How To Buy Gold | Homemade Investors

How To Buy Gold

I'm going to say it again - if you're not in the
gold market, you're making a huge mistake.

Reason: Gold is the ultimate asset. It is the
purest form of money, and the oldest, most
durable wealth-preserving asset on the
planet.

Governments can't debase it. It has no
debts, no board of directors, no politicians or
central bankers that can mess with its value.

Remember, back in 1980 gold hit a high of $850 an ounce. So to reach that same level
now, gold will need to trade at $2,100 in today's pathetic greenbacks, which are being
systematically devalued by our own government.

I don't really blame the folks in Washington. As I've said many times before, they have no
other choice but to sacrifice the value of the dollar on the altar of all the debts that are
turning sour in this country.

That's what's happening now, in spades. And if it's not a reason to own gold, I don't
know what is.

Heck, just since last month, the price of gold has jumped more than $84 an ounce, or
about 13%. That's three times the decline in the value of the dollar during the same
period! Plus, we haven't even seen the worst of the dollar's decline yet.

So today, I want to tell you all about the many ways you can invest in gold, including my
top six criteria for separating the good mining companies from the bad.

That's why gold has survived every economy history has ever
witnessed, and preserved investors' purchasing power over a span
of some 5,000 years.

And if you think gold is expensive right now at about $740 an
ounce, think again. My longer-term target for gold is more than
$2,100 an ounce.

That means gold is undervalued by as much as $1,400 an
ounce!

Gold is Underpriced by $1,400 an Ounce!
by Larry Edelson, Money And Markets
Reprinted Saturday, April 19th, 2008

First, let's talk about two ways to buy physical gold.

#1. Gold bullion coins. The best examples are the
American Eagle, Canadian Maple Leaf, and South African
Krugerrand. These are great to buy, very liquid, and fun to
look at. But they are not the best way to buy physical gold,
in my opinion.

That's because buying these coins invariably entails paying
premiums of anywhere from 4% to 7% over the actual value
of the gold in the coins.

So, I prefer...

#2. Gold ingots and bars. Ingots are generally one ounce, but can be found in two or
three ounce slabs as well. Bars generally come in sizes of five to 10 ounces, with the
10-ounce form more readily available.

Either way, you can get significantly more gold for your money than you can with bullion
coins.

For example, at today's price of $740 per ounce, 100 ounces of gold is worth $74,000.
But if you buy 100 of the one-ounce gold Canadian Maple Leafs, you'll pay $77,700 for
the same metal content.

The additional $3,700 for the Maple Leafs is essentially for the design, minting and
brokering of the coin.

Bottom line: For physical gold holdings, I recommend one-ounce ingots and 10-ounce
bars. And for even larger purchases, you can consider the internationally-traded
one-kilogram bars.

They're all relatively easy to buy - just make sure you
are buying what is called "four nines fine" gold - metal
that's .9999 (99.99%) pure gold.

The most common hallmarks are Johnson Matthey,
Engelhard, Credit Suisse and Pamp. Most reputable
dealers carry these ingots and bars in these hallmarks,
or can readily acquire them for you.

How to Store Your Physical Gold

For small purchases, say up to 20 or 30 ounces, I'd recommend the safe deposit box at a
local bank. It's simple, safe and worry free. Even if the bank were to encounter financial
difficulties, access to the box would not be affected.

Important note: I do not recommend storing any gold in your home or office!

For purchases beyond 20 or 30 ounces, use your
dealer's storage facility as long as they offer
non-fungible storage.

With non-fungible storage, your bullion or bag of coins
is labeled with your name as your specific property.
Moreover, it's stored separately from dealer assets and
it is not commingled with the bullion of others.

I think this is the only type of dealer storage you can be
fully comfortable with. So if your current dealer doesn't
offer it, find one who does.

Always Keep Some Physical Gold. But for Larger
Quantities, Consider These Two Choices...

Sometimes storage is impractical, especially when you're
holding large amounts of metal. Fortunately, there are a
number of ways to invest in gold while avoiding some of
the hassles of storage and delivery.

#1. Exchange-Traded Gold Funds (ETFs). My favorite is the streetTracks Gold Trust
(GLD), which effectively offers investors physical gold in the format of an
electronically-traded security, with each share representing one-tenth of an ounce of gold.

Two other choices are the iShares Comex Gold Trust (IAU) and the Central Fund of
Canada, Ltd (CEF). However, among the three, I prefer the streetTracks Gold Trust
because of its greater liquidity.

#2. Perth Mint Certificates (PMCs). These are issued by Western Australia's
government-owned mint, and they give you title to a specified number of ounces of gold.

Some advantages:

- The Perth certificate comes with a government guarantee carrying a triple-A rating from
S&P.

- Lloyd's of London insures your bullion against fraud and theft.

- There are no storage fees.

- The certificates are transferable.

- And you can redeem your certificates at the mint.

For more information on the Perth Certificate Program, check out this site.

One last thing on PMCs: if you buy them, specify you want "allocated" certificates, which
has similar advantages to the non-fungible storage I described above. ...

[Ed: If you would like to receive more information on buying gold, including timing
alerts and where to buy, feel free to sign up for our free email newsletter by visiting our
main page at http://HomemadeInvestors.com. To read the second half of this article,
which discusses how to select gold mining stocks, click here.]

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Disclaimer: This issue of Money And Markets was originally published on September 27, 2007 and was republished
with permission in Homemade Investors by Homemade Investors LLC. The information contained in this article
does not constitute personal investment advice and is not designed to meet the personal financial needs of any
individual. Investors should seek advice from a qualified investment advisor before entering into any transaction.
The information contained in this article is deemed reliable but is not guaranteed. The information and opinions
contained in this article are subject to change without notice, and there is no obligation to update such.

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