how to buy gold stock- Money Morning - Only the News You Can Profit From.
The recent slide in gold prices has left investors puzzled over why the metal is not acting in the way it was intended: a safe haven from economic uncertainty.
But as Martin Grubb, managing director of investment for the World Gold Council, explained in a recent commentary for MarketWatch, it is not all that unusual for gold to experience a delayed reaction to macroeconomic events.
That's because gold is one of the very few assets that retains its value during tumultuous economic times. It is often the go-to holding investors sell when they need to raise cash, want liquidity, or are faced with margin calls. So events can trigger a gold sell-off and knock down prices before sending them soaring.
Grubb referenced Black Monday 1987 as a perfect example. The infamous day rocked markets the world over. Many feared it was a "financial Armageddon" as billions of dollars were erased from stock prices during the month of October.
Gold, instead of rising as market participants looked for safe haven assets, dropped as it was sold to raise cash to bolster accounts. It hit as low as $390 in the months that followed before rising to $484 by the end of 1988.
An even more extreme example of gold's liquidity role was the 1997-1998 Asian currency crisis. The Korean won was unacceptable in currency markets, so the Korean government stepped in and bought gold from locals in exchange for interest-bearing won-denominated bonds.
The Korean government sold the 250 tonnes of gold it received in the international market and was able to service its debt with the sales.
A more recent example of gold's initial sell off in a financial crisis is the Lehman Brothers bankruptcy in September 2008. Despite the bank's failure marking the credit crunch kick off, gold initially fell for a couple months as investors sold it for cash. Then it started a bull run that ran the price up 156% in three years.
Grubb wrote that we are currently in the infancy stage of a new crisis and gold's legendary behavioral pattern is repeating itself.
The precious metal is being liquidated to meet margin calls. In addition, it is believed the yellow metal is being lent into markets to provide ailing European banks with much needed liquidity.
"As a result, gold is not yet reacting to the worsening euro zone news and its current behavior is much like its behavior prior to and shortly after the Lehman bankruptcy," Grubb wrote.
To continue reading, please click here...
How to Buy Gold Coins At a Bargain Price
We told you how to buy gold coins as an investment back in June, and anyone who followed our guide to shopping the bullion-based gold coin market has netted a nice profit so far.
"Spot gold" - based on the London P.M. fix - has moved up 10% since then, from $1,515 an ounce to about $1,660 an ounce. The most popular government-minted bullion gold coins - the United States Gold Eagle and the Canadian Maple Leaf - have climbed 10.7% from a range of $1,560 to $1,610 to $1,746 to $1,763, depending on the source.
And I have some good news for those of you who have not yet bought gold coins- there's still time to profit.
A number of top analysts see gold testing the $2,000-an-ounce level by year-end and, according to a few, potentially reaching $5,000 an ounce longer term.
Adding to your coin holdings is a great way to profit from gold's rise. Still, given recent sharp volatility in the metals markets, it only makes sense to do a little "bargain shopping."
Due to the overwhelming reader response to our last look at gold-coin buying, we put together this guide so you can find the best deals in the bullion-based gold coin market.
How to Find a Gold Coin BargainBargain shopping in the coin market isn't quite as easy as it is with stocks. That is, we don't know of any major coin dealers who will take "standing limit orders" to buy at a price below the current market. But it is possible to watch the spot gold markets and buy your coins at a discount on days when metals prices suffer large losses.
For example, the London P.M. fix for spot gold on Sept. 6 was $1,895 an ounce and the leading dealers were quoting one-ounce American Eagle gold coins at around $1,970 each. The next day, gold plunged $85 an ounce to $1,810, and the quote for American Eagle coins fell to just $1,882 - a savings of around $88 per coin.
Gold-coin bargain hunting is possible now that the major U.S. and international coin and bullion dealers have computerized quote systems that link their product prices to current market prices in commodity markets. Some adjust their prices for coins and bullion bars every few minutes, reflecting changing market quotes -- unlike a few years ago when many dealers set coin prices just once a day (or even less often), based on the previous day's close.
To continue reading, please click here...