Question on Gold Expenses

[stuper1]

I'm just getting started with the PP, and I'm not real crazy about holding physical gold.  I'm much more attracted to gold ETFs or CEFs.  One reason for this is purely based on expenses.  To hold say $10,000 in physical gold, my bank wants $55/year for a safe deposit box, and my insurance company wants $110/year for insurance.  If I did the math right, that's a 1.65% expense ratio.  Whereas I could put the money in IAU at something like a 0.25% expense ratio.  To me, the IAU sounds much more attractive.  Am I missing something?

[Pointedstick]

Insuring gold held at a bank sounds like overkill to me in the safety department. Maybe if you're holding it yourself at your house or something, but if it's at a bank AND insured, unless you have a much larger amount of gold it's not worth it. However, for 100k of gold, the effective ER is only 0.165% compared to IAU's 0.25%. Much more reasonable if you still want to do both.

Perhaps you should address why you're uncomfortable holding physical gold. Are you worried it would be stolen or lost in a disaster or something?

[flyingpylon]

It's true that for small amounts of physical gold, the expense ratio for storage and insurance can seem high.  Obviously it gets much better as your holdings increase.

But the main point is that physical gold is much more than just ones and zeroes in a computer somewhere.  That's worth something in my opinion, but everyone will see that a little differently.

[stuper1]

For $100k of gold, the insurance cost would be about $1,100 and the safe deposit box would be $55, so the expense ratio would be 1.155%.  My main objection to holding physical gold is just the expenses involved.  I had the feeling that insuring gold held at a bank was recommended.  Are you saying that only kicks in at a certain dollar level?

[flyingpylon]

You will get much better rates by insuring with a company that specializes in this sort of thing (coins, collectibles, art, etc) instead of a typical homeowners policy.  One example is Hugh Wood, Inc.  Their rate is about .3% with a $150 minimum annual premium (which would be .3% of $50,000).

[rickb]

Re Hugh Wood - see this thread http://gyroscopicinvesting.com/forum/ht ... ic.php?t=0

[frugal]

I want to move from etfs to physical.
Just dont know how to sell one day later all it, if I need.

Regards

[MachineGhost]

I'm just getting started with the PP, and I'm not real crazy about holding physical gold.  I'm much more attracted to gold ETFs or CEFs.  One reason for this is purely based on expenses.  To hold say $10,000 in physical gold, my bank wants $55/year for a safe deposit box, and my insurance company wants $110/year for insurance.  If I did the math right, that's a 1.65% expense ratio.  Whereas I could put the money in IAU at something like a 0.25% expense ratio.  To me, the IAU sounds much more attractive.  Am I missing something?

$10K in gold is not a lot with how much coins costs these days.  So you dont need to use a bank/vault or insure it for such a pittance.  Use your imagination!

[stuper1]

Well, here's what my imagination has come up.  Make a small, waterproof container out of PVC pipe with waterproof caps on each end.  Put American Eagles inside.  Bury it in the back flower beds, keeping some cryptic notes for myself and my wife, so we don't forget where it's at.  That seems a lot safer than keeping it in the house where fire is a risk and thieves are more likely.

What do you all think of this plan?

[l82start]

Well, here's what my imagination has come up.  Make a small, waterproof container out of PVC pipe with waterproof caps on each end.  Put American Eagles inside.  Bury it in the back flower beds, keeping some cryptic notes for myself and my wife, so we don't forget where it's at.  That seems a lot safer than keeping it in the house where fire is a risk and thieves are more likely.

What do you all think of this plan?

  i would only add, taking your gold from the store to the flower bed by way of a risky boat trip on choppy waters... 

[melveyr]

Well, here's what my imagination has come up.  Make a small, waterproof container out of PVC pipe with waterproof caps on each end.  Put American Eagles inside.  Bury it in the back flower beds, keeping some cryptic notes for myself and my wife, so we don't forget where it's at.  That seems a lot safer than keeping it in the house where fire is a risk and thieves are more likely.

What do you all think of this plan?

Step 2: don't post plan on the internet... Wait, damn!

[frugal]

I want to move from etfs to physical.
Just dont know how to sell one day later all it, if I need.

Regards

This bothers me, too, especially for larger amounts of bullion. ETFs have their drawbacks, but I can liquidate my position with a mouse click and be done.

Problem is  risk of ETFs, brokers...

[sophie]

Well, here's what my imagination has come up.  Make a small, waterproof container out of PVC pipe with waterproof caps on each end.  Put American Eagles inside.  Bury it in the back flower beds, keeping some cryptic notes for myself and my wife, so we don't forget where it's at.  That seems a lot safer than keeping it in the house where fire is a risk and thieves are more likely.

What do you all think of this plan?

You'd better really trust your gardener :-)  And hope he/she doesn't know how to surf the internet.  What's wrong with the safe deposit box option, other than the fact that your bank is overcharging shamefully for it?

Incidentally, selling coins is easy, although I haven't done it:  1) log into Goldmart or wherever you bought them.  2) execute a sell order, or call to do the same.  3) Send the coins by registered, insured mail.  4) Wait for the check.  Oh, and don't forget to claim the proceeds on your income tax.

[stuper1]

I trust our gardener enough to sleep with her, but if she ever starts digging 4 feet in the ground for no obvious reason I may question why I married her.  None of her internet surfing would be on this website, which is fine by me.  She handles certain things in the household very well, and I muddle along trying to handle some of the other things.

This whole idea came about from MachineGhost's post above in which he said not to bother with a bank for such a small dollar amount.  The more I thought about it, the more it makes sense too.  How are you going to get your gold out of the safe box, if the bank's doors are closed (not that I think that very likely, but who knows what could happen)?  Storing inside the house seems much riskier than storing in the flower bed, due to fire and theft risks.  I don't know too many thieves that are going to dig 4 feet in the ground at random locations until they find my little PVC pipe which they won't even know is there.  I think the chance of somebody going through my backyard with a metal detector is less than the bank door's closing, but even so I could put a piece of scrap metal at 2 feet down and hope they would stop there.

[BearBones]

This bothers me, too, especially for larger amounts of bullion. ETFs have their drawbacks, but I can liquidate my position with a mouse click and be done.

You cannot liquidate your position if there is large geomagnetic storm. Or if one of the institution holding it folds. And it may be tough getting your money if you have fled to Canada or New Zealand.

There is the PP, and then there is the PPP (also called P cubed). A third P you say? Paranoid! Perhaps. Prudent, perchance. Preposterous? Potentially.

[MachineGhost]

I think you guys are underestimating how difficult it will be to sell buillion, GLD/IAU/etc. if the U.S. government decides to pull an Argentina.  You won't even need to liquidate it in your online brokerage account; it will be done for you at a price you have no choice but to accept.  Same with gold dealers.  As long as they are U.S. or do business in the U.S., the U.S. Treasury is uber alles.

HB said store it offshore.  Pay heed.

[Libertarian666]

I think you guys are underestimating how difficult it will be to sell buillion, GLD/IAU/etc. if the U.S. government decides to pull an Argentina.  You won't even need to liquidate it in your online brokerage account; it will be done for you at a price you have no choice but to accept.  Same with gold dealers.  As long as they are U.S. or do business in the U.S., the U.S. Treasury is uber alles.

HB said store it offshore.  Pay heed.

Wouldn't that be overestimating how difficult it will be to sell ETF's? The government will do it for you; it can't get much easier than that!