The 2023 Daily Reckoning Gold Buying Guide
Greetings and salutations on this fine Thursday morning!
Last Friday, Byron and I co-hosted a Rickards Uncensored session. Both Jim Rickards and Matt Insley were away, so Matt handed the keys to me. Looking out of the corners of his eyes he silently intimated to me, “Don’t muck this up!”
To stay on the reservation, the safest thing for me to do was to let Byron talk as much as possible.
And what a good call that was!
Byron is a lively raconteur with an unrivaled gift for storytelling.
And his props are the best! He showed us the drill bit that struck his first oil well. He showed us shiny rocks and gleaming bullion. Byron even showed us a shell from one of the Navy’s guns.
In short, he was a total rockstar. (Has a geologist ever been called that before?)
I just sat there with a bottle of Barbaresco and enjoyed myself like I was a member of the audience.
But before we even went on, Byron and I were trying to figure out what we were going to talk about.
Byron said, “You know, Sean… I think we should talk about how to buy gold. Not everyone knows…”
It turned out to be exactly what the doctor ordered.
Last week in this column, I wrote “This Relic is Ready for its Close-Up.” It was about how we all liked the yellow metal in Paradigm’s editorial room.
On Tuesday, Greg Guenthner wrote “Can Gold Defeat the Big, Bad Dollar?” It’s about the current USD-gold war. (You can read that below if you haven’t already.)
We’re detecting a theme here.
So today, Byron and I are going to show you how to buy gold, depending on your situation. We talked about it on the Rickards Uncensored call. Now we’re putting it in print for you to bookmark in case you need it.
Obviously, we don’t know what your portfolio looks like, so please don’t take this as personal investment advice. It’s for your education and edification. If and how you implement what’s in this piece is entirely up to you.
Let’s get to it.
The Ways to Buy Gold
We’re going to go in the order of least risky to riskiest. We’re of the view that if you hold the gold in a safe in your house, that’s the safest. If you live in an urban community full of artists, your mileage will vary on that assumption.
Individual Coins and Bars
Hard Assets Alliance
Paradigm Press has had a relationship with Hard Assets Alliance for a long time. We want you to know that for two reasons. One is that we’ve got a duty of care we owe you. And the second is that there’s a reason for the long relationship: HAA is excellent at what it does and takes care of our subscribers.
Hard Assets Alliance allows you to buy gold at your pace and then take physical delivery once you own enough full bars or coins.
If you’re new to buying gold — or if you’ve tried online dealers in the past and you’ve been put off by the complexity — there’s no easier way to buy and hold real physical metal at exceptionally low cost.
You can also buy and store your metal in your choice of five audited vaults worldwide.
It’s the hands-down easiest way to get started with gold, silver, and other metals.
The US Mint
If you prefer to buy coins directly from your country’s mint, that’s certainly an option. However, we’ve noticed the mints tend to charge well over spot price for whichever metal you’re buying.
For example, as I type, the spot price of gold on the market is $1,820 per ounce. In the US Mint Catalog, the American Eagle 2022 One Ounce Gold Uncirculated Coin costs $2,670.00. That’s a 46.7% premium over spot.
Unless you’re a genuine coin collector, it’s not the best deal.
Contrast that with the Hard Assets Alliance. A 1-ounce gold bar is $1,867.10. That’s only 2.58% over spot. You get much more value for your fiat.
Next, we look at the precious metals ETFs, specifically gold ETFs.
ETFs, or Exchange-Traded Funds, are investment funds traded on stock exchanges like individual stocks. An ETF is designed to track the performance of an underlying index or basket of assets, such as stocks, bonds, commodities or currencies.
These two ETFs track the price of gold…
The GLD ETF, or SPDR Gold Shares, is one of the largest and most popular ETFs investing in physical gold. The GLD ETF provides investors with an easy and cost-effective way to invest in gold, without having to own and store physical gold themselves.
The physical gold is held in a vault in London. GLD shares represent a fraction of an ounce of gold. So when investors buy shares of GLD, they’re effectively buying a portion of the underlying gold GLD holds.
