Owning Gold: The Basics

 

If you want to own gold but don't know how here are some basic rules.

1 Gold is money.  Gold has always been money.  All Central Banks own Gold.  We are in a period when most central banks are accumulating more gold.  

2) You can't trade gold.  Gold is a stability hedge.  As gold rises it is a baromater of unstable financial conditions.  The US Central Bank - the Fed - knows that.  They try to cap the price of gold in dollars by knocking traders out of the market with massive Futures sell orders through proxies at the bullion banks like JP Morgan.  You will lose your position if you try to trade gold.  

3) The Fed can affect the day to day trading of gold.  Nobody can affect the Primary Trend over time.  The late great Richard Russel taught me that and it is a trueism of all markets.  The Primary Trend of Gold is UP as long as the Global Central Banking system is run on Deficit Spending.  That is a certainty for the foreseeable future.  So accumulating gold over time is a winning strategy.

4) Physical gold in the form of Central Bank Issued coins is a good way to buy bullion gold.  It is easy to identify. It can be exchanged in any major city in the world for any currency.  But it takes effort to buy and sell so you can't impulse trade it.  That makes it good for accumulation.  Buy from a reputable dealer.

5) Gold Stocks are not gold.  They are stocks.  So gold can go up and they can go down.  For many many reasons.  However GLD tracks the price of gold.  If you accumulate it and don't trade it it's a good way to reap the benefits of a gold upward primary trend.

6) Other precious metals are not like gold because Central Banks own gold and Central Banks don't own other precious metals.

7) Because Gold has always been money there are about 5000 years worth of Historical Gold Coins and Medals and a vibrant global market that trades this Historical Gold.  You can see dozens of auctions listed during any given month on line at Numisbids.  

As long as the primary trend of gold is up these markets will rise.  But buying and selling in these markets takes Expertise.  You need a good grasp of the history of the period in which a gold coin or medal is minted  You need a good grasp of how Hard Asset Markets work.  You need conviction and a reasonable time frame in which to accumulate in an area you understand.  If you have these things, or if you can learn these things these can be very profitable markets.  If you dive in without expertise they - like all markets - can be dangerous.