Investing in gold and/or silver?

[Angel13]

A while ago i was looking at investment options for my new baby. See thread here http://somersoft.com/forums/showthread.php?t=88680

Ok so I'm still researching. I know I know I'm taking ages (don't have a lot of time these days).

Anyway I'm now looking at investing a portion of the cash into either some gold and silver bullion or bars 99.99% pure) from the Perth mint or silver collector coins (also 99.99% pure) from Perth or Royal Australian Mint.

We're not talking huge amounts of money here. Just a couple of thousand that we have received in gifts for her.

What are your thoughts?

 

[Jamie M]

We're not talking huge amounts of money here. Just a couple of thousand that we have received in gifts for her.

lol - better than a rattle and a few bibs

Cheers

Jamie

 

[MsAli]

Been a big mistake for me and my family . Learnt that...do your own DD

Might be different over the next 10-20 years till your baby grows up.

 

[Aries]

Been a big mistake for me and my family . Learnt that...do your own DD

Might be different over the next 10-20 years till your baby grows up.

Would you please elaborate more?

Thank you...

 

[MsAli]

Bought at $33 an ounce last year...been in unrealised loss ever since . Will stick to real estate from now on.

 

[Indifference]

.....

What are your thoughts?

That this is a very polarizing topic here on SS.... actually, it is quite polarizing most places to be honest.

My thoughts..... PMs are "money" and dollars are "fiat currency". Therefore, if I want to save "money" or have a long term monetary reserve, my first choice is PM currency. (ie. legal tender bullion grade coins). Second is bullion, last is cash....

 

[Intrinsic_Value]

Bought at $33 an ounce last year...been in unrealised loss ever since . Will stick to real estate from now on.

That kind of thinking would have been reflected by many who 'diworsified' into the stock market 2006/2007, especially those who bought into listed property trusts.

There will also be a point in time in the future where someone said they 'bought into residential property at 'x' price and have 'been in an unrealised loss ever since'. In turn they will stick to whatever asset class has been 'working' in times recent past (ie the asset price over recent past years has still had an 'upwards trend')

The key again and again and again, is to assess the intrinsic value of the underlying class. Over time intrinsic value ALWAYS goes to market value where IV is less than market value (and that IV holds).

The trouble with precious metals is how does one calculate IV.

I am starting to view precious metals in the same light as currency.
In otherwords the IV comes from a relativity basis rather than an absolute basis.

This makes it very very hard to really value precious metals.
Intrinsic values focus on absolute values rather than relative values.

 

[Intrinsic_Value]

.

My thoughts..... PMs are "money" and dollars are "fiat currency". Therefore, if I want to save "money" or have a long term monetary reserve, my first choice is PM currency. (ie. legal tender bullion grade coins). Second is bullion, last is cash....

No its not so simple, because you don't really know the underlying value of the precious metals at that point in time.

This sought of hog wash, PM's are 'money' and dollars are 'fiat currency' is complete BS.

Why?
because they are all interlinked.

Under your argument, precious metals could still be 'value' at any currency price, simply because they are PM.

Its this sought of simplification that has led so many na?ve 'investors' in PM to loose money.

Just like those na?ve 'investors' who thought that it was a simple method of 'dollar averaging' that lead to long term wealth creation in the stock market.

Nothing is two dimensional over the long term.

 

[Angel13]

So as a first piece of investment for Helaina I bought this.
https://eshop.ramint.gov.au/2012-Jubilee-Silver-Proof-Set/510147.aspx


A good friend works at the Royan Australian Mint so got a 10% discount.

The same friend also bought her this as a gift https://eshop.ramint.gov.au/2013-Year-of-the-Snake-1-oz/210174. It's the Luna series.

And grandma bought her this one to add to the Luna collection https://eshop.ramint.gov.au/2014-1-1oz-Silver-Horse/210262.aspx

I'm hoping they will be worth something in 20 or 30 years. She might want to cash it in or she might develop a love for collecting pretty shiny things and add to the collection to pass down to her kids.

I still have an 1859 queen Victoria gold coin which my great grandfather gave to my grandmother when my dad was born. Surprisingly it's not worth a lot considering how old it but to me it's priceless.

 

[hobo-jo]

You need to be very careful when buying high premium, modern numismatic coins (such as those you have linked). They are not really an investment in Gold/Silver so much as speculation on future demand for the particular coins that you have bought.

Take for example the '2012 Jubilee Silver Proof Set'. It contains 66.5g of Silver, A$48.50 worth at today's spot price. So you've bought the set for roughly 10x spot price. This set won't rise or fall with the value of Silver spot price, it will rise and fall with demand for that particular set (unless we came to a time where the value of the set was very close to the spot content). Many of these types of sets end up falling in value down to the metal content + a small premium.

If you are interested in buying any more Silver coins, I would highly recommend you take a look at buying some of the BULLION coins from Perth Mint, these can be purchased much closer to spot than the numismatic series from RAM. Ainslie currently sells 1oz Perth Mint Lunar Snake Coins for circa $31-34 an ounce (depending on quantity): https://www.ainsliebullion.com.au/BuyBullion.aspx

This is still roughly a 50% premium to spot, which is high for a bullion coin (you can get Eagles, Maples, etc for around 20% over spot), but nowhere near the premium you pay for numismatic coins.

