http://www.igindex.co.uk/content/as_how_our_bets_work.html


Substitute "FTSE 100 index" for "Dollar-denominated gold price" and this is quite a good explanation of how it works.

http://www.igindex.co.uk/content/as_risk_management.html


The above explains how to limit your downside risk.

hope that helps,



zz.

I am thinking of a June-05 buy spreadbet on gold, also.

If you want to limit your risk to your stake, you need to set a stop loss and then calculate your margin and how much you would like to bet per point (each "point" in this case is a $1 change in the price of gold).

eg, If I want to limit my risk to £1k, and want to buy gold and want to use x5 leveraging, I would put down the following bet:

- "Buy" gold $430 on a June 05 bet.
- Set my stop loss @ 86 points (stop loss limit $344)
- Bet £12 per "point"

£12 x 86 = £1032, which gives you your initial stake. Now if gold climbs 10% and the sell price goes up to $473, that is 43 points it has gained, so your bet will be worth £1032 + (£12pp x 43) = £1548. Gold has gone up 10%, but you have used x5 leveraging to turn £1032 into £1548.

If you want higher gearing, bet more £ per point and decrease your stop loss limit. Higher risk because it takes a smaller move the opposite way to wipe you out, but obviously also higher reward because of increased gearing.

Thanks ZZG, VAN I will try and digest this tonight aided by a bottle of Becks or two!

[quote=urban_hymn,Jan 24 2005, 11:19 AM]
<!--QuoteBegin-DrBubb+Jan 23 2005, 07:16 PM

Think of gold as a currency. You dont ask about how to buy Sterling in Euros or Sterling in dollars, you just buy Sterling.

[right--><div class='quotetop'>QUOTE(DrBubb @ Jan 23 2005, 07:16 PM

Think of gold as a currency. You dont ask about how to buy Sterling in Euros or Sterling in dollars, you just buy Sterling.

[right)</div><div class='quotemain'><!--QuoteEBegin-->
[/quote]

Dr Bubb's still going over my head! If I wanted to bet 2 or 3k on gold or silver going up and wanted to limit my risk to my stake I still don't know what to do!

I need a step by step explanation from the point after opening a spread betting account!

[/quote]




Looks like every man and his dog are wary of the dollar. - 300% debt compared with our 25%. Correct me if I have got these figure wrong. It seems more than a tadge unreal.

Just wondering where the smart money is buying gold at the moment. Will try and look at Bubb's and Yonmon's previous postings. Bubb buys shares, Yonmon, I think opted for the metal. Not sure if I grasped the whole issue. Did not understand how one could buy gold shares in dollars and when the dolar falls I gain.

Incidentally, I believe that silver is subject to VAT.

PS. Just seen the links by ZZ and Van's input. Will have to try and focus on these.

[quote=RRP,Jan 24 2005, 12:08 AM]
Dr Bubb's still going over my head! If I wanted to bet 2 or 3k on gold or silver going up and wanted to limit my risk to my stake I still don't know what to do!

I need a step by step explanation from the point after opening a spread betting account!

[/quote]
Looks like every man and his dog are wary of the dollar. - 300% debt compared with our 25%. Correct me if I have got these figure wrong. It seems more than a tadge unreal.

Just wondering where the smart money is buying gold at the moment. Will try and look at Bubb's and Yonmon's previous postings. Bubb buys shares, Yonmon, I think opted for the metal. Not sure if I grasped the whole issue. Did not understand how one could buy gold shares in dollars and when the dolar falls I gain.

Incidentally, I believe that silver is subject to VAT.

PS. Just seen the links by ZZ and Van's input. Will have to try and focus on these.

[/quote]


I only "buy the metal" via sbets, which pay out on increase per $/oz, but are themselves in £s, hence discount the currency effect which might offset gains if you bought physical in dollars without hedging (no use seeing a 20% gain in price of gold, if you end up with a fistful of dollars worth 20% less per £!!)

I'm bullish overall, though perhaps less so than the Goldbugs, so just buying on dips and selling fairly short-term therafter. E.g last week bought after dip to $421.50 or so and sold within 24 hours at $426.50 or so. Am waiting for clearer trend before taking a bigger/longer term position.

