The real deal with buying gold and silver

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Written by tradingwithcody
Compare the Charts of Gold and the US Dollar, Which Would You Rather Own?
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Link to an eBay page
Compare the Charts of Gold and the US Dollar, Which Would You Rather Own?
Link to an eBay page Remove
Add up to 2 more photos
Link to an eBay page
Compare the Charts of Gold and the US Dollar, Which Would You Rather Own?

Last month when gold became a hot money favourite, I started turning near-term bearish. My theory is also based on the idea that the banks and the Fed are likely also wanting gold prices here or lower, but they certainly want gold prices heading no higher anytime soon. 

That doesn’t mean that I’m selling any of my own holdings of physical gold and silver coins and bullion. Far from it. I’d welcome yet another opportunity to scale into more physical gold if there were to be another near-term crash in its prices. I plan to own my own physical gold basically for the next ten to fifty years. Let’s discuss. 

We know that the developed world’s governments here and around the world are actively engaging in broad-reaching currency wars, mostly trying to keep their currencies weak in the name of spurring export growth and helping transnational conglomerates maximise their reported earnings. We know that the Fed is in way uncharted (and frankly, un-CHARTERED) territory using all kinds of tools like 0% interest rates and QE and so on to artificially repress interest rates and force people to take on excess risk in search of yield. 

I’ve been spending a lot of time lately helping retirees try to figure out how to maximise their returns and yield on their money, and trying to find anything safe yielding what historically was a measly 5% is keeping me up at night. These people for whom I’m doing these deep dive analysis on their portfolios, are the real-life examples of investors being forced to take on excess risk in search of yield. 

Gold doesn’t give any yield, and therefore it probably shouldn’t be a huge part of most retirees’ portfolios. And as the fool Keynes once rightly noted as he lost his shirt once again in the markets, “Markets can stay foolish longer than most people can stay solvent,” which means we don’t know when the long-term imbalances and bubbles that the policies of today will finally hit. But I am extremely confident that before I die sometime in the next forty or fifty or whatever years, that the relative value of physical gold and silver will be up many orders of magnitude when this all unwinds at some point in coming years or decades. 

So I do think some physical gold and silver holdings are key to every portfolio, even for retirees, though they would probably want to allocate a much smaller fraction of their portfolio than younger investors, in general. 

I prefer gold over silver for the long-term, as I think gold-backed state currencies are likely to make a comeback in future decades, probably at China and/or Russia first. 

To get gold exposure, I suggest the following, in order of importance for long-term investors: 

Buy physical gold and coins and store them somewhere safe where you can access them personally anytime you want. Safes, local bank safety deposit boxes, and even buried in the ground somewhere are not bad ideas. Like I said earlier, I plan to own my own physical gold basically for the next ten to fifty years. 
Buy some GDX common or some GDX long-dated calls. $GDX is an ETF comprised of actual gold mining company stocks. 
Avoid GLD and SLV. I don’t think there’s nearly as much actual access to physical gold for all the promises of access to physical gold that $GLD‘s banking industrial complex lets on. That is, there are probably hundreds of paper promises to real physical gold in ETFs and other paper securities for every one of actual physical gold they could redeem. A paper gold ETF/securities “Run on the bank” is probably on the cards at some point in the future, perhaps this or next year or in five to twenty years. 

And finally, I’m happy to send anybody who wants a copy of my ebook, Everything You Need to Know About Investing in Gold and Silver, if you just ask in a comment below, by emailing me at support@tradingwithcody(.)com or by posting a Scuttle requesting one from me on Scutify. 

Here are some FAQs I get about gold and my answers to them.  

Q. Gold is such a hot topic right now with technicians in heated arguments about where gold is going...You think the Fed is shorting gold via banks to prop up the dollar? That's a formidable opponent, isn't it? Swiss Referrendum won't pass, will it? What catalyst changes the game here? What do you need to see to invest in GDX as you have mentioned wanting to? I have already invested and am planning to wait it out...dark as it is right now. Think I will avoid gold moving forward once I get out of this mess...has not been a fun nor "reasonable" investment... 

