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Hedgeless_Horseman’s E-Z Internet Guide On How To Actually Buy Gold, and Not Just Talk About It.

ZeroHedge  |  Headless Horseman

“When robbery is done in open daylight
by sanction of the law,
as it is done today,
then any act of honor or restitution
has to be hidden underground.”

-Ragnar Danneskjold

The internet and ZeroHedge are filled with articles discussing why it is a good idea to buy gold.  If I only had an extra ounce of gold for every time I typed or read the phrase Gold, Bitchezzz!!! here on ZeroHedge.  Which brings me to the topic of today’s article, hedgeless_horseman’s E-Z Internet Guide On How To Actually Buy Gold, and Not Just Talk About It!  

Several years ago, I posted a brief parody on the topic of gold, The Twelve Steps

The Twelve Steps

We came to understand that our government is powerless over its spending – that our nation’s debt had become unmanageable.

We came to believe that a power greater than our fiat currency could restore us to sanity.

We made a decision to turn our savings and our investments over to the care of gold, as we understand gold to be a physical asset – not a paper promise.

We made a searching and fearless inventory of our wealth.

We converted to gold, to Krugerrands, and to Maple Leafs, the fiat paper assets of our wealth, thus eliminating our counterparties.

We were entirely ready to have gold remove all risk of default.

We humbly asked the coin dealer to reduce our exposure to The Inflation Tax.

We made a list of those politicians that expose us to The Inflation Tax, and became willing to work against them all.

We gave direct support to Libertarians whenever possible, except when no Libertarian is on the ballot, and then we voted against the incumbent.

We continued to create wealth through our own industry, and then we converted it to gold, and promptly buried it.

We sought through silver coins to increase our contact with precious metal, as we understand silver to be a physical asset – not a paper promise, paying for as many day-to-day transactions with silver as possible, using our credit card (not debit) for what was not, and paying off the entire balance each month.

We, having had a fiscal awakening as the result of these steps, tried to carry this message to others, and to practice these principles in all our affairs.

If you feel like you are one of us, or want to be one of us, but need a little help getting started, then keep reading, because this article is for you.

As long-time ZH readers may know, as an American, I prefer buying one ounce South African Krugerrands and Canadian Maple Leafs, and not coins from the United States Mint.  I am frequently asked about this preference, and I usually respond with something like this:

Unlike the kilo bars, one ounce Canadian Maple Leafs [and Kruggerands] don’t have serial numbers, can be claimed as foreign currency with a face value of $50 [one ounce Maple Leaf] , and are much harder to core and fill with tungsten [versus a bar].  They are also easier to stick up your a** in a pinch.

These may seem like minor points to some, but it is my understanding and experience that DHS does allow me to enter and exit the USA with up to $10,000 of undeclared cash and coin, and that the Maple Leafs are counted by their face value of $50 Canadian dollars, and not at their melt value or market value.  It is also my belief that the United States government would have an easier time making illegal, confiscating, or requiring a mandatory exchange of any coins issued by the United States Mint, as opposed to foreign currency.  See India for a present day example.  As far as being able to smuggle gold coins in my a**, well, I have had the privilege of knowing two very amazing people that owe their very lives to doing exactly this.

I like to buy gold every month, right before Options Expiration, when the big banks and paper-gold traders historically hammer down the quoted price of gold.  Remember, the idea is to buy low.  The CME OpEx calendar is available here:

By being a regular-monthly customer, I am able to negotiate a lower premium and overall price from the coin dealer, because he wants my repeat business.

Regarding premiums, when buying or selling 1-10 one-ounce Krugs or Maples, I expect to pay or receive a premium of between $30 and $45 above the spot price for gold, which is also a negotiable amount between the Bid and the Ask quotes listed on www.kitco.com or similar websites.  Do not ever trust the dealer to determine the spot price.  Look it up on your phone.

In addition, I benefit economically from, and enjoy emotionally, the self-discipline of consistently paying myself first each month. This is no small thing.  Please, spend some time pondering these concepts while holding a gold coin in one hand, and a credit card statement in the other hand.

