How to Trade in Gold, Silver and Platinum

silver Liberty coinGold continues to be the hot topic and it has settled down for the time being. Inflation is starting to heat up though, no matter what the government tells us. What about falling prices, with inverse ETFs, you can profit when precious metals start to decline in price.


You can invest in gold bars, gold bullion and collectable gold coins. You can take possession of it yourself or have it stored for you. Or you can invest in the direction of gold through exchange traded funds (ETF). You can also invest in the gold mining companies that do the actual finding and mining of the gold.

Buying gold and taking the actual possession of the commodity means you will have to store it yourself, which adds another expense, unless you keep it in your house. When you buy gold bullion, you also have to pay a premium or commission over the spot or actual current price of gold, this adds to the price you are paying. Commission can be anywhere from 5% and higher. It is best to look for current gold bullion coins that have the least commission or are close to the spot price. One way to buy gold, silver or platinum and have it stored for you is the Perth Mint Certification.

The most popular gold ETF is the SPDR gold shares with the symbol of GLD. Another similar and popular gold ETF is the iShares COMEX gold trust with a symbol of IAU. You do not take possession of the gold; you are basically investing in the direction of gold. There are other ETFs and exchange traded notes (ETN) like the Power Shares DB (DGL) and the Power Shares double long (DGP). The double long tries to replicate twice the daily performance of gold. That means if gold goes up, this ETN goes up twice as much, which also means you can lose your money twice as fast if gold goes down.

With gold mining stocks you have the price of gold and also the value of land and the company doing business that affects its stock price. Some large gold mining companies are Newmont Mining (NEM), Barrick Gold (ABX), IAMGOLD (IAM), Yamana (AUY), Gold Fields (GFI), Kinross (KGC) and Freeport McMoran (FCX). Freeport McMoran is mainly traded as a copper stock. With mining companies, they aren’t always just mining gold. You can buy shares in all of the large gold mining companies with the Market Vectors Gold Miners ETF with the symbol of GDX.

There are hundreds of companies that are called junior miners; small mining companies that can be bought out by a bigger company or they can hit a huge gold strike. These are more speculative than investment grade stocks. There is a new ETF that has bundled many of the junior miners into an ETF. This might be a better way to speculate on a large number of junior gold mining companies. It is called the Market Vectors Junior Gold Miners (GDXJ).


How to Profit if Gold Prices Fall

If you feel that gold prices have peaked and are about to drop, there are several ways to make money in a falling market. You can buy puts on individual gold mining companies or GLD. Just like there are the gold ETFs, there are also gold shorting ETFs. This means that when gold prices drop, these ETFs will rise in price. The Power Shares Gold Short ETF (DGZ) and UltraShort Gold ProShares (GLL) are two ETFs that short gold. More risky are the double short gold exchange traded funds. These seek twice the gains when gold drops, and you can lose money twice as fast with this if gold goes up. The double short ETF symbol is DZZ.


Many people feel that silver is a better investment. Silver is used more in industry than gold is, and any economic rebound could mean more silver is needed.

You can buy and take possession of silver just like gold in silver bars and coins. Some of the silver coins you can buy would be any pre-1964 US dimes, quarters and half-dollars. Also the silver Euro Philharmonic, silver Maple Leaf and the silver American Eagle. You can also buy 10 ounce silver bars and other sizes.

There are silver mining companies you can buy stock in. One of the best silver mining companies at this time is Silver Wheaton (SLW). Other silver mining companies are Coeur D’Alene (CDE), Hecla (HL), Pan American Silver (PAAS) and Silver Standard Resources (SSRI).

Just like gold, you can buy an ETF that tracks the price of silver with the iShare Silver Trust (SLV) or the Power Shares DB Silver Fund (DBS).

Collectable or Bullion Coins

When it comes to gold and silver, you can buy just the bullion coins, which have no real numismatic value or you can buy old gold and silver coins that do have the value of the precious metal and also the numismatic value of the coin. In 2009, coin and other collectable prices have either dropped or been flat. Usually in bad economic times, collectables like coins don’t do as good as they do when many people have a lot of money to spend. You should also look into the tax differences between collectable coins and bullion coins.

Platinum and Palladium

Platinum is the precious of precious metals with there being far less platinum than gold.
You can buy platinum and palladium coins like the platinum American Eagle, platinum Canadian Maple Leaf and the palladium Maple Leaf.

There are platinum and palladium mining companies you can invest in like Anglo American (AAUKY), North American Palladium (PAL) and Stillwater Mining Company (SWC), which mines both platinum and palladium in Montana.

You can also buy an ETF that tracks the price of platinum with the iPath DJ AIG platinum index (PGM) and numerous mutual funds for all of the precious and industrial metals.

If you think the underlying precious metal is going to drop in price, you can buy puts on the Chicago Board of Options Exchange for any of these stocks or ETFs and profit from the dropping price.

Copyright © 2009 Sam Montana

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