Free Capitalist Network - Community Archive
Mises Community Archive
An online community for fans of Austrian economics and libertarianism, featuring forums, user blogs, and more.

Question on gold/precious metal investment for college students

Not Answered This post has 0 verified answers | 19 Replies | 4 Followers

Not Ranked
5 Posts
Points 145
AndrewF72 posted on Tue, Dec 20 2011 10:31 PM

I have $5000 that I made over a few years that I would like to invest in gold or other metals- as a long term, stable and steadily rising investment. 

Any advice on where to start or if this is even a good idea in the first place? If anybody has any reommendations, books, articles etc- it would be greatly appreciated. I am new to this forum so sorry if this post is not allowed in this thread. Thanks in advance. 

  • | Post Points: 95

All Replies

Top 500 Contributor
366 Posts
Points 7,345
Fephisto replied on Tue, Dec 20 2011 11:42 PM

You could buy gold/silver coins.  pre-1965 U.S. quarters (silver), U.S. eagles/South African Kuggerands/Canadian Maple Leaves (Gold).  Atm, personally, I only have some old silver coins; and I think the most common advice I've heard is to buy coins.

 

You could also always just...buy anything that _has_ gold or silver _in_ it.  Jewelry, cultery etc..

Latest Projects

"Even when leftists talk about discrimination and sexism, they're damn well talking about the results of the economic system" ~Neodoxy

  • | Post Points: 5
Top 75 Contributor
1,133 Posts
Points 20,435
Jargon replied on Wed, Dec 21 2011 1:53 AM

Buy some silver and some gold. Silver's a little more risky, but has more headroom to grow. Might as well buy some .308 or 30-06 rounds as well, even if you don't plan on shooting them. Their value will rise as well. Or some booze, smokes, or anything else whose value will rise when our current economic situation turns south. That's what the purchase of gold/silver, to me, is really, the confidence that the dollar is going to lose value and that stocks won't be safe for a while.

Land & Liberty

The Anarch is to the Anarchist what the Monarch is to the Monarchist. -Ernst Jünger

  • | Post Points: 20
Top 10 Contributor
Male
6,885 Posts
Points 121,845

First, you need to read everything you can get your hands on about gold as money, inflation, nature of money and banking and so on. mises.org is a limitless resource for this. Start here.

Next, you need to get out of cash as quickly as you can. I think gold has tested its lows and I think we will never again be south of $1,500/oz. Let's imagine that a magic wand was waved and Paul Volcker was President... he'd kick Bernanke to the curb and we would see the market clear all the bad loans and so on and begin to restore confidence. The USD would quickly regain much of its value. Even in this "worst-case scenario" (from the PoV of a gold-holder), it is difficult to see how gold could correct below $1,500... just prior to the housing collapse in 2007, gold was valued at around $750 and the money supply has clearly more than doubled since then, even if not all of it has leaked out into the economy yet for a variety of reasons (though this is happening now at a faster and faster rate). Food and oil are the most obvious indicators here.

But I might ask what you're doing in college? If you're taking out massive student loans for a worthless degree, you might be better off staunching the bleeding on that side of your balance sheet rather than worrying about what to do with the $5,000, which isn't that much money in the grand scheme of things.

If you're on your way to $150K in debt for a sociology or literature degree, I'd say quit college, get the best job you can get (retail professional, skilled labor as a crafstman of some kind, etc.) and begin using that $5,000 to earn money on the side peddling through Craigslist. If you're careful (i.e. don't deposit the proceeds into your bank account), you can easily double your income just buying and selling on Craigslist if you know what you're doing (part of the learning curve is to just start doing it... yes you're going to take losses). NB: I'm using Craigslist as a metaphor... I mean peddling in its most general sense.

To give you an idea of what I'm talking about, a friend of mine owns a automotive restoration business (classic cars) and turns a pretty good profit on the side buying and selling high-end used cars. Beyond checking the mechanical soundness of the vehicles himself, there is no secret to how he makes money... he buys used cars with new tires/brakes/etc. drives them until they are in reasonable distance of needing new tires, etc. and then sells them. Even if he only breaks even on the buy/sell price (and he's usually at a profit there, too), he'd still make money. This general concept is applicable to any class of good... you get the idea.

I'm 7 years into my career as a computer engineer and I'm convinced I would be way, way ahead of where I am right now if I had just dropped out of college and applied myself to a standard job plus some work on the side. The secret is the side work. You won't ever get ahead or even break even working as a cashier or front-line manager at Wal-Mart. But it will pay your light bills while you're finding your stride out in the real world, which is what the side work is all about.

