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Cashing Out CDs & Investing in Gold!

Johns Wu Posted in Investing by Johns Wu
March 1, 2008 12:37 PM - 24 Comments

GOLD As I mentioned a few weeks ago, I have been looking for recession-proof ways to invest my money.

Over the last two weeks, I have been slowly cashing out my CD and savings accounts to invest in gold bullion. As some of you may know, gold is currently $970/ounce. Why this may seem like an insanely high price to buy at, I am fairly confident that gold prices will continue to soar to $1500 and $2000 per ounce.

Top Reasons Why Gold Bullion is a Good Investment

  • Gold increases in value proportionately to crude oil. Historically, 1 ounce of gold should cost 15.4x the price of a barrel of oil. Crude oil is currently trading at $100, so from this valuation perspective, gold should be worth $1500 an ounce. Oil will only continue to get more expensive.
  • Gold trades inversely with the US dollar. As the US dollar weakens, gold prices increase. The Federal Reserve is expected to slash interest rates in March. As far as I can tell, the buying power of the US dollar will only get weaker, driving gold prices up.
  • Where else are you going to put your money? Stocks and mutual funds are getting slaughtered. CD & money market rates are tanking. Real estate is cooling. Cash is getting destroyed by inflation.

Ways to Invest in Gold

  • Buy coins and bars off eBay. For gold bars, stick to popular brands like Credit Suisse and Pamp Suisse. For gold coins, stick to the standard government minted coins like the US American Eagles and South African Krugerrands.
  • Buy the gold ETF. The stock ticker is GLD.
  • Use BullionVault.com to buy bricks of gold online and have them stored professionally in Zurich vaults.

If you are wondering why the US currency is currently so weak, watch this video about the collapse of the US dollar.

Do you have any questions about gold investing? If so, leave a comment and I will answer it in my next article.

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Comments (24)
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  1. Allen said:
    on March 1st at 08:04 pm

    what nations use a gold standard and how much longer will the gold standard last?

  2. John said:
    on March 2nd at 01:34 am

    Um…isn’t the profits on gold bullion taxed at a higher rate than normal capital gains? Like, taxed as collectibles?

  3. Bankaholic.com said:
    on March 2nd at 02:17 am

    Yes, bullion like coins / bars are taxed as hobby collectibles, but ETFs are taxed as capital gains (lower)

  4. Bill said:
    on March 2nd at 03:23 am

    I don’t think any nation is on the “gold standard” nor have they been for many years. Popular bullion coins with a monetary value are the American Eagle, Canadian Maple Leaf, Australian Kangaroo, Austrian Philharmonic, and Chinease Panda. I think you’d be wise to diversify and include some platinum and palladium as well as gold.

  5. Bankaholic.com said:
    on March 2nd at 07:31 pm

    Bill,
    Yes, Platinum will be the focus of the next article. =)

  6. A.G.D said:
    on March 2nd at 07:42 pm

    As someone who bought gold (and silver), since 2002, I sure do agree with you. :o ))
    Few points:
    1. No country is using gold standatd this days, they all use printers to print fiat money backs by ????

    2. I bought many coins and bars on ebay, but watch out for scammers, if you can’t tell a fake, there are many good on-line dealers that will get you a fair deal.

    3. Thanks for a great site.

  7. o.t. said:
    on March 2nd at 10:17 pm

    if you buy and sell on ebay do u have to pay taxes?

  8. Hana Hawaii said:
    on March 3rd at 12:29 am

    In my 401k, I started investing into a Oppenheimer Gold Fund as well.
    Hope this fund grows…
    Yes, at the same time I stopped putting my money into CDs. Last year, I was shopping online CDs a lot. But since the interest is so low and CD requres us effort to remeber its maturity if you have many laddered CDs, I don’t see any point doing that now.

    Thanks to this blog, I am always learning something!

  9. Bankaholic.com said:
    on March 3rd at 12:55 am

    O.T.

