Could Some Forms of Gold Investments Be Better Than Others?

Why does this writer hate some forms of investing in gold, but love others? The rationale is even more simple than you may think.

Writing for MarketWatch, Cody Willard recently examined the various forms of exposure to gold and how they bode for the average person looking to protect their savings. For his part, Willard believes the best course of action is to stick to coins and bars and avoid stocks, ETFs and the like – regardless of the potential for short-term profit.

Willard writes that the issue with mining stocks is one of debt: Most mining companies are currently working under massive debt and are therefore dependent on higher gold prices. Everyone involved in gold likes high prices, but the miners absolutely need them; Willard explains that miners aren't able to profit when gold stays in the $1,100 range, and that they require prices to be at least over $1,300 in order to be profitable.

Likewise, gold ETFs do little to fix the problem of uncertainty. In the event of a crisis, these funds could very well be unable to deliver the gold they owe to investors – in fact, many believe that precious metals ETFs are already operating on good will and lack the physical gold that they purport to have.

For Willard, gold is all about certainty, so investing in the metal should serve as a hedge against the long-term risks of currency devaluation and other forms of central bank disruption, not bring more risks to a portfolio.

Looking towards the future, Willard believes that gold prices will hit $2,000 per ounce sometime in the next decade. Furthermore, he expects the Fed to formally enter an easing cycle again in the next few months, which could act as a tipping point for a 20-30% spike in gold prices, if not higher.

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Gold Has Reason to Shine and Here's Why

Are central banks “increasingly aggressive and counterproductive” policies causing gold to continue to brighten? Here’s why the metal’s shine is likely just getting started.

Gold might have already posted its best quarter since 1986, but hedge fund manager David Einhorn is betting that there's more to gain from the metal: on Tuesday, he spoke with Bloomberg via phone about his views on central bank policies and how they might affect gold.

Einhorn was critical of how central banks are running things and warned about the direction they're headed in: he panned the European Central Bank's record-low borrowing costs, expanded asset purchases and borrowing subsidies, calling these a "kitchen-sink policy". Aside from Europe, Einhorn also touched upon the Bank of Japan's negative interest rates as well as the reduced U.S. rate hike forecasts. According to him, the status quo is good for the metal: "These increasingly aggressive and counterproductive monetary policies are bullish for gold," he said.

Einhorn's comments to Bloomberg echo sentiment from a letter that Greenlight sent to investors yesterday. "The Fed’s 'data dependency' doesn't appear to relate to employment, which continues to improve, or core inflation, which is now running above its two percent target," said the letter. "We believe the increasingly adventurous monetary policy is bullish for gold."

Those familiar with Einhorn and his Greenlight Capital Re Ltd reinsurance company know that they have traditionally held gold in high regard: the metal accounts for nearly 10% of Greenlight's portfolio and Einhorn has long believed that central banking stimulus will fuel inflation and boost gold. Furthermore, Greenlight named gold as one of their five largest disclosed long positions at the end of the first quarter or 2016.

At any rate, the company's faith in the yellow metal seems to be paying off: their stock has maintained stability and their shares have gained 15% this year, helping alleviate the losses from investing in Japanese lender Resona Holdings Inc. which dropped 32% in the first quarter due to the Bank of Japan's negative-rate strategy.

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Is China trying to shape the gold market?

What Buyers Need To Know Before Making Their First Gold Bar Purchase

Image source: Wikimedia.org

Adding a precious metals IRA is a wise investment move as it diversifies a traditional asset portfolio. Having precious metals like gold means having an asset that would remain valuable even after an economic crisis unlike stocks, bonds, and cash. Some things must be taken into account before an investor makes his or her first gold bar purchase.

 

Image source: Personalincome.org

Once the investor acquires these assets, they have to be stored at an IRS-certified depository. Buying gold and other precious metals is a wise choice especially during an unstable economic climate as precious metals qualify as diversified investments. Having diverse assets is a practical move to protect the whole portfolio against investment risks. 