If I had the money/accumulated sector knowledge I would probably buy a range of gold mining/exploring shares like Dr B, but I don't. Might have a nibble at a gold-linked Investment Trust or similar though, e.g. MLW or GOL, if uptrend seems confirmed.

Just a reminder to be careful with who you deal with.

http://news.scotsman.com/latest.cfm?id=3507281

From that link:





Now what other scheme has this characteristic? Could it be the UK (and all around the world) property markets?


Maybe the DTI should wind up the UK property market as the biggest scam mankind ever devised.

Have decided to become self-taught expert in spread betting - will have office in the Gherkin and dead fit secretary by this time next year! Will bamboozle everyone with spread betting jargon (like Dr Bubb)

Yonmon,

I am looking at Merrill Lynch Gold and General (UT) as I don't understand all the stuff being talked about above. Haven't made a decision yet as I don't really need another specialist fund.

So what are you guys who are buying gold doing?

1. Buying gold by investing in gold companies on the basis that you think gold will rise.

2. Buying gold by having your hands on solid little bars of gold that you hide under the bed?

I assume 1 is OK if you merely think gold is going to rise but if you are thinking of a huge global crash/end of the financial system/etc then surely 2 is the option to go for?

no.2 for me

I can't get my little pea sized brain round spread bets, so I'm just buying an Oz of gold per month and silver when possible.

Been reading the gold trail archives over at usagold.com over the last 24hours. Very interesting read about how we're transitioning from the USD as the world's reserve currency towards a gold backed euro. If the middle east switches from pricing oil in $ to euro, then the games up for the $.

Obviously they're all mini Goldfingers on the forum, but it's worth a read if you've got a few hours spare

I have big money invested in the commodities sector, but I have so far not bought physical gold, or taken any sizeable spread bets on Gold. Why? Because I believe that the metal is NOT the smart way to play it IMHO- at least at this present time, while gold shares are still relatively cheap.

Of course, for those that do not understand why, and you want to buy physical gold, there are various ways to do it:

1/ You can buy gold coins, and pay a fat premium for their numismatic value

2/ You can buy physical gold (currently, there is no VAT to pay), but you will pay a small premium of some sort, and you have to part with the cash, $425 per ounce or whatever. And if gold rises in dollar terms, but gold does not rise in Sterling terms (because the dollar is weak, while the dollar gold price rises), you may not be ahead at all, when you convert the value of your gold back into Sterling. (Example: you buy 100oz. of Gold at $430, paying a $5 premium to the $425 spot price, paying a total of $43,000. If gold rises to $450, you have Gold worth $45,000. You have a $2,000 profit. But wait a minute. If Sterling has gone from $1.80 to $1.95, you need to consider what has happened to the Sterling value of your investment. $43,000 at $1.80 fx rate is £23,889. If Gold rises to $450, and the dollar weakens/ sterling rises, so the fx rate is $1.95, then the $45,000 will be worth: $45,000/1.95= £23,076. Guess what, you have LOST MONEY in Sterling terms, because gold's aprreciation has failed to keep pace with the dollar's loss.)

3/ You can spreadbet on the Gold price. This could be better than #2, because you do not have to pay the full value. Instead, you take a Contract For Differences, so if the price rises in US$ terms, and the spreadbet is denominated in Dollars, you will make your profit in that currency irreghardless of what happens to the price of Gold-in-Euros or Gold-in-Sterling. (Example: You buy Gold at $425, and the price rallies to $450, you will make $25 times the size of your bet. So if your bet is 100 ounces, you make $2500.)

... I will go on to talk about gold shares ...

Not sure yet, listening and reading at the moment and looks like I have much to learn. Somebody posted up a site about a gold dealer in Blackpool of all places. They store the glitter there. That I understand, you buy it after you are satisfied that it is a worthwhile risk and it sits in a vault.

Very wary about buying bits of paper from a dealer unless I am sure that they are kosher. Again, must have another look at the suggestions that are coming in. Interested in Van's post.

This is a bit ironic, but we filmed the Deptford Pensioners Xmas Party this year. It was partly funded by some of the Brinks Matt boys (robbers) who were there. Kid ye not, Black Bentley outside.

GOLD SHARES as a Gold Price play- - -

OKAY, assuming you are with me so far, let's move to the interesting part...

