Description
Book SynopsisIn recent years, metals have been among the safest and most lucrative investments around, but they are not entirely risk free. Before you begin investing or trading in metals, you need authoritative information and proven investment strategies. You need Precious Metal Investing For Dummies.
Table of ContentsIntroduction 1
About This Book 1
Conventions Used in This Book 2
What You’re Not to Read 2
Foolish Assumptions 2
How This Book is Organized 3
Part I: Breaking Down Precious Metals 3
Part II: Mining the Landscape of Metals 3
Part III: Investing Vehicles 4
Part IV: Investment Strategies 5
Part V: The Part of Tens 5
Icons Used in This Book 6
Where to Go from Here 6
Part I: Breaking Down Precious Metals 7
Chapter 1: A Compelling History 9
Mining the History of Precious Metals 10
Understanding why less is more 10
Giving the gold standard a gold medal 10
Going for the gold 11
Seeing the silver lining 12
Mentioning other metals 12
Taking a Look at Track Records 12
Gold 13
Silver 14
Other metals 15
Grappling with Bulls and Bears 16
The precious metals 1980–1999 bear market 16
The precious metals bull market of 2000– 17
Chapter 2: Diversifying with Metals 19
Working with Rising Inflation 19
Understanding the Versatility of Metals 20
Reaching Your Financial Goals 20
Seeking appreciation 21
Looking for the home run 21
Preserving your capital 22
Using precious metals to generate income 22
Discovering Your Investing Style 23
Distinguishing between styles 23
Understanding yourself first 24
The saver 25
The investor 25
The trader 26
The speculator 27
Knowing Whether to Get Physical or Own the Paper 28
For the conservative investor 28
For the growth investor 29
For the speculator 30
For the trader 30
Getting the Amount Just Right 31
For the conservative investor 31
For the growth investor 31
For the speculator 32
For the trader 32
Chapter 3: The Beauty and Benefits of Metals 35
Protecting Your Portfolio Against Inflation 35
Precious metals against the dollar 36
Diversification against all currencies 38
Benefits for Investors 39
Safe haven 39
Privacy 40
Inflation hedge 40
Dollar hedge 40
Confiscation protection 41
Liquidity 41
Portfolio diversification 42
Benefits for Traders and Speculators 43
Supply and demand 43
Huge gains potential 44
Trading versus speculating 44
The benefits of speculating 45
Chapter 4: Recognizing the Risks 47
What Risk Means to You 48
Physical risk 48
Market risk 48
Exchange risk 49
Political risks 50
The risk of fraud 51
Minimizing Your Risk 52
Gaining knowledge 52
Being disciplined 53
Being patient 53
Diversification 54
Making risk your friend 55
Risk-Management Tools 56
Weighing Risk Against Return 57
Part II: Mining the Landscape of Metals 59
Chapter 5: Gold: All That Glitters 61
The Ancient Metal of Kings 62
Gold for the Record 63
Explaining all the bull 63
Telling the tale of the tape: Gold versus other investments 64
Assuring gold’s success 66
Securing a Safe Haven from the Coming Storm 67
Reading and understanding inflation 67
Watching the dollar 70
Buying and owning gold 70
The Gold Market 71
Gold market data and information 72
Industrial supply and demand 73
Investment demand 74
Central banks 74
Gold Bugs 75
Gold Investing Resources 76
Chapter 6: Discovering the Secret of Silver 79
Understanding the Hybrid Potentials of Silver 79
Monetary uses for silver 80
Industrial uses for silver 80
Researching Silver 82
Sources of data 82
Sources of informed opinion 83
Owning Silver 83
Physical silver 83
Paper silver 84
Silver’s Compelling Future 85
Market fundamentals 85
The demand side 85
The supply side 85
The world needs more silver 86
The Legends of Silver 86
Jerome Smith 86
Ted Butler and the silver shortage 87
David Morgan 88
Chapter 7: Platinum and Palladium 91
The Platinum Group Metals 91
Platinum 92
Palladium 92
Rhodium 92
Osmium 93
Iridium 93
Ruthenium 93
The investor’s best choices in the group 94
Platinum Group Investment Vehicles 95
Bullion 96
Futures 96
Stock Investments 97
Mutual Funds and ETFs 98
Research Resources 99
Chapter 8: Uranium 101
Controversial Past, Bright Future 102
The uranium market 102
Uranium supply 103
Uranium demand 103
Uranium’s market performance 104
That ’70s metal 105
Peak oil and uranium 105
Uranium Investing Vehicles 106
Futures 106
