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View Full Version : Gold-Cash Transaction for Commoners!



srivatsan
02-23-09, 01:57 AM
All,

I find in recent conversations from Saner Economic Minds like EJ, etc... that buying Gold based commodities is a wise move. Granted... Now, the question is, If I had good amount of gold coins (5%-10% of my portfolio) and when I try to sell them in the market, the value of gold (aka coins) from commoner hand like me does not translate to 99% of exchange value (ok... even 90%). Why is it so ? Assume that I do have certificate of authenticity. Also, I find that the selling bullion's is NOT that easy. Therefore, how can a commoner like me transact in gold and with whom (not Fed!! hmm.. I think so ?!?!?!)

Thanks for all replies... Bear with me on my non-existent economics knowledge. :)

Cheers.

Sharky
02-23-09, 03:09 AM
If I had good amount of gold coins (5%-10% of my portfolio) and when I try to sell them in the market, the value of gold (aka coins) from commoner hand like me does not translate to 99% of exchange value (ok... even 90%). Why is it so ? Assume that I do have certificate of authenticity.

It's called the bid / ask spread. The difference is where dealers make their profit (not on the price of the metal).

With a reputable dealer, you should be able to find a 3% spread or less on popular bullion coins. For example, the gold Maples at Apmex have a 2.8% spread (plus shipping costs, of course):

http://www.apmex.com/Product/9/1_oz_Gold_Maple_Leaf___Random_Year_Feb_27.aspx


Also, I find that the selling bullion's is NOT that easy. Therefore, how can a commoner like me transact in gold and with whom

There are a number of very good and easy-to-deal-with online dealers. Apmex is one, but there are many others to choose from.

Better yet, find a large local dealer and save on shipping. Use prices from a large online dealer to negotiate better prices if you need to.

*T*
02-23-09, 05:15 AM
Assume that I do have certificate of authenticity.

It's called the bid / ask spread
I think he's referring to the discount applied due to the fact that he's not a reputable dealer himself, so the coins may be cut, shaved, fake etc.
See good delivery (http://www.lbma.org.uk/delivery).

Sharky
02-24-09, 03:02 AM
I think he's referring to the discount applied due to the fact that he's not a reputable dealer himself, so the coins may be cut, shaved, fake etc.
See good delivery (http://www.lbma.org.uk/delivery).

Possibly. He specifically mentioned coins, though, which normally aren't subject to Good Delivery rules -- that's for bars. Coins have textured edges and other characteristics that make them much more difficult and expensive to sell fraudulently. There are also inexpensive devices that can quickly confirm size and weight.

In fact, I've sold many coins myself and have never been subject to good delivery rules.

srivatsan
02-28-09, 10:38 PM
Thank you to both *T* and Shark. :) I see the way to sell and buy coins effectively. However, I do have two more subsequent questions.

1) I believe one does NOT actually get Gold bullion since it can be tampered. Therefore, one would get only a piece of paper which says that "I own 2 bullions". Is this a correct assumption ?

2) Bordering on naivety, how can one know where you can sell Gold coins legally inside your locality ? Also, does S&H people carry gold without me buying some insurance from them ? What about safety through S&H ?

BTW, I am trying to be a Gold dealer. I am just trying to keep an asset during tough times. So, consider me a very much a commoner.

Much Appreciated.

plinko
02-28-09, 10:54 PM
I've been wondering the mechanics of this as well (which has scared me away from buying physical initially and yearn more for allocated paper gold accounts).

For normal situations, yes, gold dealers will do the work, but in case gold hits more extreme values proposed on here (2500 or so), gold would seem to hold more value not for gold-cash transactions, but gold-"non-cash" assets - such as property, livestock, valued goods, etc.

Disclaimer: I am a younger ituliper who's been isolated from most major recessions

*T*
03-01-09, 08:09 AM
Thank you to both *T* and Shark. :) I see the way to sell and buy coins effectively. However, I do have two more subsequent questions.

1) I believe one does NOT actually get Gold bullion since it can be tampered. Therefore, one would get only a piece of paper which says that "I own 2 bullions". Is this a correct assumption ?

2) Bordering on naivety, how can one know where you can sell Gold coins legally inside your locality ? Also, does S&H people carry gold without me buying some insurance from them ? What about safety through S&H ?

BTW, I am trying to be a Gold dealer. I am just trying to keep an asset during tough times. So, consider me a very much a commoner.

Much Appreciated.

2) I don't know what your locality is, but mine (London) has a number of gold / historic coin dealers, as would any big city.
Guessing from your nickname, you may be in India, in which case you can buy gold from the banks and get a buyback price guarantee.

Sharky
03-14-09, 07:55 PM
1) I believe one does NOT actually get Gold bullion since it can be tampered. Therefore, one would get only a piece of paper which says that "I own 2 bullions". Is this a correct assumption ?

Most people don't take delivery of "good delivery" bars. The reason is that if you do, then when you want to sell them they will need to be re-assayed, which takes time and requires a fee.

For other bullion, small bars and bullion coins for example, many people do take delivery.


2) Bordering on naivety, how can one know where you can sell Gold coins legally inside your locality ? Also, does S&H people carry gold without me buying some insurance from them ? What about safety through S&H ?

In most countries, buying and selling gold is perfectly legal anywhere. If that's not true where you live, I can't help you.

If you ship gold, it should be insured. Different carriers have different rules about whether they will insure gold and if so, for how much. Contact the carriers directly for details.

Safety in shipping can be a challenge. For larger amounts, you may want to use a secure delivery service (armored car, etc).

Finster
03-29-09, 05:12 PM
I've been wondering the mechanics of this as well (which has scared me away from buying physical initially and yearn more for allocated paper gold accounts).

For normal situations, yes, gold dealers will do the work, but in case gold hits more extreme values proposed on here (2500 or so), gold would seem to hold more value not for gold-cash transactions, but gold-"non-cash" assets - such as property, livestock, valued goods, etc.

Disclaimer: I am a younger ituliper who's been isolated from most major recessions

A good way to handle the physical-versus-paper question is to ask yourself what you want it for. Is your intent to hedge against monetary collapse or some other societal, financial and economic breakdown? Does gold's status as an asset that is no one else's obligation motivate you? If so, that's what you want physical for. Do you want something that's liquid and easily convertible into other assets, like cash, stocks, bonds, whatever, with little cost and little hassle? Then that's what you want "paper" gold for.

Many investors could answer affirmatively on both counts. They may want to hold some physical for security and privacy, and also hold some paper for liquidity and ease in adjusting positions. It doesn't have to be a mutually exclusive choice.