Birch Gold Group is a precious metal IRA specialist headquartered in Burbank, California, that aids clients in protecting their portfolios in the face of current and coming economic instabilities. Precious metals like gold, silver, and platinum have consistently been seen as resistant to economic cycles, and over time have been bedrocks of truly balanced and diversified portfolios. Visit the company’s official website for more information on purchasing precious metals.

The Recycling Project That Lead to a Gold Mine

Apple's recycling program has resulted in an astounding collection of gold from their product. How much did they collect? Read about it here.

Aside from helping the environment, Apple's recycling projects are also making good money for the company: Digital Trends' Lulu Chang reports that Apple recovered a total of 2,204 pounds of gold through its recycling efforts in 2015, amounting to over a ton of the precious metal.

Based on current market prices, the recycled gold is worth around $40 million which is a major yearly profit even for a tech giant like Apple.

While many are familiar with numerous gold-plated Apple products, the bulk of the recovered gold comes from electronic components found in regular products: gold's properties often make it a better choice for consumer electronics than silver (conductive, but corrosive) and copper (inexpensive, but offering poor conductivity). Therefore, bits of gold can be found in most higher-end electronic devices such as iPhones, iPads and Macs.

Over the course of 2015, Apple managed to recover around 90 millions of pounds of e-waste, with two-thirds of it being reusable. Besides gold, Apple also collected 6,600 pounds of silver and millions of pounds of other useful materials.

Apple mentioned the financial and environmental benefits of recycling in a recent official statement: "We work hard to keep electronic devices out of landfills so that the precious resources they contain can be reused. And we want to ensure that these devices are recycled properly so they don’t pose a threat to human health or the environment," said the company.

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Is gold the tangible asset you can't erase, hack or delete? Read more here.

Why You Shouldn't Doubt the Shiny Yellow Metal

Gold has been experiencing its best quarter in over 30 years. Should you be doubting the metal and is it wise to keep buying? See what this leading investor is saying here.

With the recent price fluctuations that gold has seen, many have been wondering what's next in store for the wise investor: can gold sustain its rally, or is its current strength a come-and-go hot money affair?

Speaking to CNBC in a recent interview, known gold guru George Milling-Stanley said he's leaning heavily towards the former. Milling-Stanley is a true gold buff, having stuck to the metal for 40 years in spite of naysayers – his faith paid off, as he now manages the $33 billion S&P depository receipts (SPDR) Gold Trust fund that's up 15% year-to-date.

His experience with the yellow metal also lets him refute these naysayers easily, especially since they tend to focus on gold's perceived lack of return. "For 40-something years, since I first got into gold investing in the 1970s, people have been saying it doesn't pay a return. Well, guess what? Not much else does these days, either. People are charging you to store money. [gold] GLD costs less at 40 basis points annually than holding Swiss francs," Milling-Stanley explains.

While recognizing the risks that hot money poses, he doesn't see it as responsible for gold's early-year success: "We think most people were dangerously underweight gold or out of the market altogether," he said. Instead of huge gains ahead, Milling-Stanley would prefer to see a moderate steady increase, predicting such thanks to demand "across the board" – including that from emerging markets – and stagnant mine production. "I would like to see gold go up steadily by about $100 in 2016, so to the $1,350 to $1,375 level by Christmas. That would be sustainable."

Milling-Stanley also mentions his four talked-about factors that have been keeping gold down in recent years. Each of them is now swinging towards the metal's favor: the dollar trade won't be as monolithic as before, the Fed is struggling to reach inflationary goals, equities are no longer posing a significant threat and investor sentiment is shifting. Milling-Stanley explains why the last point is particularly important: "A big factor is the change in the perception of risk, which has done a 180, even if the risks haven't changed. People are looking for risk-off assets. Risk-off trading was enough to give us a $200 rise. The perception of a riskier environment is liable to be what's governing here."

As for investing, the gold expert doesn't think anyone missed the boat: those who wanted to sell gold already did so at its $1,800 level, so there shouldn't be a surge in selling back or recycling until the metal goes a lot higher. And Milling-Stanley believes it can: "This thing could run. I won't say it's going to, but it could. It showed us in 2011 it could go up dramatically," he added.