Mining stocks 106
Uranium exchange-traded funds 107
Options 108
Resources 109
Chapter 9: Base Metals 111
Understanding How Base Metals Fit into Your Portfolio 111
The building blocks of society 112
The up and down for base metals 112
Base metals and inflation 112
Base metals versus precious metals 113
Past performance 114
Covering All the Bases 114
Copper 114
Aluminum 115
Nickel 116
Zinc 117
Lead 117
Tin 118
Other metals 119
Base Metal Investing Vehicles 119
Futures 120
Options 120
Mining stocks 121
Mutual funds 123
Exchange-traded funds (ETFs) 123
Base Metal Resources 125
Part III: Investing Vehicles 127
Chapter 10: Buying Metals Direct 129
Weighty Matters 129
The Case for Physical Ownership 130
What could go wrong with paper assets 131
Bullion versus numismatics 132
Other metals 133
The risks of owning physical 133
Forms of Gold Physical Bullion 134
American eagle gold bullion coins 134
The American Buffalo Gold Bullion Coin 135
The Krugerrand 135
The Canadian Maple Leaf 135
Other gold bullion 136
Silver Physical Bullion 136
American Eagle Silver Bullion Coins 136
One-ounce rounds 136
Junk silver bags 137
The $1,000 bag of silver dollars 137
The 40% silver bag 138
Silver bars and ingots 138
Platinum bullion 139
Palladium bullion 139
Bullion’s costs and fees 140
So, what kind of silver is best? 140
Gold and silver commemorative coins 140
Bullion Dealers and Resources 141
Putting Precious Metals in Your IRA 142
Chapter 11: Purchasing Numismatic Coins 145
The Basics of Numismatics Coins 146
Profitable coin investing 146
Making the grade 147
Information sources 148
Collectible Coins 149
Gold coins 149
Silver coins 149
Other coins 150
Still other coins: Commemoratives 151
Coin Services and Organizations 152
Information sharing 152
Grading services 152
Selling Your Coins 153
Back to dealers 153
To other investors 154
eBay and other auctions 154
Pricing information 155
One final note 156
Chapter 12: Mining Stocks 157
Essential Stock Investing 101 157
Stock investing for all 158
Mining stocks 101 162
Mining Stocks — Digging Deep 164
Mix and match 164
The majors 165
Development companies 165
Eureka! Exploratory companies 166
Ancillary companies 166
Getting Down to the Nitty-Gritty 166
The upside to mining stocks 167
The risks of mining stocks 167
Mining properties 168
Hedging practices 168
Resources 169
Boosting Your Returns 170
Generating income 170
Leveraging with warrants 171
Indexes 173
Chapter 13: Investing in Mutual Funds and ETFs 175
Mutual Funds 175
Advantages of mutual funds 176
The downside of mutual funds 178
Keys to success with mutual funds 181
The Prospectus: Netting it out 182
Mutual Fund Resources 183
Exchange-Traded Funds 183
The pros and cons of ETFs 184
The world of precious metals ETFs 184
Other ETFs for the metals-minded 185
ETF Resources 186
The exchanges 186
The issuers 187
Newsletters 188
Web sites 188
Chapter 14: Exploring Futures 189
Back to the Futures 189
How the futures market works 191
What can be traded as a futures contract 192
The Players in the World of Futures 193
The exchanges 193
Speculators 194
Hedgers 194
The regulators 195
The Fundamentals of Futures Contracts 196
Features of the futures contract 196
Metals Futures Contracts 198
Precious metals contracts 198
Base metals contracts 200
Mini-futures contracts 200
Pass the margin 201
Leverage: The double-edged sword 202
Basic Futures Trading Strategies 203
Basic strategy #1: Going long 203
Basic strategy #2: Going short 203
Basic strategy #3: Spreads 204
Futures versus Options on Futures 208
Futures Resources 209
Chapter 15: Options 211
How Options Work 211
The call option 212
The put option 216
Resources for beginners 216
Working Out Your Options 216
Understanding the orders 217
Something for Everyone 217
For those seeking gains 217
Income strategy #1: Writing covered calls 218
Income strategy #2: Writing puts 219
Minimizing Risks with Options 219
Some Profitable Combinations 220
The zero-cost collar 220
The straddle 221
Options in the World of Precious Metals 222
Options on mining stocks 222
An option with no expiration? 223
Options on ETFs and indexes 223
Options on futures 224
Golden Rules for Options Success 225
Options Resources 227
Part IV: Investment Strategies 229
Chapter 16: Choosing a Trading Approach 231
