In times of economic uncertainty and political instability, investing in gold is an attractive option for many investors. While, in majority, investors buy gold bars, sophisticated investors typically invest in certified gold coins. By being established as a medium of monetary exchange in many countries, gold reflects a country’s economic and political climate: when gold prices rise, economic inflation is a threatening possibility.
In fact, investing in gold coins is a good way to safeguard savings for numerous reasons.
Why investing in gold coins
Gold coins, unlike stocks, bonds, and real estate, are tangible assets that can be stored and dispensed. Even if economy collapses and paper money loses its purchasing power, gold coins, being globally accepted as money, can safeguard lifetime savings from declining during recessions. Because of their tangibility, they can be sold easily and liquidated with no delays, which makes them a really good investment that pays immediately.
Historically, gold coins have been a safe investment in a recession economy and the safest investment during a depression. Although precious metals are said to have dual personalities, meaning long-term historical performances and short-term price performance, owning gold coins is like having a life insurance. Particularly, in the 1960s when everybody was desperate to move on and the Baby Boomers were looking for safer investments, gold coins have been the answer.
The gold market is a bull market with extraordinary core fundamentals. The price of gold is determined by the interaction of supply and demand. Supply of gold coins is limited and consequently their demand is growing making them a really profitable investment. Besides, their price cannot be estimated on a long-term horizon because it is extremely volatile. However, the value of gold coins is constantly increasing. The price of the gold coins is higher than the gold spot price, which shows that investing in gold can really give investors some really high returns.
How to invest in gold coins
Investors normally invest in gold bullion coins or in numismatic gold coins.
Gold bullion coins contain a high amount of precious metal and are valued based on the weight of their gold content. Besides, gold bullion coins are standardized and accepted in all central banks of the world. As there is no need to grade them, investing in gold bullion coins is profitable in global capital markets.
Numismatic gold coins are typically rare, of unique design and date, and derive their value from the demand of coin collectors. Unlike gold bullion coins, numismatic gold coins are no standardized and their value depends on their grade. This makes them extremely risky investments during recession because they cannot be distributed easily.
Before investing in gold, investors should consider the proper allocation of their portfolio in gold-related investments. For instance, new investors do not allocate more than 5 percent of their capital in gold, but as they become more sophisticated and become more familiar with gold, they increase their capital allocation to gold investments.
The best investment strategy is to invest in gold coins that are high graded and common dated. High graded gold coins are selling for a small part of what they sold for at their historical record highs. Common dated coins can be bought at a low cost and offer great returns. On the contrary, specific dated coins are expensive and their price can increase dramatically thus diminishing potential returns.
Overall, there are many options available for investors who are interested in investing in gold coins as a way to protect and bolster their assets. The fundamental fact that gold retains its value over time when all other investment vehicles may lose their value has been true for ages and is still true today.
A freelance writer, top MBA graduate with Finance major, passionate about business, finance, history and music; this is pretty much me in a nutshell.
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