+++ Buy a lot, save a lot? +++

(from the series: Your question about precious metals - part 3)

Today I would like to address a question which rather comes from a statement of @Tommy_oh_c137 under the bar purchase of @TeilzeitKapitalist was taken:

"Would have bought directly ne ounce, save money."

Is this statement true? Basically, yes. In precious metals trading, the principle is: "The more, the cheaper." So if we buy more gold, the price I have to pay per gram goes down as a rule.

The calculation example using the 5g bar of @TeilzeitKapitalist is the following:

We assume that he bought the 5g bar for about 290€ (290€/5[g]= 58€). So he paid 58€/gram. If he now bought the mentioned ounce (nominel 31,1g gold) at a price of 1.770€, his price per gram would have reached 56,91€/gram (1.770€/31,1[g]=56,91€).

So he saves 1.09€ per gram of gold. If he would buy the 31.1g with 6 bars of 5g and one 1g gold bar, the total amount would be 1,806€ (assuming a 1g bar price of 66.00€).

A difference of 36 EURO.*

The statement is therefore plausible and realistic.

But: The same can be continued with 50g bars, 100g and even more with a kilo of gold. The more gold "I" buy, the more I approach the middle rate for gold.

Why do small bars cost relatively more than bars over 1 ounce?

I have already explained it above. The more gold is purchased by the customer, the cheaper the price per gram becomes. The same principle applies, of course, to traders who are themselves customers at the next higher instant in the purchasing chain. The more gold I purchase from banks, refineries or third party dealers, the more favorable my ratio becomes in the purchase price.

In addition to the price, there are forming and minting costs, operating, personnel and marketing costs, and shipping costs.

Let's assume that the manufacturer costs 54,03€ (ounce: 1696€ according to the stock exchange minus 0,50€ melting costs per gram) in the purchase of melted gold (melted gold or raw gold (i.e. mine gold) are to be considered differently, more about this possibly sometime). The gold is melted and poured into a 100g bar. The process costs money to the manufacturer, the so-called molding cost is 2.5€ per 100g bar.

The refiner sells the bar plus shipping costs of a flat 36€. Assuming it sells the minimum quantity of 25 pieces, the 1x 100g bar costs 5.487€ including shipping. (Originally number mistake; thanks @BregisMoon )

If this 100g bar is now minted by 10 (so is minted into 10x 10g bars) so the price per gram increases again. So instead of 2.50 euros, 3.50 euros, for example, will be due. Coined again in 5g or smaller notation, the minting costs can increase by a factor of 5.

There are also constant minting costs, where the following applies: If the minting costs remain at least the same, the share of the minting costs nevertheless increases as a percentage in proportion to the low price for the bar. Result: The gram of gold costs more with a smaller quantity (percentage calculation incoming...).

This is of course only a calculation example, because the forming costs become more expensive, the less the customer is a regular customer at the Scheid company or buys only modest quantities.

It is not uncommon for minimum purchases to be set at the beginning of each year or periodically renewed. If one should not come as a dealer on the sales, then the business relation ends faster than one can look.

Also, the form costs set here are actually set too low, but is irrelevant for the example.

The embossing and forming costs therefore describe the amount of work required on the material. If this increases due to the smaller standardization, this is reflected in the price per gram. It is not for nothing that the 1g bar costs 10€ more per gram than per ounce.

The statement whether I "save" money when I buy larger quantities is true and correct.

But... Let us come to the actually more important question for the investment in precious metals:

Does buying larger quantities of gold actually make sense?

Basically, the answer to the question depends very much on the intended use and the investment objective, which standard size is purchased. And then, of course, the wallet.

Here I also go back to the example of the 5g bar.

If we assume a portfolio with a size of approx. 5700€ and acquire a 5g bar at a price of 290 EURO, we have a weighting of 5% in the total portfolio.

So if you are aiming for 5-10% as a target for gold in your portfolio, you have already laid a foundation with this purchase.

If @TeilzeitKapitalist however, the ounce that makes more sense in terms of price goes into the vault, suddenly the entire risk allocation collapses like a house of cards. The share is then a remarkable 23.6%.

I once addressed this in another post on the subject of paper gold or physical money. We have then no more small anchor for a lifeboat, but that of a cruise ship. Whether this is sensible is a matter for debate.

