Buying Gold Bullion

[ramy98]

Buying Gold/Silver Bullion

Hey guys,

Just wondering what everyones opinion is on gold at this time??

Even though the price is roughly 885 USD an ounce I see no reason for the price to drop based on the fundamentals. All in all the fundamentals look good for gold, just my opinion.

Looking to go in big; I actually feel that the US is going to be going into some very tough times in the future... I actually feel like the "writing is on the wall" and the clues are everywhere....

Anyone else employing a buy and hold strategy for gold bullion ?

EDITED to add: I feel that gold will rise primarily due to the continuing weakening of the US Dollar.... Just what I am thinking...

thanks !

 

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[kidgas]

ramy98,
I agree 100% that gold bullion is a good purchase now. However, I would leg in to my full position over about 1-2 years time. There can be quite some seasonality associated with gold and some volatility as well. I could easily see it dropping toward 700/oz later this summer. The IMF would like to sell roughly 400 tonnes, and when the price begins to fall, GLD will have to liquidate if all gold's "fair weather friends" decide to get out. This would add even further supply. Just my 0.02 regarding legging in.

 

[ramy98]

thanks for the reply Kidgas,

I just wanted to point out that if we all look and see what is happening within the US the clues are everywhere!

Also, my dad was telling me how the price is "high"; you know what I think its a decent buy.

Why?? The price maybe 885 an ounce but nobody is talking about it and Gold's store of value properties hasnt hit the mainstream media. Wait until the dollar further collapses and people start rushing in and again once "the local plumber" starts taking about how much he is making.... Its time to sell...
I got that plumber example from MJ BTW.... Just my 2 cents

Kidgas;it looks like the 403 tonnes of Gold that will be sold will be done over the next two years and it represents 12 billion US or so...Just from a few posts I read; seems like a small amount of money to cause the price of gold to drop by such a large amount.

Cheers !


Ramy

 

[kidgas]

ramy98,
I agree that it does seem like a small amount to make the price of gold drop so much. I tend to read a lot of the commentary and analysis at Kitco.com and try to pick up other tidbits elsewhere. I also agree that the price of gold at $880/oz should seem low. In my opinion it should be a lot higher. However, it is not my opinion that matters but the collective opinion of many, many traders and investors that make the market. Right now, the market says $880 is the right price.

I am suggesting that there may not be a rush to get in, that during this summer, the price may actually approach $700 or $650. If you want to shoot your whole wad now and can handle that potential "paper" loss, that is fine. I was just suggesting taking an approach that Jesse Livermore or another trader might advocate...namely, legging in. The nice thing is that gold possesses some intrinsic value and will not go to zero in a bankruptcy. With that in mind, you could consider buying a third of your position now and waiting a few months. If the price is higher, you have already established a profit and would be adding to a profitable position (ala Livermore). If the price goes down, you are adding to your position and lowering your basis. Either way, you should feel good. But this is just my 0.02 and would be a way that I might consider getting started.

I still feel that we are in the late first or early second stage of the secular bull market in gold. Investing demand is starting to increase and should create a floor under the gold price. I agree the signs are everywhere but it will take a while for it to be recognized. A secular bull market should last anywhere from 12-18 years. Thus, the recent bull should have several more years to go. Just have to wait for that plumber. Regardless the method you choose, it is important to start investing in gold as a hedge and store of wealth.

 

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[ramy98]

kidgas,

I do believe in scaling into a position. Especially with July/August being a lower demand period for Gold.
What are you views on Silver? Do you see an advantage to adding some silver bullion or stick purely with Gold ?

Will the fact that Silver is used as a manufacturing input play a large role in suppressing the price of silver ?

 

[kidgas]

Here are my thoughts on silver:

I think silver is good to own. It is more volatile than gold. It tends to be a by-product of base metal production. With the industrial slow-down there will be two factors at play. First, the decreased production of base metals will result in a decrease in silver supply. Second, the decreased economy will result in a decrease in silver demand. These may or may not offset each other. Right now it seems that decreased manufacturing is playing a bigger role and so the price of silver has declined.

I also think that the investment thesis for silver should be similar to that for gold. Silver ends up being a poor man's gold. Not everyone can go out and buy an ounce of gold. But anyone who can afford a carton of cigarettes can buy an ounce of silver. So the potential market for silver is greater. Thus, in the event of a complete loss of confidence in paper currency, silver would have more upside potential. Finally, I think of gold as reserved for larger purchases and silver for everyday type purchases when it is time to cash out.

I own some gold bullion and some silver bullion as well.

 

[kidgas]

ramy98,
Thought you might like this article:

Devote 25% of portfolio for gold, buy in dips | 09 April 2009 | www.commodityonline.com

 

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[ramy98]

thanks Kidgas

 

[Exact]

Great thread! I prefer silver right now to gold because, at $860 per ounce, gold is trading at around 70 times the price of an ounce of silver. At $12 an ounce, silver is by no means cheap, but if you believe that precious metals have nowhere to go but up, then silver feels like it is cheap relative to the price of gold right now. Just to give you an idea, historically an ounce of gold has been as cheap as 15 times the price of silver and as expensive as 100 times the price of silver. At 70X, it is definitely on the high end. One final thought on silver -- it is used in industrial applications (electronics, cameras, etc.) and many people speculate that silver could become quite scarce in the future. This speculation is based on the fact that the the total world consumption of silver is greater than the amount produced in mines annually and inventories held by governments is thought to be running low. One source I read about claims that the U.S. Government has less than a 1 year supply of silver in the treasury. I am in the process of doing additional research to confirm this. Best, E