A. The Swiss Referendum has as much a chance of passing as the Scotland secession did. As for a gold price catalyst, how about just a steady drip higher as the universe/markets work to balance themselves and the Fed/banks who have allowed gold paper promises to build up to unfathomable levels of leverage grow complacent about a slow-and-steady increase until one day that tide is so far out there that we see who is really naked in the waters (as Buffett would put it). Anyway, the lack of a catalyst in $gold getting above $1500 an ounce in the near-term makes the goldminers lack the profitability to spike their stocks, ala, the Gold Miner Index, GDX. If gold can't stay sustainably above $1200/oz for the next few months, we might see some serious hard-times in the gold miner stocks and at that point, it'd be time to pick among the wreckage. Maybe the bottom won't come for the GDX until the first major gold miner stock files for bankruptcy. 

Q. What are your feelings/analysis about gold/silver? Not talking about buy and hold for next 10 years or longer, doing it continuously. But more about timing now, more aggresive trades? Like GDX, GDX calls, AGQ. Your feet to fire bottom target on gold?  

A. I like the contrarian aspect of your timing on wanting to buy $GOLD for a trade here as its crushed of late and hated by anybody but gold bugs right now. I think trying to game a move up in gold, even a short-term one would probably be dependent on trying to game the dollar's inverse move to gold. That is, as I've said for the last few months, gold's moving basically opposite of the dollar's strength vs other currencies. Short-term, gold is probably a high-beta version of the dollar's moves - if you can catch a quick buy or two of gold (or even GLD for short-term purposes, though I never recommend owning GLD ETF paper promises of gold for the long-term) in some moves against the grain (meaning a lower dollar in the broader context of the stronger dollar rally) you'll make some big short-term profits. As for actually pulling that off...it'll be tough, of course. I might buy some $GDX call options again some day, but not right now, not yet. 

Q. Cody, The mining stocks continue to be very out of favour, almost loathed. Why? 

A. Market is saying that the gold miners aren't profitable enough below $1300/oz to be a good trade/investment. I have been patiently waiting to get back into a miner or two, but it doesn't look like it's going to be anytime soon frankly. 

Q. What are your thoughts on gold. I'm thinking about adding to my position. 

A. I do think gold is going to be continue to be driven by the dollar's broader action, and as the dollar's uptrend looks set to continue (as I outlined in a report on TWC yesterday), I think gold might be capped near-term. I still think having maybe 5-10% of your longer-term capital in physical gold (and a little silver) is very important, but I don't know that you have to rush into it just now. Over the next few years, I do expect a solid uptrend in gold to return, regardless of the dollar's overall strength vs other fiat currencies. 

Q. Is it time to buy $GDX now as it got hit hard? 

A. $GDX might be rangebound at best along with gold for the near-term, driven by dollar strength. So, I'm not considering going back and buying $GDX just yet. 

Q. Cody, are you thinking of adding more physical gold at these levels or do you think there's more risk/lack of upside coming up? 

A. I've done my physical gold buying at these levels in months past and am not in any rush to add to my gold anytime soon. Gold and silver might be dead money and/or stuck in a down trend while this dollar rallies, as it has been and as it looks like it might for the foreseeable future. 

Q. Cody, been buying silver and will start gold soon. On the silver I never buy unless .60-.80 over spot. Is that a good point? When and what to pay. Thanks.

A. If you're finding gold and silver that's available in physical form for less than 5% over what passes for "Spot Prices" today, you're getting a good buy. Just make sure you have faith in your dealer and that they are of course real silver. 

I buy most of my gold and silver coins at Apmex on eBay. I have found them to be completely reliable and always trustworthy.   Here's a link to their store, the APMEX Bullion Centre. 

One of the great things about buying on  eBay is their Money Back guarantee. 

Also don't forget to take advantage of their Daily Deals for coins.
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