While I'm on the rabbit-trail, I'll keep going further. You should take an inventory of your friends and associates. Do you know someone who has a well-established business and where you could have an opportunity to "apprentice" under that person? That's your best bet of all. People used to work for free for years on end for the chance to apprentice under someone who really knew what they were doing and had an established customer base. While the word "apprenticeship" has died, the fact is that this is how the world really works. Even in the corporate world, you need to identify someone who really knows their crap and go work for them for free (in other words, complete deliverables in their name so they get the credit for the work you do, in exchange for you getting the opportunity to work with them and learn what they know). Unfortunately, in the corporate world, the opportunities are few and far between and are usually dished out to the sons and daughters of VPs and board members.

</rabbit-trail>

Clayton -

http://voluntaryistreader.wordpress.com
  • | Post Points: 20
Top 25 Contributor
Male
4,249 Posts
Points 70,775

From best to worst:

1. Gold coins, meaning American eagles, canadian maple leafs, south african krugerands. Find a reputable coin shop that will sell you with as little tax, paperwork, and comission over spot price as possible. Shop around. For silver, pre 1965 dollars, half dollars, quarters, and dimes. They are called junk silver, and they are fantastic.

The reason these are the best to buy is because they are the easiest to sell. If you buy jewelry made out of gold, who will buy it when you need to sell? Who will know it's really gold? The above are the well known, widely coveted gold coins. Same reason for the junk silver. Everyone knows them.

2. Shares of the major gold mines, those that make up the HUI. Barrick gold, newmont mining, others.

Reason: When gold prices go to the moon, the price of the mines will "probably" go even higher. At least, that's the conventional wisdom.

3. A  fund that is linked to the price of gold, like CEF, central fund of canada. This is bought and sold on the stock market, so it's easy to sell. Risk: You don't know that they actually have gold until you see it, right?

4. Jewelry. I say stay away from it, for reason explained above. And how do you know how to assay it?

6. And of course, the big scam, collector's items coins. If you have to pay more than a few percentage points over spot, it's not what you want.

Finally,  Booze seems like a great idea to me. I'm with Jargon here, his whole post.

My humble blog

It's easy to refute an argument if you first misrepresent it. William Keizer

  • | Post Points: 20
Top 150 Contributor
Male
690 Posts
Points 11,315

 

AndrewF72:

I have $5000 that I made over a few years that I would like to invest in gold or other metals- as a long term, stable and steadily rising investment. 

Any advice on where to start or if this is even a good idea in the first place? If anybody has any reommendations, books, articles etc- it would be greatly appreciated. I am new to this forum so sorry if this post is not allowed in this thread. Thanks in advance. 

 

Step [1] : if possible divide your $5000 into 2 "piles" consisting of :

[1] money you cannot under any circumstances, afford to lose...........

and [2] money you _can_ afford to lose [you should be so lucky!]. 

If that is not possible because you have no money that you can afford to lose, then just be honest with yourself and admit this.

Your next step in the "honesty process" might be to then admit that no -one, can reliably, consistently predict future economic events.

You then might wish to consider the proposition that if a person puts all of their $5000 savings that they cannot afford to lose [or whatever part of that $5000 that they  cannot afford to lose] into a single "investment category" such as precious metals, then consciously or unconsciously , they are doing exactly that [ i.e. attempting to predict future economic events], because precious metals historically have only performed well under certain economic conditions, and those conditions may, or may not , reoccur within the span of your  own lifetime- there can be no guarantees. 

On the other hand, if you can afford to lose some, or all of that $5000, then a speculation in precious metals might be justified, depending on your own wants /needs/understandings regarding rewards/risk ratios, support/resistance levels, automatic stop losses and the rest of the boring [yet necessary!] paraphernalia surrounding safe, successful speculation in markets of every type. Regards, onebornfree.

For more information about onebornfree, please see profile.[ i.e. click on forum name "onebornfree"].

Top 25 Contributor
Male
4,249 Posts
Points 70,775

onebornfree.

My understanding is that owning dollars is like being in a car headed toward a cliff. You are correctly pointing out the dangers of jumping out of the car, and how best to do it, but neglecting the danger of staying in the car.

If we had sound money and a gvt that isnt printing and borrowing like maniacs, you would be right. Stay safely at home instead of playing in traffic. But we live in a diffeent world, where doing nothing with dollars is dangerous.

My humble blog

It's easy to refute an argument if you first misrepresent it. William Keizer

  • | Post Points: 20
Top 10 Contributor
6,953 Posts
Points 118,135
Top 150 Contributor
Male
690 Posts
Points 11,315

 

Smiling Dave:

onebornfree.

My understanding is that owning dollars is like being in a car headed toward a cliff. You are correctly pointing out the dangers of jumping out of the car, and how best to do it, but neglecting the danger of staying in the car.

If we had sound money and a gvt that isnt printing and borrowing like maniacs, you would be right. Stay safely at home instead of playing in traffic. But we live in a diffeent world, where doing nothing with dollars is dangerous.

 

Not the best analogy, but it will do in a pinch.

Assuming you are in the car, how do you know for certain that it will reach the cliff within your own lifetime? How do you know for certain that it won't just slow down to a crawl, maybe stop, or reverse, or even  "do a "U-ie"" , or even just drive parallel to the cliff apon reaching it?

