How do you invest the gold portion?

Discussion of the Gold portion of the Permanent Portfolio

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vnatale
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How do you invest the gold portion?

Post by vnatale » Tue Sep 10, 2019 8:05 pm

I am soon to be a Level 4 investor.

The book advises that the best way to invest in gold is to own it. However, initially, that would take some time to fully implement.

Therefore, to get started I am strongly thinking of the book's alternative gold recommendation...

The following exchange-traded funds and closed-end funds are popular options for this type of gold ownership.
1. iShares Gold ETF (Ticker: IAU)
2. StreetTracks Gold ETF (Ticker: GLD)
3. Physical Swiss Gold ETF (Ticker: SGOL)
4. Sprott Physical Gold Trust (Ticker: PHYS)
5. Central Fund of Canada (Ticker: CEF)
6. Central Gold Trust of Canada (Ticker: GTU)
7. Canton Bank of Zürich ETF (Ticker: ZGLD)

Does anyone have any experience / recommendations regarding any of the above? Also, since the book was written over seven years ago, have there been superior new products introduced?

Thanks

Vinny
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats."
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Re: How do you invest the gold portion?

Post by boglerdude » Tue Sep 10, 2019 8:45 pm

Perth mint ETF is new
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Re: How do you invest the gold portion?

Post by pmward » Tue Sep 10, 2019 8:50 pm

Yes, AAAU (Perth Mint) is my ETF of choice these days. Lower ER than IAU, and shares are redeemable for physical gold shipped to the U.S. for a $30 shipping fee. So these shares are basically "as good as gold".
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Re: How do you invest the gold portion?

Post by KodoCastle » Wed Sep 11, 2019 1:34 am

vnatale wrote:
Tue Sep 10, 2019 8:05 pm
The book advises that the best way to invest in gold is to own it. However, initially, that would take some time to fully implement.
Sorry to be a nag, but can I ask why?

Are there no gold dealers around you? Because there are some good online sellers as well. And if you're worried about storage, setting up a secure deposit box (and some insurance for it) only takes a bit of a day and probably costs less than $200 a year (unless you're planning on insuring a lot of gold).
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Re: How do you invest the gold portion?

Post by vnatale » Mon Oct 07, 2019 9:10 pm

One fixed $30 fee no matter how much $/weight of gold involved?

Vinny
pmward wrote:
Tue Sep 10, 2019 8:50 pm
Yes, AAAU (Perth Mint) is my ETF of choice these days. Lower ER than IAU, and shares are redeemable for physical gold shipped to the U.S. for a $30 shipping fee. So these shares are basically "as good as gold".
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats."
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Re: How do you invest the gold portion?

Post by vnatale » Mon Oct 07, 2019 9:19 pm

I actually finally addressed your question earlier tonight in my post asking gold dealers that one uses.

In it I described how I found a list of all the gold dealers within an hour's drive of me. I investigated each one of their online presences and I was unimpressed with each of them. They seemed to be low level, tiny operations. Have no problem with dealing online, though, with someone clear across the country from me. And, finally, I prefer to accomplish as much as I can via sitting in front of this computer as opposed to time that is wasted in travel.

I am still collecting information to decide what I am going to buy for all four investments of the Permanent Portfolio and then making a list of all the steps that will be necessary to do it all. And, as I earlier stated tonight, one of my tasks is consolidating six of my retirement accounts at Vanguard into just two retirement accounts. Then I need to sell ALL in ALL my Vanguard accounts to do the grand repositioning into being a Permanent Portfolio.

There is going to be a lot I'm going to want to accomplish in a short period of time therefore I need to come up with a plan that can be accomplished in a short period of time. Once the Permanent Portfolio is established I can refine certain aspects of it. I know for certain that I'll be implementing the Gold investment via ETFs. I feel fine about owning gold coins. The question is whether I do some gold coin purchases at the part of the initial Permanent Portfolio implementation. Or, whether that becomes a later refinement.

Vinny
KodoCastle wrote:
Wed Sep 11, 2019 1:34 am
vnatale wrote:
Tue Sep 10, 2019 8:05 pm
The book advises that the best way to invest in gold is to own it. However, initially, that would take some time to fully implement.
Sorry to be a nag, but can I ask why?

Are there no gold dealers around you? Because there are some good online sellers as well. And if you're worried about storage, setting up a secure deposit box (and some insurance for it) only takes a bit of a day and probably costs less than $200 a year (unless you're planning on insuring a lot of gold).
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats."
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Re: How do you invest the gold portion?

