worth buying gold 1/10 at a time??

I read once pn this site that many peoplet say only buy A whole ounce at a time.. im just wondering the reason behind this..

I would think that 1/10 coins would almost be better.. as the price of gold rises it will be easier to sell the smaller more affordable 1/10 rounds.. or am I just thinking backwards???

New into gold and was thinking about trying to buy 1 1/10 goltod coin every month For 2012

 

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The problem with the fractional coins is the cost over spot for the coin itself.
APMEX charges about $28 over spot for a 1/10 American Eagle. That is $28 per coin! So it would be $280 per ounce.
If you just hold off until you have the funds for the 1/oz you are going to pay about $95 over spot.

The volume on 1oz coins is higher so they have a lower premium than the fractional coins.
Also you will NEVER have a problem selling 1oz at a time.

I would think if you are new into PM buying and you can't afford 1oz and you would like to buy every month you might want to consider buying silver instead. Or maybe even using a ETF if you don't care about holding it in your hand.

 

I only buy 1/4 oz and 1/10 oz gold fractionals because I have a barter mentality. An entire 1 oz gold piece is a lot of value to spend all at once. Though I don't have much gold either and would rethink that if I were doing large amounts. The premiums get easier to deal with the larger you go, but the difference between 1/4 and 1/2 wasn't a big deal to me. If your goal is simply wealth preservation then the bigger the better, but I would stick to coins.

 

I would NEVER buy gold or silver I didn't actually possess. Unless it's in your hand, you don't really own it. People purchase PM as a form of insurance against paper holdings (currency, stocks, bonds, etc.) Why have something you are trying to insure against default ?
Also I keep in mind the collapse of the PM market during the 80's, when dealers were selling gold and offering to store the coins for a nominal fee. They sold the same coins to several buyers of course, creating a ponzi scam. If you are gonna own silver or gold, buy the coins and sit on them. Silver instead of fractional gold, and 1oz gold coins are what I prefer. Known quantities of metal, so the value would be well established. Portable and easily exchanged. IMHO

gary

 

People say to only buy ounces because of efficiency. Per ounce, one ounce coins are the cheapest was to buy. 1/10 ouncers theoretically should keep their premium if sold to another collector, so in theory you shouldn't be out this money. However, sellnig to a dealer he usually will only pay you gold value, so all of the excess price you paid for the 1/10 ounce size would be lost.

If you are not a collector, (just interested in gold as bullion), and can only afford to buy about an ounce next year, (which is fine man, we all start somewhere), my recommendation would be to buy a quarter ounce once every 3 months. Just save up, and know at the end of each quarter you need to go and buy a 1/4 ounce gold piece. It will lower this "transaction cost" a lot.

Just an opinion.

Chris

 

I would only buy bullion with the expectation of profit, and not as insurance. I also have no problems with owning stocks and bonds. To me, the probability of being affected by an MF Global-type event is no greater than the probability of fire, theft or other physical loss.

 

I so far have only bought 1/10 and even 1/20 oz sizes, mainly because I can't afford to buy the whole ounce. As others have said the premium for smaller sizes is a lot higher than if you were to buy an ounce at a time. Like anything else, it's cheaper if you buy more. From now on, I'm probably just going to save up over time to buy a whole ounce instead of buying a few 1/10 oz over a period of time.

 

The odd sizes like 1/20 might turn out to be difficult to resell without a big discount. I would avoid them. If your budget is limited, silver may be the way to go. Of course, if your budget is limited, you may do better just increasing your savings account.

 

Yes please. When we talk here of investing in bullion, we are assuming everyone here does not have credit card balances, and has a couple of months worth of income saved in a bank. These two things are simply prudent, and if it doesn't apply to you I sincerely believe you are better served to get this accomplished first. Then worry about investments.

There have been times in my life where this DIDN'T apply to me, so I cut myself off. No more buying coins or PM or stocks until I got my house back in order, on a solid footing, then I allowed myself to worry about investments.

