Gold and silver suffered a spectacular fall on Friday.
Silver, especially, suffered a one day fall in price of 15%.
That is one of the biggest silver price crash in history, since the price fell from more than $40 per ounce of silver to just $30.
While the price of gold fell by more than $100, the overall percentage is still less than 10%.
Is now a good time to buy gold? Is now a good time to buy silver?
Before we talk about the best time to buy either, let us examine the reasons for the market crash.
There are basically two factors that come into play.
First, the change in margin requirement.
CME group, the owner of COMEX trading platform, raises margin requirements for precious metal trading and bond.
The performance margin for COMEX gold future increases as much as 21%, and the performance margin for COMEX silver future increases by 15%.
This is not the first time that the decision of CME group has affected commodity pricing.
It comes at a time when the market sentiment is at the turning point.
That brings us to the second reason for the market crash in precious metals.
The second reason is that of rumors spooking the investment world. The rumors talk of hedge funds moving away from gold and silver to cover losses for other investments.
This is partly based on the fact that many fund managers do not consider gold and silver as safe haven anymore.
The price per Troy ounce of either precious metal has increased too fast and too much. The hedge fund managers have made a good profits if they had held the precious metals for more than two years.
It makes sense for them to liquidate some of the assets to realize profits.
The combined factor of fear, and margin requirement, brought about panic selling all over the world.
Based on these two factors, do you think now is the best time to buy gold or silver?
If you have the fund for investment, it is indeed a good time, if not a best time to start buying.
Better use just a third of your available funds for investment.
The market is still not stable. People are fearful of uncertainty. The roller coaster ride in stock market and commodities is a good reflection of the fear.
The main reason to buy now is that the factors driving gold and silver to record high are still valid.
That means the economy is not in good shape now. The risk of US government printing more money to devalue the currency is still there.
The inflation is still eating up the buying power of people.
In short, as long as the economy is not doing well, and the US dollar will not strengthen, the price of gold and silver will still go up.
The current market crash may last a day or two. It may last a week or more. It may last for a month.
The only certainty is that gold and silver price will go up in the long run. The only time to stop buying and start selling is upon economic recovery.
That means when you see formerly unemployed people gaining employment, and look like they have gotten good jobs, that is the time when gold and silver will fall for good. That is the true market crash.
Saturday, September 24, 2011
Friday, September 16, 2011
1 oz gold bar best for investment
If you are buying physical gold for investment, the best is to buy 1 oz gold bar size.
It is true that the cost of 1 oz gold bar is rather expensive, since the cost of purchase includes premium over spot, plus applicable sales tax.
However, you will find it easier to sell when you want sell.
It is true that the 1 gram gold bar is very attractive in term of price, but when you factor in the premium, you will find that the price is ridiculous.
Bear in mind that you are buying at a higher premium than selling.
Regardless of where you want to sell your investment, you cannot get the same high premium for small bars, such as 1 gram or 5 grams.
The transaction cost involves in sale of 1 gram or 1 oz is the same.
The cost of wrapping and paperwork is the same.
If you think of it in this way, you need to get 31 sets of 1 gram bullion to make up 1 ounce. If you buy separate, as in a few 1 gram every month, you can see that the transaction cost is far too high.
That is why saving up your money to get 1 oz gold bar is better in the long run.
It is easier to sell 1 ounce than 1 gram.
The only time when you buy many 1 gram bullions is for gift giving. It makes a very nice gift, and your friends and relatives will feel appreciated.
That means buying 1 gram gold for gift and not for investment.
Let us talk about where to buy physical precious metals?
If you want to get real gold without worries of getting fake products, the best is to buy from the local banks.
You must keep the invoice, so that you can sell it back to the bank in the future.
You can also buy from the goldsmith shop or the registered gold coins and bars retailer shops.
Check if they will buy the products back.
Some shops will buy back when you have the invoices to prove that you buy from them. They will give you a higher premium over spot.
However, do not expect the same premium.
That means when you buy at a 20% premium over spot, you are likely to get only 10% premium over spot for selling back to them.
You have to keep it in good condition too. Best to keep it in original, unopened condition.
It is true that the cost of 1 oz gold bar is rather expensive, since the cost of purchase includes premium over spot, plus applicable sales tax.
However, you will find it easier to sell when you want sell.
It is true that the 1 gram gold bar is very attractive in term of price, but when you factor in the premium, you will find that the price is ridiculous.
Bear in mind that you are buying at a higher premium than selling.
Regardless of where you want to sell your investment, you cannot get the same high premium for small bars, such as 1 gram or 5 grams.
The transaction cost involves in sale of 1 gram or 1 oz is the same.
The cost of wrapping and paperwork is the same.
If you think of it in this way, you need to get 31 sets of 1 gram bullion to make up 1 ounce. If you buy separate, as in a few 1 gram every month, you can see that the transaction cost is far too high.
