Gold Stocks

[Rag and Bone]

Does anyone have any tips on trading gold stocks like GLD? It seems like it would be a good way to capitalize on the market fluctuations without dealing with the hastles (and apparent impossibility for the small timer) of buying and selling bullion.

Any advice would be appreciated.

I've watched gold rollercoaster for the last year and wished I had a way to capitalize on it.

 

[Palladium]

Non teneas aurum totum quod splendet ut aurum.

 

[Noxx]

Which means: Do not take as gold everything that shines like gold.

 

[Palladium]

:wink:

 

[JustinNH]

Another option is the actual mining companies themselves....
I know someone who invested in gold mining companies- 9k 3 years ago turned to 25k when gold peaked at 1000, but they went down to 21k now or somewhere around there, which still isnt too bad.

There are also two completely opposite sides to gold mining companies... with gold goign up, less profitable ores/places to mine are becomeing economical for the companies to get to- which would mean a higher profit.... but, I also have heard that certain supplies (like any natural resourse) are going dry and smaller companies arent doing as well... Its a different story from who you hear it from.

Gold peaked, now its on its way down. Eventually it will set a new peak, and eventually it will go back down again. It happens to a lot of commodities and ive notices they coincide with how the stocks are doing. If stocks are going down, commodities will go up. Visa Versa. Atleast ive notices that recently...

I heard plat mining companies arent the best to buy as many were locked into contracts for 1000/ounce plat when the level went up to 2k, they lost a lot of potential profit, and the fact that it is a lot harder to mine plat.

Of course, i am not an economist, thats just a few things ive noticed...

 

[JustinNH]

And of course, its just not the same as physically havign the gold yourself

 

[Rag and Bone]

Yeah it is cool to have gold. I'll always keep some pieces that have sentimental value like my first button and first eagle but I want to put the rest to work!

 

[junkelly]

GLD is an ETF that is supposed to reflect the price of gold. They actually hold more gold than many government central banks. Other stocks, such as mining companies, may ride the tide of gold, but not reflect it closely. For all we know, some of these companies may be incompetent or otherwise not good investments.

The cheapest practical way to buy stocks is to open an account at a discount broker like eTrade, TDAmeritrade, or Scott Trade. They'll charge you $7 - $12 per trade. So the first downside is that you'll have to pay this fee each time you buy and sell. To minimize this, you'll have to buy in as large lots as possible.

The second downside is that you'll have to pay taxes on your profits. You pay higher taxes if you hold for less than one-year. I'm not sure, but it wouldn't surprise me if the brokerages simply told the taxman how much you owe - not leaving it up to you to decide to file or not. For us Americans, if you invest in a Roth IRA, you won't have to pay taxes on the gains, but still have to pay the trading fees. You are also limited in how you can withdraw.

Between fees and taxes, I don't think there's any benefit over buying physical gold. This may be different for millionaires investing 20% of their portfolio, but it is true for me investing $100 here and $100 there.

If the thought is to "buy low, sell high" I think we've missed the boat. The best way to buy low is to go back in time...

-junkelly