Beginners guide on how to invest in gold coins. Investing in gold coins is a good way to safeguard your savings in times of economic instability
Gold coins, like any products of precious metals, are tangible assets that you can store and disperse conveniently unlike stocks, bonds, and real estate. Gold coins are indeed pocket-size investments.
Gold is often called the ancient metal of kings and pharaohs. Its yellow metal has a timeless aesthetic appeal and is resistant to corrosion.
Big time investors dub gold coins as a financial insurance. This is because gold has long been established as a medium of monetary exchange in most countries.
Thus, gold mirrors a country’s economic and political climate: when gold prices rise, economic inflation is looming ahead.
Why should you invest in gold coins?
The benefits of investing in gold coins, as mentioned above, is that they are tangible assets. But given the worse case scenario, what if the fiat economy collapses?
In such circumstances, the present paper money currency will lose its purchasing power. Thus, gold coins, being universally accepted as money, can bolster your hard-earned savings from dwindling during recessions.
How should I invest in gold coins?
Owning gold coins is often compared to having a life insurance; you can aim to get as many gold coins you can fairly afford.
Remember, precious metals –specifically gold – are said to have dual personalities. First, they have long-term historical values and on the other hand, they have a short-term price performance.
The price of gold is volatile to measure up with the economic climate so it is impossible to predict its price for a long term. However, the value of gold coins has increased for the past decades or so.
In the stock market, the base price for precious metals is called the spot price. However, gold coins cost a bit higher than the gold spot price. You can track the daily rise and fall of the gold spot price to know the exact cost of your gold coins. When the price drops, this is the go signal to make an investment.
Which gold coin should I invest in?
First, you have to determine whether you want to invest in gold bullion coins, or the collector or numismatic gold coins.
a) Investing in gold bullion coins
It is more ideal to bank on gold bullion coins since they contain a good amount of precious metal. Hence, they are valued for the weight of their gold content. It would not matter if the gold bullion coin is scratched on the surface as long as its weight remains the same.
Gold bullion coins are standardized so there is no need to grade them. They are accepted in all central banks around the world. Thus, investing in gold bullion coins is more appreciated in a wider global market.
b) Investing in numismatic gold coins
Numismatic gold coins – usually the collector proof sets and the Brilliant Uncirculated coins – derive value from the demand of coin collectors who choose these coins for their rarity, unique design, and date. Their price depends much on their grade. These gold coins are risky during recession because they cannot be dispensed easily.
However, investing in gold collector coins are private transactions. You are not under any government law and regularization like in buying gold bullion coins.
Bear in mind that some rare numismatic gold coins could worth a thousand of dollars but the gold content may not be that notable.
Which gold coins should I invest in?
In the US, the American Gold Eagle coins are popular among gold coin investors due to their 1 oz gold content. But these gold coins are just copies of the original Saint-Gaudens gold coins minted in 1907.
Other alternatives are gold American Buffalos, Chinese Panda coins, Austrian Philharmonic coins, British gold sovereigns, and the Swiss Vreneli coins. Although some of these gold coins may be lighter in weight.
What are the advantages in investing in gold coins over gold bars?
Gold bullion coins have the lowest premium among any other forms of physical gold. Gold coins are easier to store and to move around compared to bulky gold bars.
Gold bars are usually kept in large companies, institutions and centrals banks of the security implications they entail to the holder. On the other hand, gold coins can be conveniently stored in safety deposit boxes wherever you want.
The liquidity and portability of your gold coins collection make them easier to en-cash and you can just dispose a minimum number of coins according to your needs rather than selling the whole gold bullion bar.
What are the disadvantages in gold coin investing?
The downside upon investing in gold coins is the transaction cost. Apart from the market price of gold, you also have to pay for the premium (dealer’s mark up price, including the production and promotional costs) plus the cost of shipping. When you sell your gold coins, you actually lose the most of the premium.
Sometimes, a gold coin investor is faced with the dilemma: where can I discreetly store my coins? Even if you have the best theft-proof safe to keep your collection, there is always a risk of investing in gold coins because they entail added security precautions.
While gold coins offer several advantages as an investment, there are important considerations to keep in mind:
- Storage: Physical gold coins require secure storage, which may incur additional costs. Consider options like safe deposit boxes, home safes, or third-party storage facilities.
- Costs: When purchasing gold coins, investors should be aware of transaction costs, including premiums over the gold spot price, dealer fees, and potential taxes.
- Market Volatility: While gold is considered a safe-haven asset, its price can still be subject to volatility. Investors should have a long-term perspective and be prepared for price fluctuations.
- Authenticity: To avoid counterfeit coins, investors should only purchase from reputable dealers and consider acquiring coins with authentication certificates.