Precious Metals - Invest now?

[edro]

Since the economy has recovered, it seems precious metals are down.

I'm thinking about switching a large chunk of my IRA into a precious metals fund, like this:
https://personal.vanguard.com/us/funds/snapshot?FundId=0053&FundIntExt=INT#tab=0
$3000 min, no purchase or redemption fees, .26% ER

Thoughts?

Most stock funds are ~+25% YTD.
Tell me I'm crazy and I will keep my funds in a stock fund.

 

[rudeguy]

You are crazy

 

[AViking]

Speculating on metals is simply gambling.

I wouldn't touch them with a penny. I worked professionally with the London Metal Exchange and I can definitely say that the intrinsic values of metals mean nothing. Basically a hedge fund comes in, buys a shit load of metal, doesn't take delivery, affects the supply and demand of the commodity, prices rise, and they dump. Rinse and repeat. Was insane. I don't understand why it's allowed.

It used to be that you would monitor the activity of mining, smelters, refineries, recycling, manufacturing, aerospace contracts, etc and work the prices from there. That's not possible any longer. Prices are all over the fucking place due to market manipulation and speculators.

 

[glenn1]

Unless you have a pretty small balance I wouldn't allocate more than a small percentage like 5%, maybe 10% if you have very strong convictions on this. That being said, I'm not a fan of the metals funds and would recommend one of the well-established and stable mining company stocks instead. For example, I own some Iamgold (ticker IAG) in my IRA.

Standard disclaimers apply - above is not a recommendation, consult your financial advisor, securities may lose value, blah blah blah.

 

[z1ggy]

Speculating on metals is simply gambling.

I wouldn't touch them with a penny. I worked professionally with the London Metal Exchange and I can definitely say that the intrinsic values of metals mean nothing. Basically a hedge fund comes in, buys a shit load of metal, doesn't take delivery, affects the supply and demand of the commodity, prices rise, and they dump. Rinse and repeat. Was insane. I don't understand why it's allowed.

It used to be that you would monitor the activity of mining, smelters, refineries, recycling, manufacturing, aerospace contracts, etc and work the prices from there. That's not possible any longer. [B}Prices are all over the fucking place due to market manipulation and speculators[/B].

This is the hardest part about investing for me. There's too much manipulation by hedge funds with hundreds of millions of $ backing them.. Then little ol me with just a few 10 thousands. I feel like I just blindly dump my money into ETFs and pray for the best, because I'm not sure what else a little guy investor can do.

 

[CurseTheSky]

I kind of want to buy a small (troy ounce?) bar of gold and silver, just to have them. Not because I expect them to be a great investment, but because I think they look cool.

Actually, I just checked... a troy oz of gold is around $1,300 today. Nevermind on that one. Silver is only $21 or so, so that sounds like fun.

 

[AViking]

I kind of want to buy a small (troy ounce?) bar of gold and silver, just to have them. Not because I expect them to be a great investment, but because I think they look cool.

Actually, I just checked... a troy oz of gold is around $1,300 today. Nevermind on that one. Silver is only $21 or so, so that sounds like fun.

Before you do that look up what happened to Silver in the 1970's. I would HIGHLY advise against it. HIGHLY!

 

[glenn1]

Before you do that look up what happened to Silver in the 1970's. I would HIGHLY advise against it. HIGHLY!

<shrug> No big deal as long as he's looking at it as a hobby rather than a get-rich investment. For example, there's a pretty good retail market in specialty precious metals coins as a collectible in their own right above the melt value. For example, the coins from Isle of Man portraying various breeds of cats have for years if not decades consistently sold for a hefty premium above intrinsic metal content. No worse spending money on that than a new video card or something, and the coin will certainly be worth 99.999% more than the video card in 10 or 20 years.

 

[edro]

Before you do that look up what happened to Silver in the 1970's. I would HIGHLY advise against it. HIGHLY!

Also look at what happened to silver in the 80s and 2011.

 

[AViking]

This is the hardest part about investing for me. There's too much manipulation by hedge funds with hundreds of millions of $ backing them.. Then little ol me with just a few 10 thousands. I feel like I just blindly dump my money into ETFs and pray for the best, because I'm not sure what else a little guy investor can do.

The system is not built for the little guy. It's built so that the big guys get richer. Your best bet is to invest in a small business with the money most likely. If you're smaller than that then see if you can piggy back on with family who have more money and might have access to better financial advisers that have high minimum balance requirements and actually watch your money and move it around for you. Doing it yourself is generally asking for trouble and using any old financial adviser is asking for trouble. They don't know shit. You give them your money, they get paid, and whether you lose it all or not doesn't matter. You're a little guy and irrelevant to them. They're simply there to sell you anything.

General rule is that if it feels like gambling you're doing it wrong. You should either have confidence in your financial adviser or have confidence that what you are investing in is going to give you a return on your investment that is in line with the amount of risk you are taking.

Stocks are at least a bit better since there are profits and losses, cash on hand, and other financials that you can see. Sure people speculate and try to move the stock but it seems to be way easier for them to do with metals.

That's my opinion at least.

