This is an answer to my offer as stated in another question:
?If you would like a quick analysis of the best ways to invest in gold,
post that question to my attention and I'd be happy to provide the
latest information which is very different today than a year ago
because there is a new way to invest in gold.
Whether or not it is a good investment is up to you to decide, I'm
offering to show you the best ways to invest if you decide to.?
As you have probably guessed, I do some investing and gold is always a
part of my portfolio. Sometimes short, sometimes long.
The first thing you need to understand is that gold and oil are quite
similar in that their prices are both affected mainly by two things ?
crisis and the strength of the dollar. The latter is because both are
often quoted in terms of the U.S. currency.
There are also supply considerations which have some bearing at times
but for various reasons the main price considerations are usually the
state of the world in relation to government and economic stability.
People who are holding a currency in a bank or such, often think they
are not investing when they actually have invested in paper currency
(except in the rare instances when the currency is backed by gold or
silver). The value of gold in particular quoted for their currency is
often more a measure of the value of their currency than a measure of
the value of gold.
There are times (such as when the Hunt Bros. cornered the silver
market) when bubbles occur but all you need to do to determine if this
is the case at any given time is to compare the rise in gold prices
quoted in dollars against the fall in the value of the dollar vs.
other major currencies.
The rise in gold prices ($) last year correlated very well with the
drop in the value of the dollar. Although I do not give advice on
making an investment, if you believe that the dollar will continue to
weaken, you might want to consider investing a portion of your money
in gold or in an exchange traded fund (ETF) of some other strong
economy such as Brazil (EWZ) or Australia (EWA).
If you believe the dollar will continue to strengthen, as it has in
the past few weeks, then you might want to go short on gold or simply
keep your investments in the U.S.
The traditional ways of investing in gold were to buy the physical
metal and either store it yourself or pay to have it safely stored
You could also buy put or call options on the Philadelphia Gold and
Silver index (.XAU) but you risk loosing all your money in a short
You could always invest in gold mine stocks but those companies can
fail, governments can interfere with their operation, the mines can
work out and stop yielding gold profitably, or they may hedge their
sales which means an increase in the price of gold won?t benefit them
(also a decrease won?t harm them.) For any of a number of reasons,
gold stocks were not tied closely to the value of gold bullion because
you were betting on management and many other factors.
Recently there have come on the market two new ways to invest. First
is a little known Canadian firm, Central Fund of Canada Ltd.
1323 15th Avenue S.W.
Hallmark Estates, Suite 805
Calgary, AB T3C 0
Phone: (403) 228-5861
Fax: (403) 228-2222
Web Site: http://www.centralfund.com,
which, in 1983, became a holding company for gold and silver bullion.
The price of CEF correlates quite closely with the value of .XAU
because much (but not all) of the risk of holding the company stock is
absent due to the single-minded purpose of the company.
The very latest gold investment is traded on the New York Stock
Exchange under the symbol GLD and the price reflects ownership of one
tenth of one ounce of gold, denominated in the U.S. dollar.
GLD doesn?t correlate as well with the ^XAU but that is only to be
expected since ^xau includes silver (as does CEF), while GLD is 100% a
gold bullion play ? no stocks, no bonds, just piles of gold bars.
Although GLD is classified as a fund, it is actually an investment
trust and, as such, trades directly through any online or other stock
At 11:00 am it was trading at 42.02 which means gold in New York was
selling for $420.20 per ounce.
This is probably the most efficient way to invest in gold, although it
doesn?t offer any leverage at all. You can?t even buy or sell options
on GLD at this time.
Google Search Term: ETF
Google Search Term: GLD
For further reading:
(Bloomberg radio and both commodity and currency quotes.)
I hope this answers the question which, in essence, I myself posed,
which was to outline the newest gold investment opportunities.
This is not a suggestion that you should either buy GLD or sell GLD
short, that depends on your own circumstances and your own opinions of
market trends, but GLD is definitely the most efficient way to invest
in dollar denominated gold bullion because you have no insurance or
holding costs and no transaction costs if you liquidate, other than
the usual broker commissions.
It is also highly efficient because the price is continuously quoted
during NYSE hours and you can trade with only a few second?s delay.
With mutual funds you can?t do this. With bullion you have to deal
with wholesalers why will only pay a discounted price because they
need to authenticate the metal.