    The IRS requires you to report the sale and pay taxes, but it’s very hard to enforce.

  10. Bill Williams said:
    on March 3rd at 01:08 am

    Why don’t we organize all the savers in the country and march on Washington to protest how this government is stealing our savings with their contrived inflation!!!!!!!

  11. Linda Lock said:
    on March 3rd at 04:06 pm

    I am thinking the opposite to possibly take advantage of short selling. $970 is quite high for gold and it may go down to certain much lower price and back up again. If I short sell now, I can buy it back any time it goes down – of course for speculating gain, not for long-term investment. What do you think? Which simbol of gold stock or ETF can I short sell? Pls advise.

  12. Laurie T. said:
    on March 3rd at 09:12 pm

    A friend has $100,000 maturing in a CD and wants to invest in something. Any ideas? He’d be thrilled to make 8-10%.

  13. Bankaholic.com said:
    on March 4th at 04:19 am

    Buy 3kgs of gold and stash it under your mattress!

  14. cyrus said:
    on March 4th at 07:09 am

    where or how do you sell the gold when you dont want it anymore?

  15. Mactek said:
    on March 5th at 03:45 am

    Don’t buy Gold bars off Ebay. That stuff is overpriced. You can find a lot of reputable bullion dealers that will give you closer to the spot price. Do your research.

    Keep your single purchases under $10,000 so it is not reported.

    Don’t bet the farm on gold just yet. Start with 5% of your portfolio. Today was a good buying opportunity because of some selloff. I expect prices to continue creeping upward.

    I’m nervous about ETFs right now. They are quick and easy, but with the doom and gloom of a dollar collapse, ETFs do hold risk. You don’t own any true asset. I like physical gold. If it can break your foot, then you really own it.

    The problem with 3rd party bullion pools and out-of-country storage facilities is the counterparty risk. What can you do if you get screwed? …Not much. Also, do they really have a 1-to-1 relationship with your gold. it would be a leap of faith for me right now. However, I have been looking at GoldMoney.com.

  16. debpun said:
    on March 5th at 11:34 pm

    good article and video, I think I’m going to buy some gold.

  17. Chris Fleming said:
    on March 7th at 05:41 pm

    Gold is very good. I would check into silver as well. May make you more money than gold!

  18. Bankaholic.com said:
    on March 8th at 08:01 pm

    Darn, I got hit really hard on platinum today.

  19. Bankaholic.com said:
    on March 8th at 08:01 pm

    Chris,
    Yes silver is expected to rise to $35+. Silver usually lags gold prices by a few months.

  20. NBB said:
    on March 9th at 09:50 am

    I haven’t invested in anything before… how do I get started on investing on silver stocks/mutual funds or whatnot? Thanks. This is a good site.

  21. Ernesto Icogo said:
    on March 17th at 10:33 am

    Answer to Allen’s Question:

    Most, if not all nations use the gold standard and there is no definite length of time the gold standard stands to be the foreign exchange basis of a country. GOLD is needed to hedge the currency of a nation. Depending upon the gold reserve and the strength of the currency is the nation’s economic well-being.

  22. Bill Grahmn said:
    on July 1st at 11:36 am

    Dude you are nuts you bought for 970 now its at 930.
    Bummer glad I didn’t take your advise.

  23. Ernesto Icogo said:
    on August 7th at 08:53 am

    Comment on subprime difficulty related to stimulus fund:

    Tax should be used to provide solution to subprime mortgage in bailout of distressed company, while, the solution to turnaround possesses no assurance, the wealth of a nation amply depends on its national savings rate and the ability of the nation to protect their depositor’s savings.

    Other source of fund, will simply, look at interest rate, as the basis of capital raising. There should be emphasis on national savings to sustain an economy.

  24. ounce of gold said:
    on December 2nd at 05:22 pm

    Gold has been a prime commodity since time immemorial. Its price today reflects how much this precious metal has been a valuable part of society’s economics, and it will continue to do so for generations upon generations.

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