Although I may primarily transact with my local coin dealers, I have also traded with pawnshops, at yard sales, at swap meets, and privately with friends and acquaintances.  It is important to develop a relationship with, and even support, all of the numismatic shops in one’s geographic area.  It is also important to vary one’s habits, and to experience buying and selling gold coins outside of a coin dealer.

There are usually no transaction receipts or records of any kind for these exchanges, and so it is up to the individual taxpayer to track his own capital gains and losses, be that as it may.

I am not a tax expert, am not giving any professional advice, and cannot even spell CPA or IRS.

It is also up to the individual to provide his own security.  To that end, see my article:

As I mentioned, the subject of this article is not why I think it is good to buy gold, but how I think it is best to buy gold.  Let us examine a few of the reasons why it is best to buy gold coins, specifically.

Gold coins are very…

  • Anonymous – No serial numbers, no block chain, no way to track who owned or owns it.  Very difficult to tax.
  • Fungible – Unlike gems, generally speaking, one Krugerrand or Maple Leaf is as good as any other.  Stay away from grades, collectibles, mint, or proof.
  • Portable – It fits in your pocket.  Unlike real estate, I can carry a million dollars of gold coins, about 50 pounds, in a good knapsack, and a whole lot more on a little sailboat.
  • Durable – They don’t rust away, burn, or even tarnish much.  Gold coins left on the bottom of the ocean for centuries are worth more, not less.
  • Recognizable – I can and have traded Krugerrands or Maple Leafs in many places in the USA, Europe, Asia, The Caribbean, and Latin America.  One really doesn’t need any special equipment to determine authenticity, once you get the feel of them.
  • Stashable – Neither blood, nor sweat, nor tears, nor dirt, nor heat, nor cold, nor rain, nor sea, nor worm, nor moth, nor flame will affect or diminish the value of gold coins.
  • Meltable – If push comes to shove, gold coins can be melted and cast into larger or smaller ingots, jewelry, furnishings, and hardware.
  • Affordable –   Expenses are low, as you don’t need a Bloomberg terminal, phone, or even a desk.  You don’t have to pay storage fees on a hole in the ground.  If one ounce is too expensive, you can get 1/2 ounce, 1/4 ounce, 1/10 ounce. 1/20 ounce, and 1 gram coins, although the premium will be higher.  Or consider silver coins, I like Mexican 1 oz Silver Libertads (Random Year), but understand that they have very low portability.

I transact in cash, so as to not create a record, and buy an amount greater than $1,000, because then gold coins are exempt from sales tax where I live, and less than $5,000, because I believe that the coin dealer is not required to get an identification or report these transactions to the IRS.  The limit used to be $10,000, I believe, until Our Beloved Big Brother passed The Patriot Act, for our own security and protection from scary terrorists, of course.

I like to invest the same amount of money in gold each month to benefit from the age-old and proven mathematical concept of Dollar Cost Averaging.  When gold is cheap, then I end up buying more ounces, when it is expensive, then I buy fewer ounces with the same amount of money.  On average, over time, my purchase price per ounce is less, so that my return is greater…much greater.

So what do I do if my monthly investment is say, $3,000, the spot Bid/Ask is $1172.40 / $1173.40, and I agree to buy 2 one-oz Kruggerands at $1173 + $35 premium, totaling $1208 x 2 coins = $2416.  I still have almost $600 to spend.  What a great problem to have!  The oldest lil_horseman would call this a White Person Problem.  Depending on what the seller has in inventory, I can buy 1/2, 1/4, or 1/10 ounce Krugerrands, or if I don’t want to pay the higher premium, maybe some Mexican 1 oz Silver Libertads.  What is not to like about a pure silver coin with beautiful and topless Liberty on it? The important thing is to sell those depreciating US Dollars in exchange for something that holds its value.

Building wealth should be fun!  I don’t need to waste my life listening to horse-s*** narratives about the latest stock offering, reading bond offerings, checking the NAV of mutual funds, or worrying that my account is going to be Corzined.  I don’t have to help pay the mortgage of some portfolio manager.    I can sleep at night, because the value of gold coins has NEVER gone to zero.  I can practice disintermediation

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