Post by Kbg » Tue Oct 08, 2019 9:05 am

I do have a strong opinion on the gold aspect of the PP. The choice is basic: You are going to go physical or paper gold. I have no opinion on which is the better option as there are strong arguments on both sides that are both good, accurate and compelling (a mix of both is also a good choice, though I think the arguments made for physical gold on serious analysis don't hold up very well unless the holdings are extensive and you have a permanent residency card in the country your gold is being held in. They clearly and objectively don't hold up historically in the US.)

However, if you are going to go with paper gold then ultimately you are relying on someone's accounting and I would go with a firm that is reputable, has large AUM and has the lowest mngt fee. A search using etfdb.com will provide all the information you need to make a good decision. Jack Bogle's advice is good here, costs matter and to me they are the most important factor for paper gold.
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Re: How do you invest the gold portion?

Post by dualstow » Tue Oct 08, 2019 2:44 pm

vnatale wrote:
Tue Sep 10, 2019 8:05 pm
I am soon to be a Level 4 investor.

The book advises that the best way to invest in gold is to own it.

What is a level 4 investor anyway? Is that a Robert Kiyosaki book?
traveling...
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Re: How do you invest the gold portion?

Post by ochotona » Tue Oct 08, 2019 2:50 pm

25% of my gold is ETF. Now that Schwab is fee-free, if I buy more it will likely be AAAU.

75% is physical
half of that in a Roth IRA with Goldstar Trust Co; the bullion is with Delaware Depository
other half in an insured safe deposit box somewhere in rural Texas where they encourage concealed carry into the bank (but not open)
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Re: How do you invest the gold portion?

Post by geaux saints » Tue Oct 08, 2019 4:13 pm

dualstow wrote:
Tue Oct 08, 2019 2:44 pm
vnatale wrote:
Tue Sep 10, 2019 8:05 pm
I am soon to be a Level 4 investor.

The book advises that the best way to invest in gold is to own it.

What is a level 4 investor anyway? Is that a Robert Kiyosaki book?
I think the level 4 investor is a reference to Craig's/MT's book; I want to say that means stocks in via a fund or etf, bonds held directly, cash in a treasury money market fund and someone geographical diversification with the gold.
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Re: How do you invest the gold portion?

Post by dualstow » Tue Oct 08, 2019 11:29 pm

ah, ok, thank you.
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Re: How do you invest the gold portion?

Post by vnatale » Wed Oct 09, 2019 11:11 am

This was great!

I totally subscribe to Jack Bogle regarding costs!

And, many thanks for introducing me to eftdb.com.

I've been there and have the following observations:

Of the four I've most seen mentioned either in the Craig / Tex book and in this forum - GLD, IAU, SGOL, and AAAU - GLD has far and away the most assets - nearly triple what the second IAU has. And, IAU is almost 16 times what the 3rd place one is - SGOL. Finally, AAAU is only 1/10 SGOL.

IAU and SGOL have the highest returns, with AAAU next, and GLD last.

The Expense Ratios are as follows:

GLD-0.40%
IAU-0.25%
SGOL-0.17%
AAAU-0.18%

Assuming that the returns are AFTER the Expense Ratios that would mostly explain the difference in returns.

Going by your criteria below it seems like IAU would be the winner?

Question I have is with IAU ALWAYS having the better return for any time period compared to GLD why does GLD have almost 3 times as many assets?

I initially thought it could be because they were the first Gold ETF. But IAU showed up on the scene only two months later.

Finally, I'm also guessing you chose paper gold? If so, which are you using.

Thanks again for pointing me in the right direction, which is greatly simplifying my decision process regarding the gold portion of the Permanent Portfolio.

Vinny
Kbg wrote:
Tue Oct 08, 2019 9:05 am
I do have a strong opinion on the gold aspect of the PP. The choice is basic: You are going to go physical or paper gold. I have no opinion on which is the better option as there are strong arguments on both sides that are both good, accurate and compelling (a mix of both is also a good choice, though I think the arguments made for physical gold on serious analysis don't hold up very well unless the holdings are extensive and you have a permanent residency card in the country your gold is being held in. They clearly and objectively don't hold up historically in the US.)

However, if you are going to go with paper gold then ultimately you are relying on someone's accounting and I would go with a firm that is reputable, has large AUM and has the lowest mngt fee. A search using etfdb.com will provide all the information you need to make a good decision. Jack Bogle's advice is good here, costs matter and to me they are the most important factor for paper gold.
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats."
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Re: How do you invest the gold portion?

