Is Gold and Silver Still a Buy?

Earlier in February this year, I wrote a short post on whether it was the end of the gold bull run.  Of course, I couldn't say for certain that the bull run in gold was going to end.  After all, there are renowned investors out there who were still bullish in gold for the long term.  I wrote a more balanced post on some reasons to buy gold or silver.  After all, investing in gold is something that most serious investors will consider doing as part of their asset allocation.

For those who have been monitoring the gold and silver spot prices, you should be aware that gold and silver prices dropped drastically in yesterday's trading.  Gold ETFs like SPDR Gold (Ticker: GLD) fell by almost 10% in a single day with hedge funds rumoured to have started the huge sell off.  Well, a correction was more or less expected since billionaire Jim Rogers (who now lives in Singapore) said that a correction was due. In fact, Jim Rogers believes that gold prices will head towards US$1200/oz. He will probably start buying at that level.

But is this more than a correction?  Because it seems that we are now in a bear market for gold and silver.  Worries about inflation in the United States with all the money printing through the quantitative easing programs seems to be unfounded.  Inflation remains low to this day.  And besides, the stock market has been roaring on for quite a few months.  So investors in gold and silver have probably missed out on the bull run in the stock market and are taking the opportunity to liquidate their holdings since the supposed dollar crisis/crash has failed to occur.  Many traders probably closed their positions too especially if they bought at the highs of US$1800-$1900/oz.

Is gold and silver still a buy?  It probably is.  But one will probably have to wait for the right price.  And also be reminded that unlike stocks, gold and silver do not provide any form of cash flow or dividends.  It is almost simply a store of value and a hedge against hyperinflation or "catastrophic" events.  Could this be the reason why Warren Buffet is negative on gold?

The End of the Gold Bull Run?

Is this the end of the bull run for gold which has seen a meteoric rise over the past years.  Goldman Sachs has a 12 month forecast of $1,550/oz.  Gold has dropped 5 percent from the start of the year with investors like George Soros also cutting down his gold holdings.  Of course, one would be wise to heed the Warren Buffet's take on gold (even though it might be dated).  Many have also called gold the ultimate bubble while others are still quite bullish on this precious metal.  But with the US printing money with a vengeance, it is little wonder why many would want some kind of hedge against inflation.

Gold had hit an all-time high in Sept 2011 of slightly over $1920/oz.  Today, gold spot price is at $1597/oz.

Warren Buffett and others on Gold

I know that there are many people who are positive on gold and silver right now.  So it is good to take a look at the other side of the story so that we do not get too much group-think.

In this video, Warren Buffett says he would rather own a productive asset than gold.

Some time back, Wells Fargo also gave its outlook on the gold "bubble" and warned investors on being over invested in it.

Investing in Silver

Since man first discovered silver, it has been an object of desire for both its value and its use as a form of money. This usually means that investing in silver gives a good long-term return to the investment.  Not too long ago, I wrote about buying silver in Singapore, how I was buying more silver (for collection purposes) and also some of my broader investment thoughts for 2012.  Of course, I warn readers not to take what I write as any form of personal finance advice.

[Picture credits to digitalmoneyworld]

The Silver Market

The market for silver is not as big as the gold market, but is still worth an estimated $15 billion annually. Traditionally, the price of silver tracks the price of gold. The ratio was set by United States law at 1:15 in 1792, but price increases in both metals meant that the gold/silver ratio rose to over 1:60 in 2009. The price of silver has continued to rise and reached record levels in 2011, with the average price reaching $41.20 for one troy ounce.

Like most commodities, silver trades on a market with traders buying and selling the metal to make a profit. The London silver bullion market is one of the main places where it trades. Another is iShares.

Silver in Banks

In some countries investors can walk into a bank and buy silver bullion over the counter. This can then be taken home and stored in a safe or kept in a safe deposit box in the bank. It is even possible to store your silver in allocated or unallocated storage with a bank or dealer to keep it safe.

Silver comes in a variety of bars, including:
* 1000 oz troy bars (31 kg)
* 100 oz troy bars (3.11 kg)
* 1 kg bars
* 10 oz try bars (311 g)
* 1 oz troy bars (31.1 g)
* Odd weight bars

The most popular bars are the 100 oz troy, with popular brands including Engelhard and Johnson Matthey. The branded bars are usually worth more than unbranded or odd weight bars.

Investing in Silver

Silver can be both a long-term and short-term investment. In the short-term, investors can trade silver for a profit in the same way as any other commodity by always aiming to buy low and sell high. Market fluctuations can give profits on each trade, but also losses meaning that this can be a risky investment as one needs to know how to time the market (something I admit I am totally not good at!)

Over the longer term, the price of silver has generally risen, with a sharp rise over the last few years. This is great news for anyone that owned silver before 2005, but not so good for anyone thinking of investing now. Of course the market price could continue to rise, but nobody knows for sure and it could fall back down to earlier levels.

Over the past few years, investing in silver has been a great way to make money. The price has increased by eight times in 11 years and doubled since last year, but that does not mean that it is guaranteed to continue that way so never risk any money that you cannot afford to lose.

You might also be interested in reading the recent article on Investing in Gold.

Investing In Gold

Gold is one of the most valuable and desirable substances known to man. For many years it has been a status symbol as well as a form of currency since the days before money. It is also the most popular material for making jewellery, with roughly half of all gold being used in this way.

