Play with Gold and you May Get Burned, or Robbed

Credit Score DecreaseSo you may remember I like using credit cards to collect free flights and hotel nights.  Many times there is a $3,000 minimum spend required to get the bonus points or bonus cash.  Well, we don’t have a ton of expenses that can be paid by credit card, especially if you’re living with parents, so sometimes that can take a bit of effort.  Months ago I realized that I was not going to make it to $3,000 so I tried to figure out what I could buy and resell while minimizing the amount I lost, so I bought a bar of silver.  A bar was $1,600, so it put me over the $3,000 amount.  If I sold it as soon as I got it I would have lost $100 which wasn’t too bad for the bonus 50,000 miles which could be a roundtrip to Europe.  Since I got back from China I realized that you could get $1,300 of gold at only $10 above the spot price and then I got greedy.  So as a great guinea pig, let me share my experiences.

What I did

Recently Marriott purchased Starwood and their reward programs got combined.  They opened up transfers between the programs so 1 Starpoint could be turned into 3 Marriott points.  Marriott has some ways to earn turn points into hotel stays AND airline miles.  At the low end, I would need 200K Marriott, but that is only 67K Starpoints, so I thought that would be achievable with gold.  67K points is $67,000 spent or 52 ounces of gold, so at $10 lost a bar, I would spend $520 to get 7 nights in a category 1-5 hotel and 55K United miles, what I would consider a killer deal.  That would be around a $1,500 value.  So I started with 10 bars, then 10 more, then 5 more and thought I would sell them, then buy some more.  Sounds good right…

What went wrong

I started buying gold in late September $1,323, but as I said precious metals are speculative.  Well, it quickly dropped to $1,253.  For 25 bars I expected to lose $250 but a $70 drop brought that to a $2,000 loss.  I sold it and bought some more and fortunately the price slowly rose, but I am still at a huge loss. The election caused a jump in the price of gold, but since I can’t sell gold in person until the morning I was unable to sell it.  Everyone predicted gold to skyrocket if Trump became president, but somehow it has dropped even further and has caused even more losses.

More problems

Buying so much gold meant a big balance on my credit card.  Fortunately, I could sell it and use the money to pay it off so I wouldn’t be charged interest, but the statement posted huge amounts which increased my credit utilization ratio.  This ratio makes up 30% of your credit score which meant a significant increase in my ratio which caused a dramatic drop in my credit score.  As you can see in my chart, my score dropped 58 points!  That is a huge drop.  If I was looking for a loan, this would be very bad news and would cost me thousands in increased interest on a home loan.  Fortunately, that is not in the plan for the near future, but I’ll definitely need to lay off these ideas a year or so before considering a home.

Conclusion

So as you can see, this didn’t turn out well at all.  You win some and you lose some, but you should never give up.  I did lose thousands, but fortunately the points I earned in the process are worth about that amount and I didn’t get robbed!  It certainly would have been cool if gold stayed the same price or awesome if I bought earlier and had a story of make thousands.  However, I would not recommend doing this unless you need to reach a credit card minimum spend.  Since then I have figured out a potentially better way to do this, but I will share that another time.  This is the end of the sad story for now.  Farewell and keep hustling.

This entry was posted in Earn.

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