Post by ochotona » Wed Oct 09, 2019 1:57 pm

GLD works better for traders who don't care about the expense for holding it, they are about order execution. For buy and hold, avoid it. Go for a lower expense ratio
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Re: How do you invest the gold portion?

Post by Kbg » Wed Oct 09, 2019 1:59 pm

I use none of them as my PP is really a VP consisting of 3xETFs. I post performance from time to time in the VP section. However, I have looked at them and for a small investor I like SGOL. There is also GLDM you may want to check out.
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Re: How do you invest the gold portion?

Post by whatchamacallit » Fri Oct 18, 2019 10:09 pm

ochotona wrote:
Fri Oct 18, 2019 9:30 pm
I've looked at the buy / sell prices over a number of years over a number of dealers, and the Eagles are always the round-trip losers. That said, I probably will never buy another coin, and will be buying ETF AAAU in the future, now that there is no longer any commission to buy it.
Speaking of buy /sell prices got me thinking about bid/ask spreads for gold etfs.

Look at bid/ask spreads listed on morningstar for the gold etfs. GLD doesn't look like such a bad deal with only 0.72% vs IAU at 2.42% and AAAU at 3.60%. I wonder if those are accurate.

With those numbers, it would take over 10 years of holding before IAU became a better buy. The spread would almost be like a back-end load fee

I have only done IAU in the past but I will have to check bid/ask spreads next time I buy gold.

Am I seeing this wrong or are those bid/ask spreads just completely wrong?
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Re: How do you invest the gold portion?

Post by ochotona » Sat Oct 19, 2019 7:49 am

Bid ask spreads vary with time of day. Outside of normal trading hours they balloon. When the market is open and calm, they are most often just a penny. I have no earthy idea what the stat you mentioned means. Just when you get ready to trade, make sure they are tight at that moment, no tweets from Tweeter In Chief.

If you use a Market On Close MOC order, you don't get exposed to this spread... You just exactly get the closing price, like a mutual fund. Thanks to my friend Paul Novell for edumicating me on that.
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Re: How do you invest the gold portion?

Post by Kbg » Sat Oct 19, 2019 8:41 am

There is something weird with those numbers, they are all excessively high. You can calculate it yourself and all of them are probably a penny divided by the bid price.
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Re: How do you invest the gold portion?

Post by sophie » Sat Oct 19, 2019 9:32 am

Quick note about AAAU - this is also my ETF of choice, because its backed up by a mint whose job it is to hold gold, rather than an investment corporation who is probably loaning it out behind the scenes, and thus may not be able to come up with it in a "black swan" scenario.

However - I only use it in tax-advantaged accounts. If your plan is to hold gold long-term, it makes no sense to use it in taxable, because you can simply invest with the mint directly for a ZERO ER (unallocated) plus buy and sell fees. For a portion of your gold holdings, this should be a big win as it's unlikely you'll be selling it often enough for the buy/sell fees to outweigh the ER of an ETF.
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Re: How do you invest the gold portion?

Post by vnatale » Sat Dec 14, 2019 8:57 pm

KodoCastle wrote:
Wed Sep 11, 2019 1:34 am
vnatale wrote:
Tue Sep 10, 2019 8:05 pm
The book advises that the best way to invest in gold is to own it. However, initially, that would take some time to fully implement.
Sorry to be a nag, but can I ask why?

Are there no gold dealers around you? Because there are some good online sellers as well. And if you're worried about storage, setting up a secure deposit box (and some insurance for it) only takes a bit of a day and probably costs less than $200 a year (unless you're planning on insuring a lot of gold).
Your $200 is the total cost for BOTH paying the yearly fee for a bank security deposit box AND the insurance on its contents? If so, what are you estimating as the cost for each? And, what is your definition of "a lot"? I always evaluate any investment costs as its percentage of the total investment. So, $200 on a $10,000 would be 0.2%. Not a high percentage but not tiny either. $200 on $100,000 would be 0.02%. That'd be fairly tiny.

Vinny
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats."
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Re: How do you invest the gold portion?

Post by vnatale » Fri Mar 13, 2020 8:18 pm

ochotona wrote:
Tue Oct 08, 2019 2:50 pm
25% of my gold is ETF. Now that Schwab is fee-free, if I buy more it will likely be AAAU.

75% is physical
half of that in a Roth IRA with Goldstar Trust Co; the bullion is with Delaware Depository
other half in an insured safe deposit box somewhere in rural Texas where they encourage concealed carry into the bank (but not open)
How exactly do they "encourage"? Living in a state like Massachusetts with so many gun restrictions I'm fairly oblivious to all things gun (even though I go to two "Rod & Gun" clubs to hear live music (one of them just 2 miles away on my street) and an EMT once told me that my town has the highest rate of gun ownership in the state).

