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I'd like to invest in GOLD... advice please

(106 Posts)
Wolfgirl Sun 02-Aug-09 15:53:45

I'd like to invest in GOLD, not BIG money, but a few thousand. I believe over the next couple of years is it going to rocket and provide a decent yield.

But whilst I know a few companies to trade shares with, I don't know about gold. Can someone advise a company please? grin cheers.

TDiddy Sun 02-Aug-09 15:56:25

Consider using ETFs (exchange futures) or spread bet on the gold price. Very efficient way of doing it. THis way you are betting on th ecoomodity and not the management of a company. More info to follow.

Wolfgirl Sun 02-Aug-09 15:58:25

thanks TDiddy....

Wolfgirl Sun 02-Aug-09 15:59:02

PS, I've never done spread betting before, and so would need to read up on it.

TDiddy Sun 02-Aug-09 16:15:57

Sorry ETFs = Exchange traded futures.

What is your investment time horizon? Long, medium or short.

SHORT/MEDIUM TERM
For short term, spreadbetting is probably best and very very cost efficient. You control everything, pay very very little fees, do it all on line. Best of all you are investing in the quoted level of gold and not affected by any decisions made by a specific board of a specific company. Open account with reputable spreadbetting company like IG index or ETrade. I use ETrade (https://www.etradespreadbetting.com). You are protected by FSA compensation scheme. Also, you don't have to come up with all the cash upfront. I don't mind walking you through this in more detail if you want to pursue. The good thing about this route is that you know exactly what level you have bought gold at and you can decide exactly at what level you sell it.

MEDIUM/LONG TERM
You can buy Oil, gold and other commodities using an instrument called ETFs (exchange traded futures). These are vehicles that invest in track indices designed for transparency and accessibility. These express purpose of these companies are to hold gold, oil or whatever so are infact buying into that commodity. Unlike spreadbetting, you are effectively buying a share in the vehicle so you are indirectly buying gold. Spreadbetting is most direct route apart from buying gold itself.

Let me know if not clear or if you would like more details

Wolfgirl Sun 02-Aug-09 16:29:09

I guess short\med term. I would like to dip my toe into Gold and see how it fares. Short\med - according to info above looks to be the best option for me, espesh if fees are quite low. I've read a few phrophet sites (for want of another expression) and it is predicted that the economy will crash again, although I can see that we have had a bit of a bull run lately, and everyone filling their boots with cheap bank shares etc (me incl. although not filling boots, just got a wincy bit damp on the toe for a testing time).

I have a couple of grand (maybe a bit more) sitting in a cash ISA, and Im too impatient to wait for silly pennies interest, so want something more high risk. I have a good share portfolio - although that is arguable LOL.

thanks for the link, I will take a look at it.

so then, Im guessing you are an old hand at this - yes? Im a total novice and not good a picking stocks. I kinda feel like Jonah (from the Bible) as any stock I buy into, tends to nosedive the next day. sad

TDiddy Sun 02-Aug-09 16:33:58

Just checked etrade:

Currently, I can buy Gold Dec contract at 954.1 and sell them at 953.3. So Etrade make their money by buying and selling at slightly difference prices.

The crucial thing with a spreadbet is that you need to understand how much gold you have bought as you can buy 20k of gold exposure with only 5k deposit [some analogies with investing in property but leave that aside for now].

I would recommend paying a larger deposit like 10k. The reason for this is that that if you have only put down 5k deposit that Etrade will limit your loss on your position to 5k i.e. they will liquidate the position if the price drops by 5k. SO best to put down a large deposit. You can put down the 20k if you like, that way you don't have to worry about price fluctuations. The good thing is that you can logon to your account and sell the position whenever you feel like it. Or you can put an order in to sell the position when the price reaches say 1200.

You will be buying the Gold Dec contract so you will need to tick a box instructing Etrade to "roll the contract" to the "Gold Mar2010 when Gold Dec expiries. There is a minimal costs of doing this.

ANd gains are free of income tax or capital gains tax. SPreadbetting is a tax efficient way of investing but it sounds like gambling (which it can be like any other investment!) so this puts people off. Also you need to understand the operational points that I made above.

TDiddy Sun 02-Aug-09 16:45:37

I think your thinking about the economy is spot on altho, i think that it will be a drop or slow down more than a dive. Lots of insiders have an interest in talking things up!

Spreadbetting on gold would work very well for a modest capital sum like 2k, giving you full control and full transparency.