That is why saving up your money to get 1 oz gold bar is better in the long run.
It is easier to sell 1 ounce than 1 gram.
The only time when you buy many 1 gram bullions is for gift giving. It makes a very nice gift, and your friends and relatives will feel appreciated.
That means buying 1 gram gold for gift and not for investment.
Let us talk about where to buy physical precious metals?
If you want to get real gold without worries of getting fake products, the best is to buy from the local banks.
You must keep the invoice, so that you can sell it back to the bank in the future.
You can also buy from the goldsmith shop or the registered gold coins and bars retailer shops.
Check if they will buy the products back.
Some shops will buy back when you have the invoices to prove that you buy from them. They will give you a higher premium over spot.
However, do not expect the same premium.
That means when you buy at a 20% premium over spot, you are likely to get only 10% premium over spot for selling back to them.
You have to keep it in good condition too. Best to keep it in original, unopened condition.
Wednesday, September 14, 2011
Before investing in gold and silver
With the current price of gold and silver, it seems that gold and silver are good investments.
The newspaper and internet contain tons of conflicting information about investing in gold and silver.
Some people buy physical gold bars or gold coins.
Some people prefer silver, as they have the idea that gold is overpriced.
Analysts are warning of short term crash, but they are positive about long term price increases.
If you read too much about the conflicting perspectives, you will definitely suffer from information overload.
However, the basic principles apply.
You have to consider all these factors before investing in gold and silver.
1. Your capital
How much can you afford to invest?
You have to remember that there is no dividend payout for investing in gold and silver.
If you happen to buy just before the market crashes, you may have to wait for a long time before you can sell for profits.
That is why you must not need the initial capital for immediate future.
If you plan to buy a big ticket item within a year or two, you should not use the money for investing in gold and silver.
2. The transaction cost
It does not matter how you wish to invest. There are many different transaction cost involved with each method of investment.
If you are trading gold and silver online, you have to pay for transaction cost.
If you are buying physical gold and silver bullions, you have to pay for the shipping, the insurance and the applicable tax in your country.
The best is to know the transaction cost for selling as well.
For example, you want to sell the physical bullions through a dealer, he will not pay you a high premium over spot rate.
You may have to ship the items over to the dealer. You will have to pay for shipping and insurance cost as well.
3. Your risk appetite
Bear in mind that investing in gold and silver does not guarantee a profit.
Those who bought silver when silver price was at historical high of nearly $50 would not make a profit even at the current price.
Those who bought at that price would remember how the price of silver managed to fall below $4.
Can you imagine buying at $50, and the price fall to $4? Can you still sleep if you are in their shoes?
The current price of silver per Troy ounce is still less than $41. It is still far away from the historical high.
If you cannot tolerate the idea of losing money, you can forget the whole idea.
4. Your knowledge
Investment is partly science and partly art, that means a mixture of knowledge and luck. Since you cannot control your luck, you can do your best to control your knowledge.
You have to read and analyze the daily price change.
You have to know the relation between USD and the price of precious metals. You have to know the relation between stock market and precious metal investing.
You have to know how crisis around the world affects the prices of gold and silver.
Even if you are not correct all the time in predicting a price change, you are able to make money when you are correct more than half the time.
Investing in gold and silver requires you to exercise caution, and not get affected by the general mood.
The newspaper and internet contain tons of conflicting information about investing in gold and silver.
Some people buy physical gold bars or gold coins.
Some people prefer silver, as they have the idea that gold is overpriced.
Analysts are warning of short term crash, but they are positive about long term price increases.
If you read too much about the conflicting perspectives, you will definitely suffer from information overload.
However, the basic principles apply.
You have to consider all these factors before investing in gold and silver.
1. Your capital
How much can you afford to invest?
You have to remember that there is no dividend payout for investing in gold and silver.
If you happen to buy just before the market crashes, you may have to wait for a long time before you can sell for profits.
That is why you must not need the initial capital for immediate future.
If you plan to buy a big ticket item within a year or two, you should not use the money for investing in gold and silver.
2. The transaction cost
It does not matter how you wish to invest. There are many different transaction cost involved with each method of investment.
If you are trading gold and silver online, you have to pay for transaction cost.
If you are buying physical gold and silver bullions, you have to pay for the shipping, the insurance and the applicable tax in your country.
The best is to know the transaction cost for selling as well.
For example, you want to sell the physical bullions through a dealer, he will not pay you a high premium over spot rate.
You may have to ship the items over to the dealer. You will have to pay for shipping and insurance cost as well.
3. Your risk appetite
Bear in mind that investing in gold and silver does not guarantee a profit.
Those who bought silver when silver price was at historical high of nearly $50 would not make a profit even at the current price.
Those who bought at that price would remember how the price of silver managed to fall below $4.
Can you imagine buying at $50, and the price fall to $4? Can you still sleep if you are in their shoes?
The current price of silver per Troy ounce is still less than $41. It is still far away from the historical high.