Is gold the asset you can't hack, erase or delete? Read about this here.

Silver is Shining Bright, Sales are Through the Roof

People see the perfect buying opportunities for silver and have been stockpiling the metal. Demand is currently through the roof, so, what will this mean for the future of the metal? Find out here.

Reuters reports that the global silver-coin market found itself under an unprecedented supply squeeze. Both the U.S. and Canadian Mints had to set weekly sales quotas in July because demand was too high. Australia's Perth Mint responded to a record of 2.5 million ounces sold in September by rationing supply of a new line of coins.

When North American and Australian coin producers could no longer keep up, demand spilled over to Asia and Europe, creating a worldwide “domino effect”. Roy Friedman, vice president of sales and trading at a large U.S. coin dealer, says he never witnessed demand spilling over to other markets in his 35 years as a precious metals dealer.

“Silver [coin] demand is absolutely through the roof,” said Perth Mint wholesale manager Neil Vance. “There seems to be a bit of frenzy as people think there is a shortage of silver. But in fact it is a (crunch in) manufacturing capacity.”

While the U.S. Mint in West Point is operating three shifts and paying overtime, the Austrian Mint had to increase production of silver blanks and has begun allocating sales of its Philharmonic coins. But what is really driving the frenzy?

As the article notes, some investors like using these precious metals to protect themselves from volatility, especially in currencies and stocks. Since the Chicago Board Options Exchange (CBOE) Volatility Index briefly jumped to its highest since January 2009 earlier this year, it's easy to see why one would want to seek shelter for their assets.

Regardless of investors' reasoning, the industry will continue feeling the effects of increased demand for the time being. “We can only get a fraction of what we could sell,” said Terry Hanlon, president of Dillon Gage, with dealers adding that this buying binge has lasted longer and been more pronounced than previous ones.

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China Begins to Report Their Gold Reserves Monthly, But Are They Massively Understated?

Beginning in the last month, China has begun to report their gold reserves monthly. But with many questioning the accuracy of the numbers, what could be China’s ultimate goal? Find out here.

Most countries report their gold holdings to the International Monetary Fund (IMF) on a monthly basis. Until recently, China was among the few who elected not to do so, having created no such reports in six years.

But within the past month, that has changed. Now, they seem to have adopted the monthly report system in an effort to get in the IMF's favor and thus increase the chances of the yuan being included in the Special Drawing Rights (SDR) basket.

China hasn't just been criticized about the lack of reserves reports. Their first report after six years was met with widespread disbelief, as most analysts estimated that their holdings were high above the 'official' figure of 1,658 tons. It would be strange for China to have such small reserves considering how they view the metal. While the West recognizes the value of gold, many Asian countries – with China perhaps at the forefront – go a step further and see it as the ultimate money.

At any rate, Lawrence Williams finds the way China reports their gold reserves to be in stark contrast with how the West does it. Whereas Western countries will inflate their reserves by including leased and swapped gold in the figures, China seems to be hugely understating their holdings by using “non-reportable” government-controlled accounts.

Williams writes, “It also seems to be the situation that in China, a very substantial gold holding – far above the currently stated ‘official’ figure – is considered to be a prerequisite for attaining a stronger position for the yuan in global trade.” Despite this, it seems as though China prefers to avoid “rocking the U.S. economic boat” with a report of massive reserves – at least for the time being. But what happens once the yuan finds its way into the SDR basket is anyone's guess. After all, Williams does point out that Chinese gold holdings “magically” increased by 600 tons from 2009 to 2015.

Aside from frequent holdings reports, China is also devaluing the yuan in response to the IMF's recent criticism. Yet should the IMF delay the yuan's inclusion for too long in spite of China's efforts, Williams notes that the Chinese could see this as an unfriendly act and respond accordingly by trying to destabilize the U.S.' global position using their forex holdings.

While the time might not yet be right, Williams warns that “the game could change” should China's plans of joining the SDR be thwarted. “China thinks long term in a way the West mostly does not. It may lose the odd battle but ultimately aims to win the economic war,” he says.

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