The GLD is trading around $169. That’s a touch under 10% of the price of a gold ounce.
If that’s a bit too pricey for you, that’s ok. Another option is the SGOL ETF.
SGOL invests in physical gold, held in a vault in Switzerland.
The SGOL ETF is similar to the GLD ETF, but there are some differences.
For example, the SGOL ETF is backed by gold held in a vault in Switzerland, while the GLD ETF is backed by gold held in a vault in London. Additionally, the SGOL ETF has a lower expense ratio than the GLD ETF.
Right now, SGOL is trading $17.38, a bit under 1% of the spot price of an ounce of gold. So this is a cheaper way of starting with gold ETFs.
Gold Miners ETFs
The Gold Miners ETFs invest in companies that are involved in gold mining and exploration. Since there are 56 companies in the GDX and 104 companies in the GDXJ, investors are well diversified within the miners’ spaces.
The GDX ETF, or the VanEck Vectors Gold Miners ETF, is an ETF that invests in, you guessed it, gold mining companies. The ETF’s objective is to track the performance of the NYSE Arca Gold Miners Index.
It invests in a diversified portfolio of gold mining companies, such as gold producers and exploration companies. The ETF’s holdings are spread across various countries, with a significant portion of its holdings in Canada, the United States, and Australia.
Right now, GDX is trading around $26.75.
The GDXJ ETF, or the VanEck Vectors Junior Gold Miners ETF, is an ETF that invests in smaller gold mining companies. The ETF’s objective is to track the performance of the MVIS Global Junior Gold Miners Index.
It invests in a diversified portfolio of gold mining companies but with smaller market capitalizations compared to those in the GDX ETF.
These companies are generally considered to be riskier investments than their larger counterparts, but they may also offer more potential for growth.
Right now, GDXJ trades for about $32.25.
“Pure Plays” – Single Stocks
It’s important to understand you’re exposed to two big risks with single stocks: systematic and unsystematic risk.
Systematic, or market, risk is the risk your stock may fall through no fault of its own; its price may fall just because the market has a bad day.
Unsystematic, or specific, risk is the risk your stock falls even if the market is having a great day. This is the risk specific to your stock, which may have bad management or an earnings miss.
These two risks are amplified if you own gold mining, exploration, or royalty companies.
Single Established Companies
If you’re up for a bit more risk, you can choose any one of the constituent companies in the GDX.
Companies like Newmont Mining, Barrick Gold, and Franco Nevada are well-known and respected companies.
But like any single stock undertaking, you’re carrying more risk with single stocks than by investing in an index.
Even established gold miners are riskier than the average stock.
Small Cap Mining and Exploration Companies
There are even riskier companies that can increase your wealth substantially.
As Byron likes to say, “Investing in these companies can sometimes take you from this side of town to that side of town.”
That is, one winner with these companies can create life-altering generational wealth.
In the last Rickards Uncensored call, Byron listed five of the potential companies.
Like I said, I enjoyed that call like I was a subscriber. I hope you choose to join us next time. Byron and I don’t always do the calls. You’ll get the man himself, Jim Rickards, sometimes. Other times, you’ll get our publisher, Matt Insley, or the hardest working analyst in the business, Dan Amoss.
We mix it up, so you get the fullest possible coverage from Paradigm Press.
We’d love to see you on the next call. You can sign up here.
Lastly, I’ll mention gold futures.
We don’t want you to trade these. They’re just too risky.
But gold is unique in that the futures price leads the physical price and not the other way around.
So the gold futures market is critically important. Keep an eye on it so you know what’s going on.
But if you’re new to gold investing, our other choices above are far better suited to your needs.
I hope you got a lot out of this piece.
It’s more of a reference column than anything else.
Hopefully, it gives you food-for-thought when considering your next move in the gold market. Let me know what you think by emailing me here. Be sure to tell me if there are any topics you’d like me to cover in future articles.
Have a great rest of your week!