Book Review: How to Profit in Gold


In this time of turmoil and strife, there’s a nature tendency for investors (among all other people, really) to get nervous.  When that’s the case, investors start to look for ‘safe’ investments, investments that are unlikely to lose value (or perhaps even to become more valuable) when times get tough.  One investment in particular that gets attention during these times is gold.

How to Profit in Gold seeks to provide individual investors with a better understanding of gold as an investment.  (It’s also a prize that I won from a giveaway back in January; see, Kevin, I didn’t forget about your generous giveaway!)  So, does it give you everything you need to successfully invest in gold, or does it leave you wanting?  As always, let’s read on to find out!

Summary

How to Profit in Gold opens with a discussion of gold’s shift over the past decade or so, from being ‘friendless’ in 1999, when major banks were selling it to diversify their holdings, to hitting record highs in 2009, in the wake of the financial crisis in 2008.  Using that as an introduction to the ways that gold prices can fluctuate, the second chapter then covers some of the factors that can cause such fluctuations, from variations in the value of the dollar compared to other world currencies (as gold prices are set in dollars) to the physical demand for gold for jewelry or other uses.

The third chapter looks at the central banks around the world who hold gold, and provides an explanation for why they do so as well as some statistics about how much is being held.  The fourth chapter provides a basic primer of some of the issues that confront the non-central bank organizations of the world as they buy, sell, and borrow gold reserves.

Chapter five covers ‘bullion banks’, the banks that are involved in precious metals markets.  It provides a list of several of the most important players, and explains how such transactions are made and settled (that is, ‘cleared’).  Chapter six then looks at some of the major gold markets from around the world.  It provides information from the standards that are used by each exchange to the currency used for the price quotations.

The seventh chapter covers Exchange Traded Funds (ETFs) that can be used to invest in gold, with particular attention paid to SPDR Gold Shares (Symbol: GLD), which each represent roughly one tenth of a troy ounce of gold.  Chapter eight cover physical gold, and discusses the cultural difference in how gold is viewed in America compared to many Eastern countries.

Chapter nine covers some of the myths about gold, from its ability to serve as a portable source of wealth (not really so much in Western countries) to some of the conspiracy theories about gold price manipulation by countries, such as both the United States and Germany having completely lost their gold stores in a complex plot to bolster the US dollar (yes, that’s actually what some people believe, apparently).  The tenth and final chapter lists several different methods for starting to invest in gold, from stocks (which the author admits to knowing nothing about) to physical gold.

The remainder of the book is made up of several appendices.  Appendix A provides a few ‘rules’ for things to consider when thinking about gold investment.  Appendix B provides some frequently asked questions, from how much gold has been mined to the meaning of numerous gold-associated abbreviations.  Appendix C is an glossary of gold investment linked terms (and there are a lot of them; almost thirty pages worth).  Appendix D provides some of the physical properties of gold (including many, like its crystal structure, that are probably only useful to those of us who are chemists).  Finally, Appendix E provides a handy chart for determining the amount of gold in various weights of gold at different purities.

Pros

Very well written, quite interesting, and much less dry than you might think a book about investing in gold would be.  A number of different aspects are covered, and the book is quite informative.

Cons

A lot of information is covered, mostly quite rapidly and possibly not thoroughly enough for complete novices to gold investing (myself included).  Many of the terms remain confusing, even with in chapter explanations and the glossary at the end.  For a book that seeks to tell you ‘How to Profit in Gold’, there’s not much information on how individual investors can actually get into the gold market.

Overall

How to Profit in Gold is a pretty interesting read, and if you want more information on how the gold market functions, it definitely serves that purpose.  That said, if you want to invest in gold yourself, there’s not much here to help you.  You’ll have to look elsewhere if you want a hand-holding guide to getting started in gold-investing.

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