See my post on Lunar coins here: http://www.silverlunar.com/2013/08/lunar-horse-coins-are-bolting-out-of.html

Unfortunately it was (and still is) very difficult to source the Perth Mint 2014 1oz Lunar Horse coins for a reasonable premium ($36-38 vs $31 for snake), but as I linked above, the snakes are easily found and if you take a look at the 2001 snake it sells for around a 220% premium to spot, so even if Silver track sideways in nominal terms for the next decade (unlikely IMO) there is a good chance these bullion lunar coins will develop a higher premium and a nice return regardless.

Hope this helps

 

[Indifference]

No its not so simple, because you don't really know the underlying value of the precious metals at that point in time.

This sought of hog wash, PM's are 'money' and dollars are 'fiat currency' is complete BS.

Why?
because they are all interlinked.

Under your argument, precious metals could still be 'value' at any currency price, simply because they are PM.

Its this sought of simplification that has led so many na?ve 'investors' in PM to loose money.

Just like those na?ve 'investors' who thought that it was a simple method of 'dollar averaging' that lead to long term wealth creation in the stock market.

Nothing is two dimensional over the long term.

Thanks IV, for both demonstrating and missing my point.

BTW, re-read my original post... You know, the bit where I state "my thoughts"... which aren't arrived at lightly either. Yep, they are still "my thoughts" ....

 

[Aries]

Bought at $33 an ounce last year...been in unrealised loss ever since . Will stick to real estate from now on.

Ouch (for now...).
Fingers crossed, things get better in the future!

 

[Angel13]

If you are interested in buying any more Silver coins, I would highly recommend you take a look at buying some of the BULLION coins from Perth Mint, these can be purchased much closer to spot than the numismatic series from RAM. Ainslie currently sells 1oz Perth Mint Lunar Snake Coins for circa $31-34 an ounce (depending on quantity): https://www.ainsliebullion.com.au/BuyBullion.aspx

See my post on Lunar coins here: http://www.silverlunar.com/2013/08/lunar-horse-coins-are-bolting-out-of.html

Unfortunately it was (and still is) very difficult to source the Perth Mint 2014 1oz Lunar Horse coins for a reasonable premium ($36-38 vs $31 for snake), but as I linked above, the snakes are easily found and if you take a look at the 2001 snake it sells for around a 220% premium to spot, so even if Silver track sideways in nominal terms for the next decade (unlikely IMO) there is a good chance these bullion lunar coins will develop a higher premium and a nice return regardless.

Hope this helps

Thanks for the advice, it's much appreciated. Your website is also very informative

 

[S.T]

I've had some success with silver coins, but more from a collectors view point. I look for some of the ones from Perth mint that have lower mintage figures and are more desirable. Some have doubled in a few years after purchase. This is more of a fun little hobby for me as I tend to only buy a few at a time and not intended to make any serious money out of.

 

[oracle]

Just like those na?ve 'investors' who thought that it was a simple method of 'dollar averaging' that lead to long term wealth creation in the stock market.

Can you please elaborate on this point? Every study done so far has proven DCA into low cost index fund over long term 15-20year period has produced satisfactory returns, way better than actively managed funds at the very least. Please don't use example of Japan only. Japan is not the rule it is an exception.

Cheers,
Oracle.

 

[Spades]

I've had some success with silver coins, but more from a collectors view point. I look for some of the ones from Perth mint that have lower mintage figures and are more desirable. Some have doubled in a few years after purchase. This is more of a fun little hobby for me as I tend to only buy a few at a time and not intended to make any serious money out of.

Sensible approach.

 

[attrill]

I picked up some silver bullion today at the Perth Mint. It's a no brainer in my book, but then I have be known to be completely wrong on many occasions.

just a thought...

 

[Intrinsic_Value]

Can you please elaborate on this point? Every study done so far has proven DCA into low cost index fund over long term 15-20year period has produced satisfactory returns, way better than actively managed funds at the very least. Please don't use example of Japan only. Japan is not the rule it is an exception.

Cheers,
Oracle.

Sorry my thought process tends to jump ahead faster than I type. So the result can be an inaccurate post.

My intention re dollar cost averaging in an index fund is that this strategy is used most effectively as a 'marketing' tool to retail investors after a sustained bull run in a market.

The 'buy the dips' strategy is fantastic in a secular bull market. A dollar cost average approach inherently adopts this strategy because more 'stuff' is bought on the dips.

So the financial marketing departments peddle all this stuff out to retail investors, who base their decisions on recent historical trends.

And I rest my case factually by using our very own Somersoft.
Look at the hype in the coffee lounge about investing in shares pre-GFC. Look at the hype of running to the hills during the GFC. And look at the subsequent lack of hype over the last couple of years.

So given this factual conclusion about human investing psychology, I then attempted to draw reference to the current secular bull market in residential property.

But residential property will also have its time of winter, it will also have a time of being in a secular bear market.

Those who have never experienced it, or those that don't understand that there is a season for everything under god, have a real risk of incurring serious wealth destruction.

 

[oracle]

And I rest my case factually by using our very own Somersoft.
Look at the hype in the coffee lounge about investing in shares pre-GFC. Look at the hype of running to the hills during the GFC. And look at the subsequent lack of hype over the last couple of years.

So given this factual conclusion about human investing psychology, I then attempted to draw reference to the current secular bull market in residential property.

But residential property will also have its time of winter, it will also have a time of being in a secular bear market.

Agree. You would have noticed the silence in topics discussing Precious Metals now that they are not going up. Although, ironically we are in gold/silver thread now but in general they are not discussed as much now here.

Cheers,
Oracle.