferrous Metal, Nonferrous Metals Prices

December 20, 2009

Investors Touch Sweet from Gold Funds

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Investors who put their money in gold exchange-traded funds (ETFs) are smiling their way to the bank. Gold ETFs have outperformed physical gold with returns of 30 per cent in a year, while physical gold has so far gone up only about 23 per cent (average on an annualised basis) in the same period.

Though physical gold has gone above Rs 18,000 per 10 grams recently, on average it was at Rs 15,400 per 10 gram in 2009 from Rs 12,500 in 2008. Dhirendra Kumar, CEO, Value Research, said, “Realising better returns, now some of the gold ETFs have attracted investors to invest in ETFs more than any other funds. Recently, some exchange-traded fund companies such as Gold Benchmark, Kotak Gold, Quantum Gold, Reliance Gold, SBI Gold and UTI Gold have shown their performance with a rise of as much as 30 per cent in one year’s time.”

Just more than two-year old gold ETFs — instruments that can be traded like shares — are backed by physical gold holdings. As the country’s gold collection under exchange-traded funds rose 32.9 per cent a year to 7.4 tonnes in November, industry sources said, this new segment would gain more popularity with some more funds planning to enter the market.

“In the mutual fund space, we avail only two distinct kinds of gold-related funds. The first one is gold ETFs, which closely track the price of gold itself and deliver profits and losses that mirror investing in physical gold. The second one consists of a couple of equity funds (one from AIG and the other from DSP BlackRock) that actually invest, not in gold, but in foreign gold-related stocks, like those of gold mining and processing companies,” Kumar said, adding, “Over the last one year, gold has gained 44 per cent (year-on-year basis), but these funds have gained more than twice that.”

Kumar said, “All the ETFs deliver identical returns. Unlike an investor in equity or equity-backed products, there aren’t hundreds of choices.” Jaydeep Bhattacharya, chief marketing officer, UTI Mutual Fund said, “In the long term, bulls think the metal will continue to shine. Gold has been proved to be a historic store of value and an inflation hedge. I think it is an asset class, not just a trade. As far as gold fund is concerned, for last three months and six months we have seen 6.83 per cent and 17.3 per cent rise of returns respectively in absolute term and it may be doubled on an annual basis.”

Hiren Dhakan, mutual fund analyst, Bonanza Portfolio said, “The US dollar and gold share universal correlation with each other. Gold isn’t a bubble. Although it has gained of late, the dollar remains weak, the stock market has run up more than fundamentals support, and a lot of people haven’t invested in gold yet. That suggests gold ETF investors should stand apart.”

Gold, Nonferrous Metal, Nonferrous Metals Prices

October 14, 2009

Price Pressure on Gold Demand

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It is reported on Oct. 14 that soaring prices are likely to dent the demand for gold tomorrow, which is Dhanteras.

Merchants are expecting demand to fall by as much as 50 per cent, with buyers opting for smaller items.

The yellow metal rose to a record high of above $1,070 an ounce on Wednesday in London as the dollar slid to 14-month lows against the euro and oil prices inched towards $75 a barrel, boosting interest in commodities.

In India, where markets are influenced by global trends, prices are sizzling at record levels. In Calcutta, pure gold is at Rs 16,265 per 10 gm after scaling Rs 16,385 yesterday.

Dhanteras, when precious metals are bought in the belief it would lead to prosperity, generally accounts for sales of 15-20 tonnes of gold. But when consumers throng to jewellery shops and banks on Thursday, they are expected to look for smaller items.

“This year, our new initiative has been the 2 gram coin,” said an executive in a private bank in Mumbai. “Smaller coins are definitely going to sell more,” the executive added.

Traders and dealers said high prices, inflation and the economic slowdown are turning people into cautious buyers. “We see gold demand to drop by 50 per cent tomorrow because prices are ruling at an unaffordable level now,” Bombay Bullion Association president Suresh Hundia said.

Dhanteras is also expected to show Indians’ growing love for gold as an investment in the form of coins and bars rather than jewellery.

Jewellers and traders said the shift towards buying bullion over the past 4-5 years was here to stay as more consumers realise it is the more economical way to buy gold.

It is said from Harmesh Arora (director of NIBR Bullion Pvt Ltd, a Mumbai-based gold refinery that sells coins) that now even small investors have started buying gold coins. They collect it for their children.

Gold, Metal News, Nonferrous Metal

September 22, 2009

China May Start Gold Purchase

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According to two government officials, China may purchase gold from the International Monetary Fund in order to diversify foreign reserves and increase its influence in the international organization.

President Hu Jintao will put the idea forward while attending the G20 summit to be held in Pittsburgh this month, the sources said.

China’s gold reserve increased to 1,054 tons by the end of 2008 from 600 tons in 2003, Hu Xiaodong, head of China’s State Administration of Foreign Exchange, said early this year.

The country has been seeking ways to diversify its foreign reserves away from the current majority held as US dollar assets.

China’s foreign reserves totaled 2.13 trillion dollars at end-June this year, adding 185.6 billion dollars from beginning of this year.

On September 19, the IMF announced that it will offload 403.3 tons of gold reserve to relieve financial pressures and provide more loans to poor and developing countries.

Currently, the International Monetary Fund, the third largest gold holder next only to the US and Germany, holds about 3,200 tons of gold reserves.

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