Mailvox: How to buy gold

Andy asks: I was wanting to ask you about your suggestion to buy silver and gold. How do you tell legitimate gold/silver investments from fake ones? I looked around this afternoon and found several places to buy gold from, and found that there are several gold and precious metal index funds. But what is the best or “real” way to go about buying gold?

The best way is to buy coins from official mints. Krugerrands, American Eagles, Chinese Pandas and Canadian Maple Leafs are all popular. You pay a small premium over the spot price – the daily gold price – but that’s neither here nor there since you’ll get it back when you sell it. You can find coin dealers listed in your local Yellow Pages. Another less handy option is to open an account in an international bank that will allow you to trade gold freely like a stock. You can do this in Swiss banks, for example, but you have to go to Switzerland to even learn about your account options since US law forbids American citizens to receive any information from them, even upon request. Canadian banks may be an easier option for most, as I believe some of them have metal-trading accounts as well.

Any gold stock that is a part of the HUI is a legitimate investment. Just go to Yahoo! Finance and lookup ^HUI. That will give you the basket of 13 or so stocks, and you can also purchase the HUI directly as it is an ETF – exchange traded fund. Since gold is fast-approaching its 200-DMA, we are getting close to what appears to be another reasonable buy point, the Elliott Wave pessimists notwithstanding. I’m a little more skeptical on silver, since it is still at a relative high after a staggering three-month run.

Another nice option, depending on the exchange rates, is purchasing foreign gold stocks. I picked up some ASX stocks a while back and the combination of the stock move and the dollar decline worked out very nicely indeed. But Jamie R can tell you more about that than I can, as he’s our resident ASX guy.

Any dealer who advertises on Kitco is likely legitimate. The one thing to be aware of is that the expansion of federal banking laws to include real estate agents and coin dealers may require them to file transaction reports with the federal government now. If this is the case, and you don’t wish to advertise your physical holdings, you may prefer to deal with private parties.