As above the key points are to ensure that you (i)only buy 2k worth of gold
(2)I would deposit atleast 1k in the spreadbetting account and set a large "stop loss limit" as explained above. I would then keep 1k cas ISA to earn interest.

All you then have to do is check papers, internet or login to your account to see the current gold price and decide when to sell. Or just put an instruction in to close you position when gold reaches say 1,200 and this will be automatically done.

One of the disadvantages of spreadbetting is that you can see a realtime update of whether your position is in profit or in loss. SO when you first buy the position you can see it fluctuate between profit and loss and can be a little off putting but you have to be patient.

yes, I use spreadbetting to invest as it is tax free and gives me full control and apart from the bid offer spread and the cost of "rolling the futures" every three months, your money isn't eaten up by fees and middle men.

Happy to provide more detail and double check that you are buying the right number of contracts.

Wolfgirl Sun 02-Aug-09 16:48:04

TDiddy.... oh my goodness, you know your stuff. I need to go away and do more reading before I invest anythign. Share trading is easy peasy, but this looks like its getting technical. I've not traded commodities before - its a different fish to shares, eh!

Right then, thank you for your time and input. It has not gone to waste. Im off to do some more research, but I will make a note of the broker site you gave me. Quick question before I go, do I have to trade futures, or can I just trade spot?

TDiddy Sun 02-Aug-09 16:49:57

ANd it will be easy to sell Gold and move into say the FTSE when you are reading, just with a few mouse clicks- almost too easy smile.

Wolfgirl Sun 02-Aug-09 16:54:31

Mmmm.... you are tempting me, but I have to cash in my ISA first, then open up account with relevant broker, then make the purchase.

Have you a history with financials? are you a broker, or worked for Reuters perhaps LOL? I did actually work for a Financial Information co many years back, but was very green and ill informed. Not much better now, but I like to have a dabble.

TDiddy Sun 02-Aug-09 16:56:29

There is a spot contract called "Gold daily Rolling" . These have a very tight bid-offer so are good for very very short term/intra day traders. The close on Friday was 951.5 bid vs 952.0 offer. However, you pay a daily "interest" amount which over a few days adds up to more than the bid offer on the future.

The thing with spot trading is that somewhere down the chain someone has to go an buy real gold so there is a real interest charge for that real purchase. So better to pay wider bid-offer on the future and avoid the daily rolling fees in my experience.

As I said I would only use 1k as deposit and put the other 1k in a cash ISA to earn interest. Let me know how you get on or other questions.

TDiddy Sun 02-Aug-09 17:01:16

I have done a few things: accountant, teacher, controller, trader, receptionist, short military stint...... smile So yes, I do have to keep an eye on financials etc.

I know some very nice people at Reuters/Thompson. Explains why you are fairly comfortable with these broad concepts.

Wolfgirl Sun 02-Aug-09 17:03:41

thank you, you have been very informative and incredibly helpful. I will mull this over and decide what to do. I may have to CAT you for more chats, but the family will arrive back home very soon and my internet time over sad.

have a good week, and hope to touch base with you again soon. smile

TDiddy Sun 02-Aug-09 17:08:21

you too, the weather is still holding. Very happy to help however I can, it's what is great about MN. Ciao.

Swedes Sun 02-Aug-09 17:14:58

As a rough rule, when equities rise, the price of gold falls. With equities entering what might be the beginning of a bull market (have you seen what's happened to the FTSE in the past 11 trading days?), I would not be investing in gold at this moment. A lot of people are calling the bottom of the property market now too.

This is from an article about the price of gold:

"People can invest in gold directly through bullion ownership or opt for indirect investments such as certificates, derivatives, or shares. As with most other forms of investments, the price of gold is greatly influenced by supply and demand. Unfortunately, gold is rather unique in that most of the gold ever mined is still in existence and could thus enter the market at any time. This leaves the price of gold open to influences from hoarding and disposal practices.

During times of national crisis, such as a war or a serious natural disaster, the price of gold tends to greatly increase. People start to fear that their paper currency may no longer hold value, but they see gold as a stable asset that can always be used to purchase food and other necessities.

Another common factor influencing rising gold prices is the success of the real estate market. When there are low or negative returns on real estate, the demand for gold and other commodities typically is expected to increase.