There any number  of imaginary "car" scenarios that might reasonably occur in the future to prevent your car ever driving off that proverbial cliff, surely?

Although, as a former " gold bug", I understand and sympathise with your position and belief, unfortunately the reality is that there can be no absolute guarantee that that analogous car will ever get to where you think it must go within yours or my lifetimes - the economic future, as always, remains unknowable, in my own opinion.  Regards, onebornfree.

 

For more information about onebornfree, please see profile.[ i.e. click on forum name "onebornfree"].

Top 25 Contributor
Male
4,249 Posts
Points 70,775

how do you know for certain...how do you know for certain....how do you know for certain...absolutely no guarentees...

I don't. But how do you know for certain the opposite? What are your guarentees that the dollar will retain its value?

Since neither side has certainty or guarentee on its side, let us look at the fundamentals.

Intrinsic value? Gold yes. Green paper no.

Retained it's value over thousands of years? Gold yes, green paper no. In fact lost 99% over 99 years.

Has any paper money not gone to zero? Nope, they all went  zero.

Has gold ever gone to zero? Never

Given the current madman money printing unprecedented in US history and world-wide history, what does that tell Austrain economics tell us, ceteris parebis? Gold up in price. Paper money down.

So I don't see why you are so content sitting on a time bomb because maybe it won't go off in your lifetime. Why sit on it at all?

 

My humble blog

It's easy to refute an argument if you first misrepresent it. William Keizer

  • | Post Points: 20
Top 150 Contributor
Male
690 Posts
Points 11,315

 

 

 

 

Smiling Dave:
But how do you know for certain the opposite? What are your guarentees that the dollar will retain its value?

 

 

Smiling Dave, where have I ever, in these forums, claimed that I could guarantee that the $US will "retain its value"? . I think you might be confusing me with another poster.

My ongoing theme here, as always, has been that the economic future is entirely unknowable, which means that just like gold, silver, or anything else, the value of the $US will change relative to everything else, just as the value of anything and everything else,  must  also constantly  change.

The $US might even become worthless at some point- I have absolutely no idea what the future holds for the $US, or gold, stocks , bonds , nor for anything else, and therefor my attempts at saving for the future involve a very wide diversification of  savings across several broad investment classes , all of which are known [historically speaking] to perform well under certain economic conditions,  in order to try to allow for and accommodate that always unpredictable future so that when the unknown and unpredicted arrives, and regardless of whatever " it" is, it is not too much of a shock to my savings.

The Only Certainty Is Constant Change 

All I know for certain is that the relative market valuations of all of these things and more, just like the relative values of everything else  relative to everything else, must always be in a constant  state of flux [ change]. I hope that clarifies somewhat for you. Regards, onebornfree. 

 

For more information about onebornfree, please see profile.[ i.e. click on forum name "onebornfree"].

Top 10 Contributor
Male
5,118 Posts
Points 87,310
ForumsAdministrator
Moderator
SystemAdministrator

Along the lines of what Clayton said:

[view:http://www.youtube.com/watch?v=lVS0vIkTrsw#t=1221s]

To paraphrase Marc Faber: We're all doomed, but that doesn't mean that we can't make money in the process.
Rabbi Lapin: "Let's make bricks!"
Stephan Kinsella: "Say you and I both want to make a German chocolate cake."

  • | Post Points: 20
Top 10 Contributor
Male
4,987 Posts
Points 89,745

You've gotta remove the last #t=... from video tags or the videos don't show.

  • | Post Points: 20
Top 10 Contributor
Male
5,118 Posts
Points 87,310
ForumsAdministrator
Moderator
SystemAdministrator

I know, but I wanted to skip ahead to a different point in time in the video, and I don't want to re-re-edit my post.

To paraphrase Marc Faber: We're all doomed, but that doesn't mean that we can't make money in the process.
Rabbi Lapin: "Let's make bricks!"
Stephan Kinsella: "Say you and I both want to make a German chocolate cake."

  • | Post Points: 5
Not Ranked
5 Posts
Points 145

Thanks for your insightful reply and advice. I am a pre-medical student and will be apply to medical school in a year. Luckily, my grandparents left me money to pay for the degree. Even though I wont be making much money at all while in school- healthcare and medicine is my passion and I feel strong enough about sticking through with it so that I can live the lifestyle I want to and eventually open up my own practice. 

I totally agree with your ideas about worthless degress. I dont think it makes ANY SENSE whatsoever to get a literature or history degree, unless you plan on doing an MBA or JD within a few years after. 

I have been writing articles on textbroker and can churn out a few $100 a week- I just want to be prepared in case shit hits the fan, which is why gold and other metals came to mind. But maybe I have been reading too much Schiff and its possible that the supposed crash will be halted for years to come. 

  • | Post Points: 5
Page 1 of 2 (20 items) 1 2 Next > | RSS