Gold shares tend to move up and down with the gold price. Let me demonstrate this with a chart

Gold price (in US$) since early 2000


Notice the important Gold-in-$ lows in:
+ March 2001
+ Dec.2001
+ July 2002
+ March 2003
+ June 2003
+ April 2004
+ "Now" maybe?
Also notice that Gold has been in a Bull Market since both the brown and blue lines turned upwards (and the cross of brown over blue in 2000) was a early warning of the emerging Bull market.

Now here's an index of Gold stocks, the "Gold Bugs Index" (HUI)

Now compare Lows: Gold Low vs. HUI Lows
no. Gold Low-- : HUI Low------- : advance
.1: March 2001 : Nov./mar2000 : 4mos/ 1mo.
.2: Dec.2001.... : Nov.2001...... : 1month
.3: July 2002.... : July 2002...... : days
.4: March 2003 : March 2003.... : days
.5: June 2003.. : June 2003 dip. : same (Mar Low in place)
.6: April 2004.. : Apr./June2004 : Same/ Later
.7: "Now" ???... : .... Now??...... : same-ish

Generally (but not always), the HUI bottoms around the same time as Gold. albeit it often bottoms a few days earlier. 2004 was an exception, when the Gold stocks were relatively weaker than the gold price. One explanation of this is that the market woke up to the fact that the costs of the gold miners are often in currencies other than the dollar. So as the dollar was weak, mining costs were rising nearly as fast as the gold price for many miners. So a higher $ gold price was less helpful than it was previously.

But the main point remains, when Gold rose, so did Gold stocks, although the relationship was less robust in 2004 than in previous years. Also, if you want to buy gold, you should watch Gold shares, since it may give you a warning by a few days. But when Gold and Gold shares are both oversold, and ready to turn (like now, perhaps) they tend to turn almost together.

WHAT I DO, is watch the Gold price (and also gold shares). I sell into the big rallies, and raise cash, which I then invest in the dips. I watch gold for timing clues, but I don't invest in the metal, I buy the shares.

I will give some more reasons later...
(but please tell me if this explanation is helpful)

www.goldline.co.uk have 1oz krugerrands at £241.50 against current spot price of £227, which is what, a 6% premium.

Not used them myself, but I haven't seen anywhere cheaper.

I started off picking up sovereigns on ebay for 58-59 quid each in october. Now its rare to see them go for less than 65, so there's definitely either more demand or less people selling.

Understood, shares did not dip below actual prices. I can see the trend here.

Seems that crime does pay after all.

Dr Bubb.

Who deals/sells in these shares. Any pointers for the novices ? I can understand your reluctance here but would like to know who the main dealers are.

Are these what DrB is talking about? I think not, but thought I would post it up anyway:

http://www.goldbullion.com/uk/shares/gb_shares.php

http://mwprices.ft.com/custom/ft-com/inter...7E0&sid=1706463

These GBS shares are freely tradeable through any execution-only stockbroker.

http://www.housepricecrash.co.uk/forum/ind...919&#entry35919

At the risk of complicating things even further, you can also trade covered warrants on gold and silver.

For instance, SG's does various gold warrants as listed at:
http://uk.warrants.com/services/quotes/pro...LD&ullabel=GOLD

If you are tempted to trade in warrants then make sure you fully understand the geared nature of them and associated risks.

Thanks, Bubb, Van, ZZ, Schad, Yon and all.

I think something might be up with the server, some of the replies wre cut short. All is coming though now.

Will surface later. Anybody else on a learning curve? Voice your queries, by asking we can all learn.

HAVE ADDED EXAMPLES, and this may clarify things...

I have big money invested in the commodities sector, but I have so far not bought physical gold, or taken any sizeable spread bets on Gold. Why? Because I believe that the metal is NOT the smart way to play it IMHO- at least at this present time, while gold shares are still relatively cheap.

