Gold Stocks and ETF's Compared to Bullion

We read all sorts of articles telling us we should invest in gold bullion, coins, stocks, etf's or mutual funds. We know that gold bullion and non-numismatic gold coins will follow the price of gold, the only difference being the percentage markup which can be from 1-20% or more depending on type, size and quantity of coin/bar purchased.

I decided to check a bundle of gold stocks and ETF's (Exchange Traded Funds, which act like and can be purchased like a stock, but are supposed to track the price of gold directly) and see how they fared against the spot price of gold. I arbitrarily chose October 1, 2009 as a start and October 1, 2010 as a finish date.

New York Spot Gold closed on 10/1/09 at $999.90 and 10/1/10 at $1318.60 for a one year gain of 32%.

I looked at 4 ETF's:
SPDR Gold Trust (GLD) (+32%)
Market Vectors Gold Miners Fund (GDX) (+31%)
Central Gold Trust (Canada)(GTU) (+29%)
Proshares Ultra Gold (UGL) (+64%)

Three of them are supposed to track gold, while the Proshares Ultra Gold is supposed to double the move of the spot gold price and that is pretty much what each of them did. With the Exchange Traded Funds, you can buy them just like a stock, so they will cost about $10 to buy and $10 to sell, depending on the broker you use. Additionally, there is a fee for administration and expenses for running the ETF which seems to be in the 1% area and is reflected in the share price.

I took a look at several common gold mining stocks as well:

Northern Dynasty (NAK) (+25%)
Newmont Mining (NEM) (+50%)
NovaGold (NG) (+82%)
Gold Fields Limited (GFI) (+14%)
Gold Corp (GG) (+14%)
Gold Reserve Inc (GRZ) (+63%)
Hecla Mining (HL) (+54%)
Barrick (ABX) (+30%)
AngloGold (AU) (+22%)
Cameco (CCJ) (+6%)

There is a much wider spread in results in the stocks, due in part to cost of mining the gold which can vary widely, as well as things like weather, political actions and economic variables like labor disputes.

Overall, it would seem like ETF's can follow gold prices far better than gold stocks without all the hassle of storage that comes with buying and owning the physical metal.


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New $5 Gold Coins -- 5-Star Generals Commemorative Coin Act

H.R.1177 -- 5-Star Generals Commemorative Coin Act has been passed by both the Senate and the House of Representatives. This act will provide that in 2013, three coins will be minted to commemorate five United States Army 5-Star Generals, George Marshall, Douglas MacArthur, Dwight Eisenhower, Henry 'Hap' Arnold, and Omar Bradley.

There will be a $5 gold coin in 90% gold and 10% alloy which will have a 100,000 coin limit. Also, a $1 silver dollar in 90% silver and 10% copper with a limit of 500,000 coins and a clad half dollar made with a 750,000 limit. The coins will all be minted in both Proof and uncirculated condition.

Technorati Tags: Gold Coins 5 Star Generals Gold CoinsGold Bullion CoinsGold InvestingGeorge MarshallDwight EisenhowerDouglas MacArthurHap ArnoldOmar Bradley

5 Tips to Gold Coin Investment

As gold has exploded in value recently, gold coin prices have followed. Since they are now so expensive, you need to use care when making your purchases. While your local coin dealer used to be the only game in town, the internet now provides you the opportunity to get better prices on many coins, but gives you a few more things to think about when buying your gold coins.

1. When you are shelling out big money for your gold coin, the reliability of the dealer is a major concern. For a store, you can check with the local Better Business Bureau to see if there are any outstanding complaints. If the dealer is a member of the Professional Numismatists Guild (PNG), that is a good sign. If you are buying through an EBay auction, make sure to check the seller's feedback rating first. If it's very low, or there are many negatives, think twice (and a third time) before spending a large sum with them. Some Ebayer's will buy or sell a number of very inexpensive items to build up their ratings, then jump in selling big ticket items. So if you see their previous transactions all seem to be $5-$10 items and they are all of a sudden selling $1500 coins, watch out. Before bidding on large ticket items, ask if the seller will agree to use Escrow.com. They act as a middleman in the transaction and the money doesn’t pass to the seller until the buyer is satisfied with the item. There is a fee, which the buyer would be expected to pay, but it's well worth it when big money is changing hands.

2. If you are buying collectible gold coin, a big issue is grading. The seller's idea of an MS65 may not be the same as yours. There can be a huge difference in price between an MS64 and an MS65 and the grading difference isn't always very obvious. Buy only certified gold coins that have been graded by one of the third party grading services and you will have peace of mind. Make sure that you only accept the major services (ANACS, NCG, PCGS, NCS, ICG) grading, there are some lesser known grading services whose grading may be suspect. Make sure that the grading wasn't done too long ago. Coin grading standards have changed over time and what was an MS65 five or ten years ago, might only be an MS63 or 64 today.

3. If you are purchasing a non-certified coin, make sure you will be allowed to return any coin if you are not satisfied. This should apply to both on-line and off-line dealers. You want to have the option to return it if your grading service returns a lower grade than you bought it at.

4. Buy the scarcest coin in the best condition that you can afford. Many collectible gold coins sell near the melt price of gold because there are more than enough around to cover demand. This is especially true in the lower grades. When gold increases or decreases in value, these coins will follow by a like percentage. But the higher the grade, the lower the population and demand will push up the price rather than just following the price of gold.

5. You can't call the tops and bottoms of the coin market any more than you can do it in the stock market. Make your investments regularly. Dollar cost averaging will do better for you in the long run than trying to call the turns.

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