Not meaning to sound like an old grumpy man, but I would hate to think people are investing money they don't have, or have absolutely no savings to fall back on. Life happens. For returns, I don't think any investment on the planet, (short of a good education), can be the risk free returns that can be "generated" by NOT paying credit card interest, or if you run into a pinch, heaven forbid a payday loan place.

Chris

 

Thanks for the concern and advise guys but let me tell you a little bit about my self. I'm 20 and a sophomore in college living with my parents. I have a decent amount of money saved up to pay for school and I work part time. I don't go and spend everything on gold. I set a side a little bit from every pay check and when I get enough I buy some gold or silver. I'm not mindlessly buying gold without having any money in the bank.

 

That's fine. I wasn't trying to pick on you, I just wanted to remind everyone generically that we are assuming these things when we discuss what to invest in.

Always remember there are like 10 times as many non-members who read these forums versus members.

Chris

 

Thanks for the input everyone..

As of right now I am solid.. I have a substantial amount of money in the bank with no car payment no credit cards and my school loan paid off!!I am 23 and just looking for long term investment that I can put away slowly and cash in when I retire.. But I limit my self to 200 a month to spend.. so that's why I was going to do a 1/10 good piece a month.. I make no large buys.. usually one silver piece at a time..

So in theory if I could get a 1/10 for slim to no margin over melt there is no short comings..

Also if I just put 200 a month away in a year who know where hold will be at????

 

Then you, my friend, are in the proverbial cat bird seat. This is a great time for you to sock some PM's away for a rainy day or other future use. You seem to have your head screwed on correctly in this regard.

 

I think the premium you pay isn't as outrageous if you account for the fact that you can sell it later for a similar high premium.

 

I was alluding to that earlier, but that is ONLY true if you sell to another collector. Usually such premiums disappear when you sell them to a dealer.

 

Given your situation, I would definitely have the money in the stock market, not gold. You don't have to learn how to pick stocks, if that is not your inclination. A stock mutual fund or a stock index fund will give you a much better probability of reaching your financial goal than the course you are on. I view PMs as the part of an equity portfolio that can be established after you have a significant position in stock equities. [my personal opinion, of course].

 

As to whether stocks or precious metals are preferrable, it really depends on your risk appetite. Precious metals aren't immune to downside price action, but where they do have the least risk is that their value is solely determined by the metal. With stocks, bonds, currency, and such you might do better or worse, but you have no guarantee that the value will last indefinitely. The value is ultimately dependent on the ability of the institutions you give your money to to remain in existence. Metals have no counter party risk which is why they are considered safe haven.

 

Well said. It's the whole, eyes bigger than stomach mentality. This is the same reason here in the U.S. our housing market is in utter shambles (we can all blame the people buying and the banks lending equally), because people were told they were approved for something they didn't necessarily need and took the plunge trusting the finance bank giving them the loan. When I was buying my last house, I was told up front with my credit I was approved up to 500k for a house, I was like, why do I need a 500k house and spend 2/3's of my paycheck monthly to pay the mortgage? I settled for a nice decent house under 200k.

Same goes for investments, if you are in debt, take care of that first. Get your priorities straightened out first, then invest if you have the money and other savings to live off of if some life changing event happens. Don't go spending all of your available extra income on investments where you can lose either.

That's my two cents.

 

If you go the stock/bond route I use this site for a portion of my savings I want to invest. It is so simple even my mother understands it.
www.betterment.com

As young as you are you should REALLY set up a ROTH account. I can not overstate how important that is.

But alas, I too like the "fondle" factor of having shiny hunks of metal in my safe. There is just something about holding something tangible that is far better than looking at a graph or a bank statement.

And the nice thing about stocking away PM is its a lot harder to just convert back to cash in case you get the urge to buy something. If you had stacks of bills in a drawer it would be so simple to just grab them and go splurge. If its coins/bars you would really have go out of your way to convert into cash to spend elsewhere.

 

Good Investment

With today's gold prices, is buying gold coins still a good investment?