Vinnny
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats."
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Re: How do you invest the gold portion?

Post by CT-Scott » Tue Mar 24, 2020 5:31 pm

So the bulk of our (wife and I) 401k funds are with employer-associated 401k accounts that, obviously (?), don't offer Gold options.

But we also have Roth IRA accounts with Vanguard, and older (associated with my side-business - haven't had new contributions in a long time) 401k accounts administered by TD Ameritrade. So if we want to purchase some paper gold, it looks like I can buy AAAU in either of those accounts. Am I missing anything important?
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Re: How do you invest the gold portion?

Post by vnatale » Tue Mar 24, 2020 5:45 pm

CT-Scott wrote:
Tue Mar 24, 2020 5:31 pm
So the bulk of our (wife and I) 401k funds are with employer-associated 401k accounts that, obviously (?), don't offer Gold options.

But we also have Roth IRA accounts with Vanguard, and older (associated with my side-business - haven't had new contributions in a long time) 401k accounts administered by TD Ameritrade. So if we want to purchase some paper gold, it looks like I can buy AAAU in either of those accounts. Am I missing anything important?
Since I started this topic and then participated in it extensively and did get a fair amount of response, there is a fair amount of information contained in this topic.

I see that I wrote (in part this):

Of the four I've most seen mentioned either in the Craig / Tex book and in this forum - GLD, IAU, SGOL, and AAAU - GLD has far and away the most assets - nearly triple what the second IAU has. And, IAU is almost 16 times what the 3rd place one is - SGOL. Finally, AAAU is only 1/10 SGOL.

IAU and SGOL have the highest returns, with AAAU next, and GLD last.

The Expense Ratios are as follows:

GLD-0.40%
IAU-0.25%
SGOL-0.17%
AAAU-0.18%

Assuming that the returns are AFTER the Expense Ratios that would mostly explain the difference in returns.

Going by your criteria below it seems like IAU would be the winner?


I've still not done anything yet in purchasing gold in any form.

Vinny
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats."
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Re: How do you invest the gold portion?

Post by CT-Scott » Tue Mar 24, 2020 9:53 pm

Hi Vinny,

I did read your earlier post, but I also read some recommendations of AAAU from 2-3 others. Vinny, you cite the fact that GLD has "far and away the most assets." I apologize for being so ignorant, but what does that really mean, and why might that be a major reason for choosing GLD over the other options?
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Re: How do you invest the gold portion?

Post by mdwilson1991 » Tue Mar 24, 2020 11:23 pm

CT-Scott wrote:
Tue Mar 24, 2020 9:53 pm
Hi Vinny,

I did read your earlier post, but I also read some recommendations of AAAU from 2-3 others. Vinny, you cite the fact that GLD has "far and away the most assets." I apologize for being so ignorant, but what does that really mean, and why might that be a major reason for choosing GLD over the other options?
I believe one aspect of more assets is that there will be more liquidity when you go to buy and sell.

My very limited one data point of experience bore this out - I wanted to purchase several thousand shares of SGOL a while back with a buy limit order. I tried several times unsuccessfully. I decided to try with IAU, and click it was done.
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Re: How do you invest the gold portion?

Post by mdwilson1991 » Tue Mar 24, 2020 11:32 pm

ochotona wrote:
Sat Oct 19, 2019 7:49 am
...

If you use a Market On Close MOC order, you don't get exposed to this spread... You just exactly get the closing price, like a mutual fund. Thanks to my friend Paul Novell for edumicating me on that.
FYI, You may want to reconsider that. Or maybe you are right...

I'm not going to attempt to explain why, because I can't, but I will quote a guy who seems like an authority, as he wrote this "War and Peace" on ETF costs http://www.etfconsultants.com/Reducing_ ... _Costs.pdf

"Using MOC Orders Routinely to Buy or Sell ETFs Looks Like a Terrible Idea
The majority of investor ETF market-on-close orders are not likely to be executed at or
“better” than NAV, and many MOC executions will not even be close to NAV. MOC orders can
be executed at a much greater distance from the NAV than the reported premium and discount
data indicate to investors. Anyone trading ETFs should understand how these orders work and
how ETF MOC orders differ from stock MOC orders. If you compare a fund’s NAV and closing
price for a few days, you will probably conclude that you do not want to use an MOC order –
unless your comparisons suggest that, for some reason, other investors are predominantly selling
when you buy or buying when you sell. At the least, you will conclude that the cost to trade
most index ETFs is more than a few basis points."
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