So how to proceed? Not to buy gold?

Who buys gold, acts from the drive of security, the risk control, the value protection or simply investment diversification. Those who buy precious metal should therefore apply the same rules of the game as for single asset investments. The amount of precious metal in the portfolio must necessarily match the risk tolerance of each investor himself. The general rule for 5-10% precious metals in the portfolio may not apply equally to all investors. This allocation stems from the fund manager's understanding of parking a portion of value-hedged investment instruments outside of fiat money.

The principle: Gold is always worth its price does not say anything else. The sentence should also read more accurately: "Gold is always worth its purchase price until "I" sell the gold at a higher or lower price."

Whoever buys gold, therefore, buys gold in the amount of his risk allocation and, above all, appropriate to his portfolio size.

How should our protagonist proceed when the value of the portfolio increases?

The easiest way to maintain and permanently continue the risk allocation for precious metals in the portfolio is with a savings plan on an ETC certificate (value-hedged with gold, e.g. EUWAX 2 Gold from Börse Stuttgart). To do this, we calculate once the monthly savings rate on shares, put our target allocation in the ratio and save in percentage terms simply the nominal value per month to maintain the weighting. Advantage, I can increase or decrease the rate at any time, have no storage costs and still a (usually) physical deposit of the shiny precious metal. About the risks I have already written in detail in the addressed article about paper gold or physical gold (see link tree in my profile).

For those who prefer physical gold, I can recommend the method of one-time purchase. Depending on your financial possibilities this means one purchase per quarter, per half year or even per year. With this variant I proceed in such a way that I estimate my year-end volume of my depot (because I invest e.g. regularly money by savings plan or single purchase of shares) and then at a fixed time the risk allocation with gold corriegieren as far as it is possible. In our example with 5g, the purchase of 5g would be due again in the next year, because the deposit may have grown by double. It does not matter if the risk allocation has gone down to 2.5% over the year, as long as I return to my 5% share at the end of the year.

The fun fact about all this: You do it like every other fund manager. At the end of the year, at the annual report of an investment year, the risk allocation is corrected and straightened out.

At some point you will have some 5g bars in your portfolio. However, since the gold price is subject to the same fluctuations, you have an average price with your purchased bars, the gold is probably again more expensive than last time, you can probably switch to a correspondingly higher bar against a payment of a small difference (namely between the purchase and sale of the bars). Or you just leave it at that, because 1kg of gold is just about the size of a big bar of Milka chocolate... try to illustrate that with the same value of silver...

Another advantage of your denomination: You can partly sell your gold when needed and don't have to sell 1 ounce or more right away.

In no case, however, the position should deviate excessively upwards, but just as important is a sufficient amount of precious metal to prevent a purely cosmetic measure (example: 500€ in precious metals with a deposit of 100,000 euros is, just 0.5% weighting... is therefore rather a thin thread instead of anchor rope on the cruise ship).

It is clear: Who has an appropriate portfolio or a certain risk allocation in mind, which makes an investment with 100g or ounce denominations meaningful, should do this, because this is then actually the "cheaper" method of investing in precious metals.

I wish you a golden future and much success! 🍀

*the prices mentioned are actual prices of a single dealer, as of this morning around 8:30.

#gold
#edelmetalle
#fragedelmetalle
#learn

Gold - (k)a safe haven?

(from the series: Your question about precious metals - part 2)

@HerkshireBathaway321 writes:

"... With me the ",crack" goes unfortunately by the family. My spouse trusts to a high degree the (physical) gold.

I am skeptical.

Gold could have had a "3" in front of it with all the distortions of the last years, but at least in the range above 2000 dollars.

None of this is in evidence, prices remain feelingly unimpressed by Corona, war fears, climate change, etc.

My concern is that for the first time in history, gold's role as a "safe haven" may be lost...."

The consideration and fear of whether gold could be a safe haven is a matter of faith.

The question, therefore, is indeed very much an individual one. As described in my post "All gold that glitters?!" (see: https://app.getquin.com/activity/ApWcaXFtjm?lang=de&utm_source=sharing

https://app.getquin.com/activity/ApWcaXFtjm?lang=de&utm_source=sharing), the question can therefore be answered in different ways.