If you cannot tolerate the idea of losing money, you can forget the whole idea.
4. Your knowledge
Investment is partly science and partly art, that means a mixture of knowledge and luck. Since you cannot control your luck, you can do your best to control your knowledge.
You have to read and analyze the daily price change.
You have to know the relation between USD and the price of precious metals. You have to know the relation between stock market and precious metal investing.
You have to know how crisis around the world affects the prices of gold and silver.
Even if you are not correct all the time in predicting a price change, you are able to make money when you are correct more than half the time.
Investing in gold and silver requires you to exercise caution, and not get affected by the general mood.
Monday, September 12, 2011
Trading gold futures is an extremely risky activity
The attention now is on gold price and gold investment.
However, that does not mean that all forms of gold investment is safe.
For example, trading gold futures is a very risky activity.
That means you are basically speculating on the price of gold in the future.
The current economic situation is so uncertain that the gold price can stay stagnant for days, then the price shoots up one day, and suffers a great fall the next day.
It is hard enough to trade gold online, buying and selling gold at spot rate. It is nearly impossible for trading gold futures to make a consistent profit for you.
The problem with trading gold futures is also the margin feature.
That means you can use a small sum of money to borrow a big sum of money, and use the whole lump sum to speculate in the future gold price.
You can use a dollar to borrow $10, and use $11 for trading gold futures.
If you happen to make a profit, you will have many times your initial capital.
If you happen to place a losing bet, you will lose all your money and get into debt. You need to pay off the borrowed amount, and the interest incurred on the sum.
That is why you should not resort to this method unless you are a very seasoned investor in commodities, and you do not need to borrow money to speculate in the pricing.
The best way to invest in paper asset if you are interested in gold price is to open a gold saving account or buy gold ETF.
All forms of investments are risky.
Gold and silver used to be safe haven, but the recent volatility turns precious metal investment into an extremely risky speculating activities.
Gold price will definitely reach $2000 per Troy ounce in the future. Silver price per Troy ounce will reach $50 in the future.
However, that is in the long term.
The only way for gold and silver price to fall in the long term is for US to reach full employment.
The short term volatility makes it fun for those with money, and can buy and sell daily.
For those of us who have no time to monitor our investment daily, the best is to buy gold bars, and keep the gold bars in the bank or a safe.
Trading gold futures is very risky.
Avoid it unless you have money for such speculative activity, and you do not need to trade on margin.
Having said that, it does not mean you cannot sign up for a free trading account.
You can sign up and learn the various functions. As long as you are using practice gold, and not real money, you can have fun in trading gold futures.
Just bear in mind that using real money is a recipe for disaster for most people.
You rarely hear people get rich through such speculative activities. Even the governments in the world buy real gold bars, instead of trading gold futures to safeguard their assets.
However, that does not mean that all forms of gold investment is safe.
For example, trading gold futures is a very risky activity.
That means you are basically speculating on the price of gold in the future.
The current economic situation is so uncertain that the gold price can stay stagnant for days, then the price shoots up one day, and suffers a great fall the next day.
It is hard enough to trade gold online, buying and selling gold at spot rate. It is nearly impossible for trading gold futures to make a consistent profit for you.
The problem with trading gold futures is also the margin feature.
That means you can use a small sum of money to borrow a big sum of money, and use the whole lump sum to speculate in the future gold price.
You can use a dollar to borrow $10, and use $11 for trading gold futures.
If you happen to make a profit, you will have many times your initial capital.
If you happen to place a losing bet, you will lose all your money and get into debt. You need to pay off the borrowed amount, and the interest incurred on the sum.
That is why you should not resort to this method unless you are a very seasoned investor in commodities, and you do not need to borrow money to speculate in the pricing.
The best way to invest in paper asset if you are interested in gold price is to open a gold saving account or buy gold ETF.
All forms of investments are risky.
Gold and silver used to be safe haven, but the recent volatility turns precious metal investment into an extremely risky speculating activities.
Gold price will definitely reach $2000 per Troy ounce in the future. Silver price per Troy ounce will reach $50 in the future.
However, that is in the long term.
The only way for gold and silver price to fall in the long term is for US to reach full employment.
The short term volatility makes it fun for those with money, and can buy and sell daily.
For those of us who have no time to monitor our investment daily, the best is to buy gold bars, and keep the gold bars in the bank or a safe.
Trading gold futures is very risky.
Avoid it unless you have money for such speculative activity, and you do not need to trade on margin.
Having said that, it does not mean you cannot sign up for a free trading account.
You can sign up and learn the various functions. As long as you are using practice gold, and not real money, you can have fun in trading gold futures.
Just bear in mind that using real money is a recipe for disaster for most people.
You rarely hear people get rich through such speculative activities. Even the governments in the world buy real gold bars, instead of trading gold futures to safeguard their assets.
Subscribe to:
Posts (Atom)
Posts
