Owning and Investing in Gold: the Pros and Cons (Part 1)



I suspect most of us aren't heavy hitters when it comes to owning and investing in gold but I can pretty well predict we all hold various amounts of physical gold in the form of placer Au, coins, bullion...or all three. Mining gold is one thing, but investing in it is another animal altogether. So let's take a look at the both the plus and down sides of owning and investing in the yellow metal.

Nix on "Paper" Gold

I've mentioned this before, but right off the bat let's get one thing clear. I suspect most of us keep our gold (whatever form it may be in) either at home or close at hand in a bank vault. Some folks I know who buy into the doomsday prepper thing stuff their gold in PVC piping and bury it nearby. That's cool...after all, who am I to question whether economic or social collapse is just around the corner. Whatever the case, the trend here is that most people who aren't Forbes billionaires like to keep their gold close at hand from a physical standpoint. The heavy hitters out there, on the other hand, tend to buy "paper" gold where they end up with nothing more than a slip pf paper or a transaction number on an internet web page telling them how much gold they "own" and where it's supposedly held in safe storage. My recommendation is, as always, to maintain physical possession of the gold (and/or silver as the case may be) you already own or plan to invest in. The truth of the matter is that if the shit really does hit the fan, even the gold in your safety deposit box at the bank is at high risk and may become "unavailable" to you. But I tend to be a bit more optimistic about America's potential collapse so I keep a good part of my gold in the bank and the rest of it at home. Now this latter is risky business for obvious reasons. If some junkie desperate for his or her next fix of meth or heroin breaks into your humble abode then your gold may go bye-bye, only to be sold for a fraction of its value since most burglars are opportunists and totally ignorant of these sorts of things. Nor do they care about their own ignorance in this regard. They just need more drugs. So there are potential issues with keeping your gold inside your home. Whatever the case, the main point I'm trying to make here is that you should never invest in (i.e., buy) "paper" gold in any form. There are tons of "experts" out there who will try and tell you differently, of course, but they have a vested interest in getting you to buy their paper gold products.


Owning and Investing 

As far as gold is concerned, allow me to explain my take on the terms "owning" and "investing." In my somewhat addled mind, owning something means that something is a physical entity whether it's a house, a car, a truck, or the gold in your possession. You either bought or paid for it, made a trade for it, or in the case of placer or lode gold...wrenched it from the earth with your own labor and effort. Again, that gold you "own" is either in your hot little hands, close by in your home, or stashed elsewhere, including a bank safety deposit box. In other words, you have physical possession of it in one way, shape, or form. Now the possibility does exist that you came to own some of that gold of yours through "investing." That is, buying gold bullion from either brick and mortar sellers or online vendors (of which there are many these days). You bought or "invested" in that physical gold for any number of reasons, including using it as a supposed hedge against paper money inflation or your innate distrust of equity investments like stocks and bonds. Maybe you're hoarding that yellow (however large or small the amount) for the coming Armageddon and its ensuing economic collapse. Then again, maybe you simply want to diversify your current portfolio with physical gold like I do. Who knows? Whatever your reason for investing in and owning gold, you're smart enough to realize that paper gold ain't the way to go.

 (Take physical possession of any bullion you buy. Stay away from paper or online "confirmations.")

Placer Gold Isn't a Good Investment

Hold up there pard. I'm not suggesting that mining for placer (or hard rock) gold isn't a good thing...if that were the truth we wouldn't be here discussing anything and Bedrock Dreams would've died stillborn. After all we're gold miners...mostly small-scale guys and gals, but miners nonetheless. However, from an ownership and investment standpoint, holding onto the natural gold you've recovered in any form is not the way to go for any number of reasons. First of all, this is 2018 and not 1848. Placer gold (or other natural gold) is not considered currency and can't be "unloaded" very quickly in most instances, especially as compared to .999 fine gold bullion in "rounds" form or in bullion bars of any weight. Additionally, depending on where you recovered that natural or placer gold, it's purity level will range from the mid-.600s on up to .917-.922 or so. These latter purity levels for placer gold are the exception...not the rule, so be advised. Sure, you can sell those ounces of placer you recovered last summer but you aren't going to get a premium price for them. In fact, you'll take some sort of hit when you sell your placer gold for the reasons already given. Yes, placer gold is real gold. Owning it is better than not owning it. But from an ownership/investment standpoint it's not a good move overall. As an aside here, you coin and beach hunters take note as well. It's always better to trade your non-numismatic finds across for gold and silver bullion as opposed to taking cash for  your finds unless you're down and out.