Gold Price


For many years, the price of gold was a relative standard for currencies around the world. This started to change in the 1970s when the value of the US dollar stopped being linked to the price of gold and finished in 2000 when the Swiss Franc was the last currency to remove the link.

Like all commodities, it is possible to treat gold as a short-term and long-term investment. Over hours, days or weeks, the fluctuation in the price of gold on an exchange allows traders to buy and sell for hopefully a profit. With luck or skill, a gold trader can buy some gold at a low price, sell it at a higher price and buy more when the price drops. Repeating the process allows an investor to make a lot of money, but if it goes wrong they could make a loss on each trade.

Historically, the price of gold has risen at a steady rate making it a great safe investment. In fact, during the recent financial crisis many people turned to gold as an alternative way of saving. This is a relatively safe way of investing in gold, but still leaves you with the problem of finding somewhere to keep it safe. Most experts recommend that gold is a rainy day investment, like an insurance policy that should be kept until you absolutely need to sell.

Gold Coins/ Bullion


Another way to invest in gold is gold bullion coins. These cost slightly more than the spot price of gold, but are easier to buy, trade and store than larger pieces. Typical sizes include 1/10oz, 1/4oz, 1/2oz and 1oz. The governments of the UK, USA, Canada, China and most other major world powers mint these coins, so they are very reputable.

Mining Stocks or Close Ended Funds


Apart from investing in physical gold itself, one can also invest in the mining companies that are involved in gold production.  There are also certain funds that invest in various mining stocks.  One of these close ended funds is Gamco Global Gold & Natural Resources Trust which pays out a monthly dividend.  If you have been reading and following this blog, you probably know that I have loaded up on GGN just recently..


Storing Gold

Many major banks will store gold for customers, as will specialized gold exchanges and trading houses. You can even walk in to some banks and hand over your money in exchange for a gold ingot. Once you have carried this heavy bar home, you need somewhere secure to store it. If you do not have anywhere secure enough then most banks will have a vault that you can use for a fee.

Every major bank and most of the governments in the world store gold. Since the start of the economic woes in 2007, the world banks have become net buyers of gold which shows just how great an investment it really is.

This desire for gold and its scarcity and it being difficult to obtain means that it should continue to keep its value, but like anything the price of gold is not immune to market fluctuations and could even crash.

How Silver Coins Are Made

I thought this was a rather informative video on how silver coins are actually made.  The video also shows how the die is made.  Enjoy.

Bought More Silver

After writing about buying silver in Singapore, I am amazed that there are also some other people who are interested in buying silver whether it is for collection/hedging/investing purposes.  Anyway, I also received some of the silver coins that I bought.  Just bought a really small quantity as I am mainly just trying to collect the different type of silver coins.

The coins I bought are from Golden State Mint and each coin weights 1/4 troy oz.

Here is a scan of it  =)

Buy Silver in Singapore

Lately, I have been having some bizarre interest in collecting silver coins.  It just feels cool to actually own silver knowing that this used to be used as currency across history.  But as a pretty newbie to silver, I won't call my purchases as investing in silver just yet.  Nevertheless, I have been reading up quite a fair bit about silver coins to know how much a troy ounce actually weighs.  And it is interesting to find out a whole new domain of knowledge literally about investing in silver bullion coins, using it as a hedge against inflation, etc.

Well, the first thing to realise is that it is not too difficult to buy silver in Singapore.    I am not talking about investing in silver through ETFs but really owning physical silver bars and coins.  There are actually quite a few companies that sells silver bullion.  Here are the few things that I have learnt about silver coins thus far:

1.  Buy silver coins or bars that are widely recognised

• This seems to be the advice that people are giving in various forums.  Coins widely recognised include the American Silver Eagle and the Canadian Silver Maple Leaf.  There are others like the Australian Silver Kookaburra from Perth Mint and also the Austrian Silver Vienna Philharmonic.  

2.  Silver Coins Trade Above Spot Price

• One can check the spot price for silver easily on kitco or some other website.  However, silver coins often trade or are sold above the spot price of silver.  Even on Ebay, they trade above the spot price.
• Silver price has been increasing slowly.

3.  Places to Buy Silver in Singapore [Grabbed this off another forum]

• www.1silver1.com (Website is a bit slow so need to be patient)
• www.silverag.com.sg
• www.silverbullion.com.sg
• www.yashabullion.com
• www.goldprice.com.sg
• www.goldsilvercentral.com.sg
• www.royalsmithbullion.com

Many of these shops have a minimum order (e.g. 20 x 1 oz coins) or a minimum purchase of $2000.  Some of them have minimum orders of 500 oz and based on today's price of silver, will literally cost you a 20 over grand (estimated $48++ for a 1 oz silver coin). So you really have to be serious about it before making a purchase.  The first link actually allows customers to buy 1 oz silver bar as a minimum order.  But it is a Scottsdale silver bar and I am not certain that it is as widely recognised as the other silver coins.

4.  Buying off Ebay

If you prefer to buy loose pieces, you can always buy them off Ebay.  However, prices are slightly higher when you do not buy in bulk.  Many sellers also do not ship to Singapore.  

Question:

Do you invest in silver or gold?  

If  yes, where do you buy them from?

How do you store them?