Being a Boy Scout — Being Prepared 231
Be a voracious reader 232
Have your plan 232
Decide your market 233
Practice with simulated trading 234
Picking Out Your Vehicle 234
Stocks 234
Futures 234
Options 235
Selecting Your Trading Strategy 235
Choosing your market outlook 235
Stock trading coupled with options 235
Futures trading coupled with options 237
Resources for Trading 238
Chapter 17: Finding and Using a Broker 239
Getting Down Some General Points 239
Futures Brokers and Accounts 240
Full-service futures broker 240
Discount futures broker 241
The futures commission merchant (FCM) 241
Introducing broker (IB) 241
Selecting a Broker 242
Commodities Futures Trading Commission (CFTC) 242
National Futures Association (NFA) 242
Futures Industry Association (FIA) 242
The exchanges 242
Keeping your eyes peeled for ICE 243
Dealing with Futures 243
Interviewing a futures broker 243
Margin in a futures account 244
Avoiding problems in your account 245
Opening a futures account 245
Futures account commissions and fees 246
Futures orders 247
Managed futures accounts 250
Some considerations about CTAs 251
Stock Brokerage Accounts 252
Stock brokers 252
Account types 252
Opening a stock brokerage account 253
Types of Orders 254
Stock brokerage services 254
Margin in a stock brokerage account 256
Chapter 18: Using Technical Analysis 259
Technical versus Fundamental Analysis 260
The guts of technical analysis 260
How about both? 261
The tools of the trade 262
Tracking the Trend 263
Trend lengths 264
Channels 265
Resistance and support 266
Charts 266
Line charts 266
Bar charts 267
Candlestick charts 267
Point and figure charts 267
Chart Patterns 268
Head and shoulders 268
Reverse head and shoulders 268
Cup and handle 269
Double tops and bottoms 269
Triangles 269
Flags and pennants 270
Wedges 270
Gaps 270
Moving Averages 270
Simple moving averages (SMA) 271
Other averages 272
Indicators and Oscillators 272
Oscillators 272
Relative Strength Index (RSI) 273
Moving Average Convergence/Divergence (MACD) 273
Crossovers and divergence 273
Bollinger bands 274
Short Term versus Long Term 274
Resources for Technical Analysis 275
Chapter 19: Following Politics and Markets 277
Precious Metals and Skullduggery 277
The controversy over market manipulation 277
The gold market manipulation controversy 279
The Plunge Protection Team (PPT) 280
The profit in market meddling 281
Precious Metals and Geo-Politics 283
Resources on Politics and Markets 284
Chapter 20: Dealing with Taxes 285
Taxable Activity 285
The regular account 286
Capital Gains and Losses 288
Tax-Deductible Activity 289
Special Tax Considerations 289
Gold and silver as collectibles 290
Tax rules for traders 290
Tax Resources to Keep You Up-to-Date 291
The IRS of course! 291
Helpful tax Web sites 291
An ounce of prevention 292
Part V: The Part of Tens 293
Chapter 21: Ten (Nearly) Reminders about Mining Stocks 295
The Company’s Management 295
Financing 296
Earnings and Cash Flow 297
Balance Sheet Strengths 297
Regulatory Environment 298
Hedging and Forward Sales 298
Valuable Projects or Properties 299
Extraction on Cost Per Ounce 299
Political Considerations 300
Chapter 22: Ten Rules for Metals Investors 301
Diversifying Your Vehicles 301
Having Some Bullion Coins 302
Limiting Your Exposure 303
Watching the Markets That Affect Precious Metals 303
Using Options to Boost Performance 304
Adding Alternatives 304
Adjusting along the Way 304
Understanding the Difference between a Correction and a Bear Market 305
Watching Political Trends 306
Monitoring Inflation 306
Chapter 23: Ten Rules for Metals Traders 307
Faking Out the Markets First 307
Having a Plan 308
Avoiding Committing All Your Cash at Once 308
Taking Profits Doesn’t Hurt 309
Using Hedging Techniques 309
Knowing Which Events Move Markets 310
Checking the Trading History 310
Using Stop-Loss Strategies 310
Embracing the Experience of Others 311
Minimizing Transaction Costs 311
Chapter 24: Ten Ways to Limit Risk 313
Staggering Your Entry 313
Using Trailing Stops 314
Diversifying Positions 315
Diversifying in Markets 315
Diversify among Different Vehicles 316
Read the Best Sources 317
Using Protective Puts 318
Avoiding Unstable Political Markets 318
Looking at Past Trading Patterns 319
Taking Some Chips off the Table 319
Index 321