Of course, for those that do not understand why, and you want to buy physical gold, there are various ways to do it:

1/ You can buy gold coins, and pay a fat premium for their numismatic value

2/ You can buy physical gold (currently, there is no VAT to pay), but you will pay a small premium of some sort, and you have to part with the cash, $425 per ounce or whatever. And if gold rises in dollar terms, but gold does not rise in Sterling terms (because the dollar is weak, while the dollar gold price rises), you may not be ahead at all, when you convert the value of your gold back into Sterling. (Example: you buy 100oz. of Gold at $430, paying a $5 premium to the $425 spot price, paying a total of $43,000. If gold rises to $450, you have Gold worth $45,000. You have a $2,000 profit. But wait a minute. If Sterling has gone from $1.80 to $1.95, you need to consider what has happened to the Sterling value of your investment. $43,000 at $1.80 fx rate is £23,889. If Gold rises to $450, and the dollar weakens/ sterling rises, so the fx rate is $1.95, then the $45,000 will be worth: $45,000/1.95= £23,076. Guess what, you have LOST MONEY in Sterling terms, because gold's aprreciation has failed to keep pace with the dollar's loss.)

3/ You can spreadbet on the Gold price. This could be better than #2, because you do not have to pay the full value. Instead, you take a Contract For Differences, so if the price rises in US$ terms, and the spreadbet is denominated in Dollars, you will make your profit in that currency irreghardless of what happens to the price of Gold-in-Euros or Gold-in-Sterling. (Example: You buy Gold at $425, and the price rallies to $450, you will make $25 times the size of your bet. So if your bet is 100 ounces, you make $2500.)

... I will go on to talk about gold shares ...

A very CLEAR explanation of the pros and cons of Gold,

comes from Paul Van eaden:
http://www.howestreet.com/fbn/player.php?v...4a5fd73a1b428c4

More Interviews: concerning Gold:
http://www.howestreet.com/fbn/

(I have had a few emails similar to this one- see answer below):

QUOTE
You have probably had quite a lot of messages like this, but I have £??k to invest and I am considering putting it in gold in some way. I watched that Paul Van Eeden link you posted, which was very interesting. Basically, my attitude to risk with this money is that I could probably stomach losing 25% of it, as long as the potential rewards are great! (which it sounds like they are).

Any advice? Many thanks in advance if you can help.
UNQUOTE

ANSWER:
I hesitate to respond. Here's why?
Suppose I make a suggestion or two, and then later my view changes, and I decide to sell, and take a profit, or sell, and replace it with something else. How do i get in touch with the one that I gave the advice to? Also, I don't know what this potential investor's overall financial picture looks like. I would hate to think that any losses suffered, might endanger the investor's future lifestyle.

So I do not like making specific suggestions. It is better for each person to make their own decisions, and learn how and when to sell.

WHAT I CAN SAY is this:

1/
I believe that gold prices are in/ or near an excellent buying window. Same goes for gold shares, and personally, I prefer to buy the gold shares

2/
If you are new to this game, it is probably better to buy a gold fund. The Merrill Lynch Gold Fund is quoted in London and has a good track record, so that is worth considering. I like several that trade in the US, like Vanguard and US Gold. Another stock that trades in Toronto, is called Endeavour Mining. I like it because it has a diversified exposure to the junior gold sector and trades at a discount to NAV. I recently bought it at C$3.06, and believe it is a good investment below C$3.20, and maybe below C$3.40

3/
I is better to buy more than one fund, to get some diversification, I might buy two. if you buy individual gold stocks, buy at least 3-4 stocks, and more if you have enough capital. These stocks are volatile, and while they generally move together, as a pack, there is always the risk that bad news may hit one, and cause a big drop. So you need some diversification.

4/
Personally, I prefer to buy a basket of Junior miners and explorers, because I think they are undervalued. I prefer those that trade in Canada. Why dont you follow my progress with some of these on another thread.

The Link is: (to be posted)

ALSO: try listening to Tom Obrien's broadcasts: http://www.TFNN.com
and Jim Puplava: http://www.FinancialSense.com

Some great advice from Dr. Bubb here.... thanks, Doc.

I'm very tempted to make a spread bet on gold or gold shares, but I'm totally new to this, anyone else in the same boat?

Also, I had a quick look on Ebay at gold sovereigns... there seems a wide range of 'types' and starting prices.....

Bottletop posted that (s)he was buying regularly from Ebay... perhaps (s)he could share some tips? e.g. what to look out for; storage options; insurance?

Shares may be good, but the metal has a certain romance about it..

If it's a "no brainer" that gold will go up in value at some point in the near future then won't the available spreads reflect this fact. Just like the odds on a favourite horse?