Gold investing in small amounts
answering reader
questions
Q.I keep reading about gold, but it is way too expensive for me to buy. Is there any way I could buy some gold with less than a thousand dollars?
A. Even though the price of gold is currently trading around $1,600 per ounce, there are several ways you can buy gold in smaller dollar amounts. A 1-ounce gold bullion coin (one that has no intrinsic collector’s value) typically sells for the current price of gold, as traded on world markets, plus about a 3 to 5 percent markup for the dealer.
At current prices, that means that a 1-ounce coin, such as the American Eagle, Canadian Maple Leaf or Austrian Philharmonic would be above your price range. But there are smaller versions of those coins, as well as small bars or “wafers” that would fit in your price range, although at a slightly higher markup over bullion prices. Some even come with frames, so you can wear them as jewelry.
Bob Greenstein, of Chicago’s Harlan J. Berk Numismatists ( www.harlanjberk.com), suggests that with gold bullion trading around $1,600, you might want to purchase one of the following (approximate prices that, of course, change with the price of bullion, and vary based on demand): ½-ounce American eagle, $860. ½-ounce Canadian maple leaf, or philharmonic, $850.
½-ounce Chinese panda or Aussie lunar, $880.
10-gram bar (about one-third ounce), $550.
20-gram bar (about two-thirds ounce), $1,075.
Mexican 20 peso (0.4823 ounces), $800. Because costs to make the coin remain fixed, you’ll pay a higher premium to gold on smaller-size coin and bar purchases. Be sure to keep the coins in your safe deposit box. Find a reputable dealer near you at the website of the American Numismatic Association — www.money.org.
There are other ways to participate in owning gold as an investment. There is an exchange traded fund (ETF) that trades throughout the day, based on the price of gold bullion held in trust to back the shares. SPDR Gold Shares Trust is traded on the New York Stock Exchange, symbol GLD. At current prices, ($154/share) it would cost you more than $15,000 to buy 100 shares. But at Sharebuilder.com, you can buy fewer shares of almost any stock, including GLD, with a commission of $6.95 per transaction — and no minimum amount.
Or you could buy a mutual fund that invests in the shares of gold mining companies. At U.S. Global Investors ( www.
USFunds.com), you can open an account in their Gold & Precious Metals Fund for as little as $1,000 — if you agree to an automatic monthly investment of at least $100 per month, either in an IRA or a traditional account. And you’ll find a wealth of information about the gold market on their website.
Remember, gold is a volatile market, so you want to consider your small purchase to be a long-term investment. Otherwise the costs of getting in and out will be prohibitive. I’ve left out gold jewelry — although it’s nice to wear — because you will pay retail prices for the workmanship, sales taxes on the purchase, and may not receive a fair “melt value” for the gold when you go to sell.
And keep in mind the real reason for owning gold as an investment: Ever since Rumplestiltskin tried to spin straw into gold, mankind has realized that governments can “create” paper money — but no one can create gold. It is truly a store of value — and that’s The Savage Truth.