As you can see in the current situation and price development on the precious metal market, I was not so wrong with my assessment a little more than 4 months ago, even if the reasons are probably to be considered differentiated.

At that time I explained under the contribution of @MaxD [source 1] my view regarding the development of the price of gold and "safe haven" issue as follows:

"...The price of gold will still rise with the next interest rate hikes in the EU and the USA, but then slowly join the bears in the market. Either we will then experience a phase of sideways movement or a correction due to the very fact that "you can't eat gold".

One should also keep an eye on the situation in China, here, in addition to gold, currency effects also play a decisive role."

As far as the reasons for such a development are concerned, this is of course to be seen and evaluated in a differentiated manner, as mentioned. Also, the possible reasons in the business can be combined or excluded with the price development and forecast.

Here, nevertheless, different influences play decisive roles... Emergency banks which are on big gold purchase tour [Source 2], but at the same time rising interest rates [source 3] and then the more and more tricky situation in Ukraine... not to mention all the supply chain problems etc. etc.

So why should gold (as industrial metal, speculative object and technology metal) be spared from this? The correlations are just as obvious as with shares or other assets.

Another point that should definitely be considered with gold (as mentioned in my comment at the time...) are the currency effects: The strong dollar has a very different impact on the gold price in USD (1 year: -6.76%) than the resulting valuations for gold in Euro (1 year: +8.68%). 💰 [Graphs 1&2]

If "I" assume that gold will always and increasingly find use as an industrial/technology metal, this is a different scenario than relying on the pure "shine" of the metal....

However, since industrial metals are also always tied to economic situations, the price development is accordingly also understandably coupled (keyword: recession).

As I already stated above: The importance of gold as a technological material is not to be despised and therefore also a reflection of the current, global problems of industry and not least mankind.

What you or your family believe in is therefore quite individual for everyone. Of course, a lump of gold in your home safe can also calm your nerves. If your "spouse" feels security in it, it is at least mentally an important "harbor". ⚓️

What do "we" always say here? The asset has to fit your own risk affinity and imagination. 💡

The idea of the "safe haven" must therefore be reconsidered insofar as one's own interpretation of it must be found.

A right or wrong regarding gold, but also any other asset, is therefore always tied to one's own subjective goal of this asset class and one's own risk tolerance.

Sources:

[1] Contribution of @MaxD (https://app.getquin.com/activity/sPofciTMxJ?lang=de&utm_source=sharing

https://app.getquin.com/activity/sPofciTMxJ?lang=de&utm_source=sharing)

[2] The gold tricks of the central banks - FAZ of 02.11.2022 (https://m.faz.net/aktuell/finanzen/die-gold-tricks-der-notenbanken-400-tonnen-gekauft-18431135.html?premium=0xd14578aa8949f9b04175a9e1ac2e8304&premium=0xd14578aa8949f9b04175a9e1ac2e8304&GEPC=s9)

[2] Why gold fails as inflation protection- ARD from 07.01.2022 (https://www.tagesschau.de/wirtschaft/finanzen/warum-gold-als-inflations-hedge-versagt-und-aktien-besser-sind-101.html)

Image sources:

[Image 1] Not a safe haven? - Hamburg - Symbol image from Hamburg24 (https://www.24hamburg.de/hamburg/wetter-sturm-hamburg-unwetter-sturmflut-hochwasser-flughafen-sturmschaeden-fischmarkt-dwd-deutsche-bahn-sturmtief-sabine-hermine-90002020.html)

[Image 2 and 3] Gold price in Euro and USD from gold.de - view on 1 year.

#gold
#rohstoffe
#meinung#fragedelmetalle
#learn

For app users:

Opinion on gold - neutral 🤷🏻‍♂️🤷‍♀️

Silver: Physical or ETC (Certificate)?

(from the series: Your question about precious metals- part 1)

Again and again I am linked under contributions to certain topics. Since my comments are also regularly longer, I therefore also need some time, I will try to publish the particularly detailed comments as an extra post. Advantage for the questioners: You get additional input and possibly reach.

Questioning from @Philinvest :

...I have now accumulated more cash in the last 5 months and would now like to invest this in silver. Do you think it makes sense to invest only in physical assets?

Or do you think that with commodities you should diversify with stocks/etfs and physical?...

