Thinking of buying gold while it's down?

Its recent collapse could provide an entry, but investors need to be careful about how they get into the precious metal.

By Jonathan Berr Jun 21, 2013 11:59AM
During the height of the recession, many investors caught gold fever as prices climbed to an all-time high of $1,888.70 on Aug. 22, 2011. The fever then broke as economies around the world began to climb out of the worst economic slowdown since the Great Depression. Prices have continued to plunge.
Gold futures prices touched $1,275.60 on Thursday in New York, their lowest level since Sept. 21, 2010, as investors were spooked by Federal Reserve Chairman Ben Bernanke's comments that the central bank would probably unwind its ultra-stimulative monetary policy in coming months. The uncertainty around the Fed's action will depress gold for some time. One analyst told Bloomberg gold may hit $1,100 this year.

For investors, though, this is a historic buying opportunity.

Small Stack of gold ingots (© Anthony Bradshaw/Photographer)But before investing in gold, there are some things to consider.

Most investment advisers tell clients that they should have some exposure to gold as part of a diversified portfolio. That doesn't mean people should sell all other earthly possessions and start stockpiling it. Putting all your eggs in one basket is always a bad, and gold is no exception.

Though polls have shown that many Americans think gold is the best long-term investment, the precious metal's track record over the long term isn't great. It took gold 30 years to recover from its one previous slump. There are practical considerations, too.

Anyone who sells gold coins or exchange-traded funds backed by physical gold can be subject to 28% tax rates. As long as investors understand those risks, gold ETFs such as SPDR Gold Trust (GLD) are fine. Coins are best avoided if possible because they need to be stored securely.

A better bet may be the stocks of miners such as Barrick Gold (ABX).

Its shares have plunged more than 52% this year amid delays in production at one of its mines in South America. But Wall Street still has faith in the Canadian company. The average 52-week price target on the stock is $28.59, more than 73% higher than where it currently trades.

Those potential returns are pretty golden and lack the tax issues of other gold investments.

Jonathan Berr owns a small stake in GLD. Follow him on Twitter @jdberr.
15Comments
Jun 21, 2013 12:56PM
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PMs were due for a correction. I'm not surprised. The 10 year bull run was awesome. This is a great buying opportunity. Long term, I think PMs will outperform fiat currencies and artificial economies based on the global QEs. The system is heavily weighed with debt and currency debasement, it relies on consumption and NOT on real growth, savings, sound money and fundamentals. The markets are manipulated. The Fed creates booms and busts on purpose. Once interest rates rise, watch out. It will be a game changer. The bond market will implode, it's a matter of time. The Fed knows this. The student debt contagion is the elephant in the room. It is far greater and bigger than the sub-prime and housing debacles of 2007-2008. The economy cannot service the debt. Once the gig is up after the next crash, while very volatile the markets will realize that PMs are better than bonds and stocks in the long term as a hedge against hyper-inflation and debased fiat currencies.
Jun 21, 2013 12:55PM
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Of course! Who needs fiat currency? No asset like gold keeps its value over periods of uncertainty.

 

 

 

 

 

 

 

 

 

 

 

 

BWAHAHAHAHAHAHAHAHAHAHAHHAHAHAHHAHHAHA!!!!!!

Jun 21, 2013 1:38PM
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Have to laugh. The banksters keep the chump public baffled with BS and white noise day in and day out. The small investor is left with a thoiusand yard stare, not knowing which way to turn until one day...he wakes up and his pockets are empty.

ll you have to remember is that it's no longer about making money.......it's about preservation of existing capital. He who has 2 nickels to rub together when this circus ends is the winner.

Jun 21, 2013 2:18PM
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ABX, GGN and GLD are all good ways to start playing the eventual rebound of gold and inflation which is 12-24 months off.  ABX pays 4.9% dividend at today's PS and you can always sell covered Calls for more return. GGN pays 14.2% at today's PS selling the Call for you. And GLD pays nothing but a little shiny yellow metal is good for the soul. 
Jun 21, 2013 4:44PM
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Gold will continue to go down because it's being replaced by the new hot item - Ritz Crackers. They're recession proof, easy to stockpile, in demand by baby's everywhere, and you can eat them when the Zombie Apocalypse comes...
Jun 21, 2013 3:59PM
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People seem to forget that gold was under $400 per oz only 10 years ago (in 2003).  If you convert that to 'today's money', it's about $500.

Smart investors will ask the question, 'why is gold so much higher in price today than 10 years ago?'  The only answer is 'fear'.
Jun 21, 2013 1:26PM
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But wait a tick, if the economy is improving then the dollar is getting stronger right????????Helicopter Ben says the feds want to start cutting back on Wall Streets Medicaid assistance.

If people rush to buy gold then doesn't that undercut the dollar and keep us where we've been all this time? So which is it?

This article reeks of mis-information planted to make a handful of people even more rich. Throw out some bogus info while they buy it up today then watch it shoot up because someone said buy and watch the masses rush to it.Then when its up in a day or 2 they dump it for a quick profit. Gold is dropping this ride was good but you better take your winnings and leave because just like a casino, you'll loose it the longer you play.

Jun 21, 2013 1:18PM
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Buy gold and watch it go lower with no dividends either.
Jun 21, 2013 1:27PM
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Gold will bottom out around 600 to 700  over the next few years, sell now and put your money into the market, with strong growth in out two largest states California 3.5% and Texas 4.8% corporate profits will hold steady or increase, gold will be dead in the water for some time.
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