What Do I Do?

OK, that said, you may have this question for me. What do I do with my placer gold? I trade it straight across for gold bullion, either in the form of small weight bars or more commonly, gold one-ounce rounds like Maple Leafs, Krugerrands, etc. I do this for two reasons. First: over the course of 40 years I've gotten a better price (weight-wise) for my natural or placer gold with reputable dealers this way. Secondly: I've converted my placer into a gold form that's easily recognized, bought and sold, and at .999 purity, strictly tied to the daily market spot price of gold. And if the United States economy collapses, or the zombie apocalypse does happen, my silver and gold bullion may buy me things paper money won't. Now here's an afterthought. Just like some of you, I've had to sell placer gold along the way to keep myself mining when I was really going at it working various claims. I sold some of what I recovered to buy gas, food, and other supplies or to pay off a claim owner when I was leasing a claim. That's understood and just fine. But in a general sense I wouldn't hang onto that placer gold you've recovered and are hoarding. Convert it into bullion if you're really serious about owning gold as an investment or hedge. The one exception to this rule is to hang onto your nuggets, especially those that are larger or more unique. Ditto for any specimen hard-rock gold you have. Both of these natural gold forms can bring premium prices above the "melt value" of your gold. Granted, it takes more time to unload them, but the pay-off is often well-worth the wait.

 (A baseball bat may well be worth its weight in gold if the zombie apocalypse does happen.)

Work and Invest Smart

Obviously you aren't bound to any of this, or anything else I say in this series of posts. I'm not trying to tell you what to do with your gold, just laying out what I consider better ownership/investment opportunities. Hell, you can stuff all that placer or hard-rock gold you've worked so hard for under your mattress for all I care. After all, miners tend to be independent spirits and I am one of those, with a little contrarian thrown into the mix. But I tend to work smart when mining and invest smart, if that's the proper term. So do what works for you but understand there are always better ways to go at things, whether you're swinging a pick and shovel or hoarding bullion. My readers are smart people, after all. I've come to know this over time. So remain smart in all respects when it comes to gold and gold mining.

There's more to come so stay tuned.

(c) Jim Rocha 2018

Questions? E-mail me at jr872vt90@yahoo.com

Comments

  1. JR, I know you are 100 percent right on this. Proven, tested and stamped pure gold bars or coins are worth much more than a vial of placer gold. Who knows, trading for it from someone , they could have added a few brass filings to that vial you are trading for! I guess the trouble I would have trading off what little gold I've found for other gold, is that I didn't find the other gold I would be trading for. The other trouble I would have is trading more of my gold for less of theirs. Mine, I know is not pure, some has a little copper color to it, so it's not worth as much as that .999 bar, so I would have to give up more for less. I know that is silly thinking, but as you well know, it's a lot of work prospecting for gold. Each little speck of gold sand is a victory that would be hard to trade off. Maybe that is the source of the "Greed" we hear so much about? As always, something to think about. Oh, and "paper gold" no way in Hell! Same with computer ebooks and such, if I can't hold it in my hand, I don't want it!

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    1. The last sentence of your comments says it all Gary.

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    2. I understand how muskrat feels about his placer gold.
      I have a little bit of gold in a glass vial, very little, and I worked my butt off for it this summer, on my placer claim.
      I was showing it to a guy in town who runs a sporting goods store by the lake.
      He looked at that and snorted, That ain't nothin!
      I said, Yeah I know it ain't nothin, but I worked my tail off for three afternoons to get this and so it's something to me.
      And that's exactly right.
      I found more than that this summer but most of it I gave to the friends that helped me prospect on that day.
      Just three or four different people at different times totaling no more than a week on the claim.
      It's hard to find people that have the time and the desire to go do some mining together.
      I think next year will be better though, and not just for me. I hope next year is better for everyone reading Bedrock Dreams.

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    3. Thanks for the comments Don and for the good wishes to all.

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    4. Happy Thanksgiving Howard,

      Thank you for your Service to our Country and keeping America Free.
      God Bless you and your Family and all those you hold close.

      Fred C. Dobbs

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    5. Sniper/Don, I thank you as well! Here's hoping for a great 2019 , in everything we do! ( Lifting a glass of whatever your favorite drink is!)
      Happy Thanksgiving , Merry Christmas, and Happy New Years in advance to all !

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    6. Thank you Dobbsie, Gary, and Don. You all be well and keep on truckin'!

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