 

[ultimatebob]

No worse spending money on that than a new video card or something, and the coin will certainly be worth 99.999% more than the video card in 10 or 20 years.

Unless you were able to get a hold of the mythical 3dfx Voodoo 6000 card, that is. That sucker is worth thousands to certain video card fanboy collectors.

 

[AViking]

Also look at what happened to silver in the 80s and 2011.

Well 1979-March 1980.

http://en.wikipedia.org/wiki/Silver_Thursday

Two brothers bought up 1/3 of the world's supply of silver and drove the price up 712%.

It then dropped 50% in 4 days.

 

[gorcorps]

other than all the things that could go wrong, what could go wrong?

 

[glenn1]

Unless you were able to get a hold of the mythical 3dfx Voodoo 6000 card, that is. That sucker is worth thousands to certain video card fanboy collectors.

I remember that, the sucker was like 18 inches long and had 4 fans on it IIRC.

 

[tmc]

is there a vanguard fund for bitcoin?

 

[Vdubchaos]

Speculating on metals is simply gambling.

Speculating on ANYTHING is gambling.

Wall street is FULL of speculation.

 

[lozina]

I've been an investor in PMS since 2004. Back then silver was around $5 and gold around $400. Gold almost reached $1900 and silver almost $49 so it was a really nice run. Now may be still a good opportunity to buy in for the following reasons:

1) The next fed Reserve chair has stated she thinks we need more inflation, that our economy would recover better if we had taken steps to increase inflation. Whether you agree with that policy or not (I certainly dont) the fact is when the currency that commodities are valued in loses value then those commodities will gain value in that currency. Simple economics. Thats the reason they are considered hedges for inflation. You can say any commodity shares the same perk to some degree - such as oil, basic metal ores, coal... but obviously PMs are far more convenient to store.

2) If gold and silver are going out of style no one has told India and China who continue to buy it in impressive quantities. China in particular has really been surging in their hoarding of gold and there are some rumors they are planning to introduce a gold or silver standard in their currency (I personally doubt it) but if you were to speculate on that possibility it would mean very good things for PMs overall.

Having said that, there are some key problems with this type of investments:

A) As someone else mentioned, this market is infested with market manipulation due to paper contracts. It would be a completely different landscape if trading was allowed only in physical amounts and only with available supplies. It makes me feel very uneasy about investing in PMs.

B) Big Government. There has already been a time when the gov prohibited trading in gold bullion and confiscated public supplies. What will happen to your investment if this happens again? Will you be compensated fairly? Or will you be forced to take significant loss? How likely is another confiscation? I have no idea but the possibility of it should make any investor nervous.

C) Looks like you are planning paper trades instead of physical bullion. How much do you trust that? As one noted investor says "If you don't hold it you don't own it!". But then if you buy physical, how do you keep it secure? How do you safely buy and sell it?

 

[Doodoo]

I wasn't looking at buying some gold bars just to have, but when its time to sell, don't you sell at a discount to the market price?

 

[IronWing]

I kind of want to buy a small (troy ounce?) bar of gold and silver, just to have them. Not because I expect them to be a great investment, but because I think they look cool.

Actually, I just checked... a troy oz of gold is around $1,300 today. Nevermind on that one. Silver is only $21 or so, so that sounds like fun.

I did this in high school with a few onces of silver. In the years I held them, the price never regained the price I paid. It was kind of cool having them around though.

 

[sdifox]

Look at Barrick...and then stash your money under your mattress.

 

[sdifox]

<shrug> No big deal as long as he's looking at it as a hobby rather than a get-rich investment. For example, there's a pretty good retail market in specialty precious metals coins as a collectible in their own right above the melt value. For example, the coins from Isle of Man portraying various breeds of cats have for years if not decades consistently sold for a hefty premium above intrinsic metal content. No worse spending money on that than a new video card or something, and the coin will certainly be worth 99.999% more than the video card in 10 or 20 years.

coin <> precious metal fund...

 

[Apple Of Sodom]

Repeat after me:

Previous metals are fiat currency, no different than paper money. They have value only because someone says they have value.

 

[mmntech]

Screw metals. I'm going to invest in services for seniors. When all the boomers retire, it's going to be a booming industry.

 

[CurseTheSky]

I did this in high school with a few onces of silver. In the years I held them, the price never regained the price I paid. It was kind of cool having them around though.

That's sort of the plan for me. I don't consider them an investment - especially with just a few Troy oz of silver. It's just a collectible or conversation piece.

 

[DaveSimmons]

This is gambling pure and simple. Don't do it. Stock funds / ETFs may be boring, but they work.

For retirement funds, the best thing you can do is put most of the money into stock index funds / ETFs and leave them alone. Don't try to time the market,or chase "hot" sectors. Just let the fund values grow from dividends and increases in the underlying stock prices.

Also, leave the money in stock funds during a crash -- the people who switched to cash or bonds during the recession lost a huge amount of money from selling low and then missing out on the recovery. Those of us who left our money sitting in stock index funds got it all back and more.

I kept buying fund shares during the recession, and did very well on that.