Bank failures, although somewhat uncommon today, can also contribute to an increase in the price of gold. The best example of this occurred during the Great Depression, when rising gold prices due to bank failures led President Roosevelt to ban the holding of gold by private citizens."

TDiddy Sun 02-Aug-09 17:23:05

Good point Swedes. I am thinking of selling FTSE at current levels. I think the point is there is a lot of uncertainty. As for the property market, we could be at the bottom but I don't see a fast rise with lagging high unemployment. The public sector cuts are to come. Note that the trading volumes on houses were low. Even though numners were seasonally adjusted you have to wait a bit longer to observe a trend, i think? Affordability indices are still poor. Interest rate pressure is upward.....

My best guess is a sideways move or shallow drop in autumn. But we don't really know. If you held a gun to my head, I would prefer to buyt gold or oil rather than shares in the medium term. I did a straw poll at work with 4 other team members and we all preferred to sell the FTSE rather than buy it in the short term.

Difficult to call and I think your points highlight the disaparity of views and general uncertainty in the market.

Swedes Sun 02-Aug-09 17:27:22

TDiddy - I'll be up, showered, dressed and in front of my computer at 7am tomorrow morning in readyness for Barclays results. I am rather over-invested. But 75% of results are currently beating consensus analyst expectations so I am hopeful.

Wolfgirl Sun 02-Aug-09 17:28:56

thanks Swedes... most of what you cut n pasted I read in another article too, but this other article veered on the pro side of buying now. As said above, folk are filling their boots with cheap bank shares which is influencing the market\FTSE, but they are a sector to be wary of, for sure. The banks are in great debt and need to buy back out from the government, reduce debts and start paying out dividends.

The mining sector have had a good run of late too, which kinda backed up my thoughts about gold commodity. Im thankful to TDiddy who has gone to some lengths to explain futures and spread betting (not that I fully understand, but intend to) and is something I will be looking into.

This game is not for the light hearted, it is all very high risk at the mo. But if you do have a bob or two spare, I still beleive it is the right time to hound out the cheap stocks. I have been dabbling in AIM stocks for the past 18 months, but now moving back to blue chips and those with a good dividend history; these are the most secure to buy into, although - agreed - there is no guaranteed payouts,but still... more stable than others.,

Swedes Sun 02-Aug-09 17:30:17

We should really have an investments topic.

Wolfgirl Sun 02-Aug-09 17:31:45

...yes. Or.... dare I say it... a share club thingy. wink

Wolfgirl Sun 02-Aug-09 17:35:38

oh yes Barclays. I was going ot buy into those last week, and spoke to an adviser at the ShareCentre who told me not to touch them, he thinks they will drop to approx. £2.70; we saw them drop this week, then level above £3. I will be gutted if they spike upwards again, when I could have bought in below £3.

TDiddy Sun 02-Aug-09 17:50:45

Wolfg and Swedes- I agree that Investment Topic is very appropriate and in line with women having half the national wealth <<I made the last bit up smile>>

Wolfg- I am in the "bear" camp with you. The accounting rules have been fiddled so that the banks don't have to mark done their positions (FASB157 in particular) but I don't think we are out of the woods by any measure. The state sector has to shrink whichever govt takes over. taxes have to rise, high unemployment will persist. But some assets will do well if you can call it.

I actually sold the pound on Friday (via Etrade) as it rallied a bit. Altho' I think that the pound will recover against the Euro longer term , I think that the GBP, FTSE and UK house prices will all fall off a bit before long. Currency is volatile so there are usually opportunities to get in and get out.

Swedes Sun 02-Aug-09 17:57:42

PDiddy - grin at half the national wealth. Well I think Mumsnet need an investment topic. A lot of women are shockingly poorly informed about investments and tax issues and the like. But I think we will let a few men in to keep the contract notes neatly filed translate the lingo and do a bit of trend charting, should we fancy.

Wolfgirl Sun 02-Aug-09 17:58:25

regarding house prices, this article came through my mail today..

"The price of your house to HALVE between now and July 29, 2010. "

You have to subscribe to their newsletter of course, but this came via ADVFN - who are pretty reliable I believe.

They insist there will be a dramatic reversal in the housing market after this mini-bounce we are seeing of late.

Sooooooooo... if this is true, and taking into account your thoughts above Swedes, then maybe this is a time to buy into gold?

TDiddy, should we ask MN tower to set up an Investment forum? Id be up for a STOCKS to WATCH thread grin I have a couple Im watching, but they are AIM - tiddlers really.

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