Answer:

If you want to invest in (physical) silver, you should basically keep an eye on the tax. In the field of silver there is a difference between direct taxation and differential taxation. While with direct taxation the tax is clearly added with 7% to the silver price (in the table business you see then the tax portion and the portion of the silver price set up), you do not see the portion of the difference-taxed product. For the customer, this unfortunately results in a slightly shifted picture, namely the apparently non-existent tax, which, however, is already calculated in by the dealer. The differential taxation allows the dealer to pay only one tax from the difference EK and VK for non-European silver investments (coins and coin bars).

Well then.... The disadvantage for the private investor with both variants is nevertheless clear. Due to the tax surcharge, you are at a disadvantage right from the start with up to -12% return on the spot price. Because you pay not only the tax consideration, but also the handling costs of the dealer or the bank with in the VK.

Further points which you should consider are possible storage costs and the sheer quantity which is needed for such an investment. At present, one ounce coin in gold is equivalent to about 70 ounce coins in silver... Not to mention the safety of the storage.

ATTENTION: The above statements are currently valid in Germany 🇩🇪 . Austria 🇦🇹 (according to profile questioner) has a tax rate of 20% for payable silver: https://www.wko.at/branchen/handel/juwelen-uhren-kunst-antiquitaeten-briefmarken/umsatzsteuer-beim-verkauf-von-muenzen.html (no tax advice!) Thus the yield disadvantage at the beginning is equal at -20% to the spot price.

Is therefore now the investment in paper silver more recommendable?

Well, yes. It comes, as already mentioned elsewhere (mentioned here is my contribution to the topic silver investment AND my contribution to the topic gold investment; both:
see link tree in my profile) on the investment reason, or the scenario.

If you see the actual reason of the silver investment as an alternative to cash and as a nest egg, then nothing speaks against an investment in physical form. The advantage is the quick availability and the relatively easy handling (i.e. the possibility to exchange it into any form of commodity or fiat money).

However, if you see the silver investment only as a hedge against possible uncertainties on the stock market and do NOT consider a physical delivery, then the investment in paper silver or participating companies can be considered. Note, however, that this can also bring certain disadvantages! In the event of an emergency (a hypothetical collapse of the financial system), trading in the paper silver would no longer be readily available. Also, all forms of ETCs are a kind of certificate, which is usually backed by the corresponding precious metal or commodity, but this is not mandatory. Thus, you also bear the issuer risk, i.e. the risk that the provider of the corresponding certificate goes bankrupt. ETCs and certificates are unlike shares of companies NO special assets. So you would only have the vague hope that with deposited precious metals and the possible sale from the insolvency estate for you a crumb of the cake falls off.

So how to proceed in your specific case?

Ask yourself what your goal is. If you want to hedge a part of your portfolio and do not believe in the imminent collapse of the financial system, you can safely invest in corresponding paper silver shares. However, due to the risks just discussed, make sure that it is a commodity-backed ETC. Also keep in mind: To have a real impact on your portfolio, you need a significantly larger share of the portfolio than the usual 5%. In the range of 20-30% a corresponding effect would be noticeable.

If you only want to have a fraction, as a fiat money substitute and hedge in case of crisis, the investment in physical silver is recommended. I "recommend" even then always a stock of value of a new washing machine, a new stove, a new dishwasher and the good repair of the own passenger car. So all eventualities are taken care of.

Please note: For physical silver investments, "we" only buy bullion coins (Maple Leaf, Krugerrand, Britania, Eagle, Kangaroo, Panda or Philharmonic), silver bars or silver coin bars each in fine silver. Other coins or bars are NOT investment metals, but variations which are very expensive to buy and bring too high discounts when sold.

One thing is true for all commodity investments and for silver even more: It is with the investment in commodities always a strongly cyclical investment! Accordingly, one should expect high price ups and downs and be able to cope with them psychologically well.

Investments in precious metals are to be considered at least with 5 years investment period.

Since these are cyclical investment instruments, one should act anticyclically and buy or sell accordingly.

Good luck to you and yours! 🍀

What do you guys think about investing in silver?

What do you think of the present contribution format?

Thanks to@DonkeyInvestor for linking below the post. 🥕

The present contribution is not related to my professional opinion on the subject. I myself work professionally in the field of physical precious metals and give with this contribution only my personal opinion.

#silber
#fragedelmetalle
#learn