Long ago, someone coined the term “gold psychosis” for a very good reason: certain people lose their minds when they think about, or are in the presence of, gold.
The shiny metal is one of humanity’s oldest forms of stored value, and has been at least part of the reason for several national and international financial catastrophes, wars, and fist fights.
As 2018 approaches, you have to wonder whether gold is still a smart investment.
Some self-described alternative investors put all their money in gold.
Others have substantial portions of their personal wealth tied up in the most popular of all precious metals.
So how does a person take part in the potential of gold investments without checking into the Waldorf Hysteria?
There are several commonsense approaches to gold investment, listed below. Of course, this discussion is not “investment advice” of any kind, just our way of demonstrating some of the myriad ways of investing in gold.
Method One: Bullion Bars
Bullion bars are the single most popular way to invest in gold.
Long the top choice for those who want to take physical ownership of the metal, bars (commonly known as “bullion”) are also a favorite with major players, institutions and national governments.
All that gold in Fort Knox? It’s in bars. But you already knew that if you saw Goldfinger.
The big downside of owning bullion is the risk of theft, which is why most owners use bank safe deposit boxes.
The upside is that bars come in a multitude of sizes, from one gram all the way up to the 12.4 kg, or a 400 troy ounce block, which will lighten your wallet by $510,800 but fits nicely into a safe deposit drawer.
Per-ounce prices are cheaper for bullion than for coins or most other forms of the metal, and the smaller versions of bullion bars are highly liquid.
Expect to pay a premium over spot for smaller units. Coin and metals dealers sell a lot of one-tenth ounce and quarter-ounce bars.
If you’re ever in Japan, the Toi Gold Mine displays the world’s heaviest gold bar. The thing weighs in at 550 pounds and is worth $10,300,000 at today’s prices. That’s a lot of sushi.
Method Two: Gold Receipts
Some gold bugs don’t want physical possession of the metal for whatever reasons, so they buy gold receipts.
This type of investment harkens back to the earliest type of “banking,” where local goldsmiths would store the metal for community members and issue paper receipts in exchange.
This is one of the only interesting factoids about the otherwise driest subject on earth: the history of banking.
Nowadays, there are quite a few entities (not governments, by the way) that issue gold receipts which represent physical gold in their vaults.
One is the Royal Canadian Mint, which issues ETRs (electronic tradable receipts) that are fully backed by real gold in a real vault.
If you own receipts, you can trade them on an exchange or buy and sell them privately among other investors.
On the Toronto exchange, the Royal Canadian Mint ETRs trade under the MNT symbol.
But remember that you will have a hard time exchanging the receipts for actual gold unless you own a minimum of 10,000 of them.
If you own fewer than 10,000 ETRs, you’ll have to settle up in cash. The current price of one share of MNT is about US$13, so you’d need $130,000 in receipts to exchange them for gold bullion.
Note that there are many other issuers of gold receipts, like BMO, also based in Canada, that allow for redemption of your paper into gold bullion at any amount, even as little as one ounce.
Some investors like the ability to be able to trade the receipts for hard metal, while others don’t care; they just want the ability to take part in the price swings of the precious metal.
Method Three: Numismatic Coins, Bullion Coins, and Rounds
For those who want the security of bullion with a degree of added flair, coins and rounds will get the job done.
Coins are an extremely popular and accessible way to own physical gold.
Sometimes, particular coins become rarities and are sought by collectors. That pushes their value much higher than the gold they contain.
Note the difference between numismatic gold coins, which are priced according to how rare they are, and “bullion coins,” which are valued solely on the weight of the gold they contain.
Most metals dealers sell both. One-tenth up to 2-ounce coins are the biggest sellers in retail dealerships.
Bullion coins have a stated value, usually $5 or more, but are never traded in the open economy at that value. U.S. Eagles and Canadian Maple Leafs are by far the most commonly traded gold bullion coins. Each has a stated value and is legally considered “money,” unlike “rounds,” discussed below.
Rounds resemble both numismatic and bullion coins but don’t have any value as a currency.
Gold bullion coins carry a stated currency value, imprinted right on the piece.
Rounds have no stated value and are essentially chunks of raw gold with a symbol and the weight printed on them.
No one “collects” rounds because they aren’t actual coins, and have no rarity value.
Some gold investors seek out rounds for their low prices. Rounds are often sold very close to the spot price of the metal, making them an ideal way to acquire gold with a minimum markup.
There are hundreds of ways to invest in gold, but some are much more popular than others.
The three ways listed above probably account for more than 90 percent of all physical gold investing (methods one and three) and a small portion of the non-physical form (method two).
Gold investors are a strange lot, and if you spend any amount of time in a large metals dealer’s shop or at a gold auction, you’ll gain a fuller understanding about the unique aspects of this ancient form of investment and speculation.
The “love of money” might be the “root of all evil,” but the pursuit of gold is the source of plenty of craziness.