How to Buy Gold Without Storing it in a Safe Deposit Box

The global stock market is teetering on the brink of a meltdown. 

As of the time of this writing (early-March 2008), the S&P 500 is down over -8% year-to-date.  The Russell 2000 Index of U.S. small cap stocks is down even more, off -20% from its peak.  Unfortunately, the problem is not isolated within U.S. markets.  Overseas, the red-hot iShares China ETF (FXI) has pulled back over -35% from its 2007 peak.  Life is not good for the index-following, even emerging market crowd.

On the other hand, metals and mining shares are skyrocketing.  The price of gold bullion is up +16% so far this year alone.  The price of silver is up +36% on a year-to-date basis. Compared against the S&P 500, silver is outperforming the market by over 44%, in under three months!  Savvy investors understand the complexities of the capital markets and the ebb and flow of money seeking the best opportunities.  There is a huge influx of money going into commodity related investments.  The good news is that we are still early in the game. 

For example, the estimated total value of present open interest in domestic commodity futures is about $435 billion.  To give you a little perspective, that is less than the entire market capitalization of Microsoft.  Gold and silver are at the center of the gathering tsunami, and we expect them to be the emerging leaders as investors seek commodity-related exposure.

How to Buy Precious Metals Without Storage, Insurance, and Transaction Costs?

There's an easy way to purchase metals and mining-type investments -- without worrying about storage and insurance costs.  All these are designed to appreciate in value if the rally in gold and silver continues.  

You should know we are wary of buying futures contracts at a commodities broker.  We certainly don't want you to risk more than your initial investment.  That's why we suggest buying exchange-traded funds (ETFs).  You can buy ETFs by simply placing a trade in your online brokerage account.  We believe this is the best way to jump on 'gold train'.
 

StreetTRACKS Gold Shares (GLD)

StreetTRACKS Gold Shares (GLD) is designed to track on a day-to-day basis the underlying commodity, gold bullion.  The share price is calculated by dividing the price of gold by 10.  A $1000 spot price of gold would equate to a $100 value of the ETF, less expenses and liabilities of the fund. 

It is cost effective to own the gold ETF versus the actual bullion.  Think of it this way:  if you were to buy $10,000 worth of Canadian Maple Leafs the process is completely different.  You would call your precious metals broker, place an order for the coins, receive them in the mail, then figure out what do with them.

Some people feel better putting the coins in a safe deposit box.  Others dig holes in their closets and install a home safe.  Either way, you're schlepping thousands of dollars of bullion to and from storage.  Don't forget about buying insurance for the coins, because you don't want a thief to make off with your loot.  And you can't forget about losing sleep with gold coins lodged in your house foundation.  Due to transaction, storage, and insurance costs, owning actual gold bullion is not always the best option. 

Bottom line, gold and silver, and many other commodities, are leading investments right now.  Don't be concerned about sudden and sharp pullbacks.  Commodities are extremely volatile.  However, the underlying forces of a weakening dollar, runaway inflation, and a U.S. Central Bank in an accommodative stance means gold and silver prices are poised to trade higher.