The ‘Who, What, When, Where, Why and How’ of Gold Investment
How to protect and build your wealth through precious metals ownership
In the final entry to our six-part series – How to invest in gold? – we offer initial guidelines on designing a precious metals portfolio that makes sense for your particular worldview and personal goals while helping you avoid some of the pitfalls commonly encountered by unsuspecting first-time investors.
How to invest in gold? √
How to invest in gold
When it comes to investing in gold and silver, there are literally hundreds of different product choices. Sifting through those choices can be both confusing and overwhelming. But gold investing is actually quite straightforward, once you know how to approach it. Save for a few product classes you should absolutely avoid (see our pitfalls article), once you decide on a proper ‘genre’ based mix, you really can’t go wrong. Listed below are the four primary genres of precious metals ownership. Whether you own all of one, or a mixture of all, the choices you make should be a reflection of the goals you are seeking to accomplish. To the point, if you’d like to review your goals and see which of the following products would best suit your needs, we invite your call to discuss a portfolio mix that works for you.
Modern gold coins & bullion
Modern gold coins & bullion are typically the most popular choice for clients looking to gold as a shorter term investment, with the intent to sell at some point in the future when prices rise. They are also the preferred choice when placing gold into a self-directed IRA. The term ‘bullion’ refers to any items minted in the modern era that trade solely for their gold value, and move directly in concert with the spot price of gold. Generally speaking, coins are preferred to bars when the product is moving into private possession. By and large, coins are easier to liquidate as they do not have to undergo the same authentication procedures required of gold bars at the time of sale. The most common bullion coins for purchase are the American Eagle and Canadian Maple Leaf, but in truth, all bullion coins are basically the same and offer the same exposure to gold ownership. Modern bullion coins are also available in fractional denominations, but such products are rather unpopular given their deficiencies when compared to the Historic Fractional genre.
Modern silver coins & bullion
Silver has become an increasingly popular inclusion in precious metals portfolios. Silver is typically purchased in bullion form, either in one ounce coins or one hundred ounce bars. Even though the coins are typically more expensive to acquire, they retain more premium at the time of sale, netting a roughly equal cost of ownership regardless of the product choice. As with gold bullion, silver coins are more liquid than bar alternatives for those seeking physical possession. As a whole, silver represents an opportunity to own product that is less costly per ounce than gold, thereby augmenting the divisible liquidity of an asset-preservation oriented portfolio. Moreover, silver is at times undervalued when compared to gold, and can offer more in the way of potential investment returns in an advancing market. Generally speaking, when the gold/silver ratio is anywhere from 72:1-82:1, it is a reasonable time to buy/add silver. Anytime the ratio is less than 52:1, it is a better time to set aside silver purchases and/or transition into gold.
Historic U.S. coins
As a genre, historic US coins uniquely combine safety and insulation against the possibility of future government intervention with the opportunity for double-barrel profit potential during periods of premium expansion. The value of historic US coins is driven primarily by the underlying price of gold itself. But due to an inherently limited supply, the ‘premium’ component of their value can also expand during times of increased demand, thereby elevating investment returns. Look no further than past flight to safety episodes – namely the 2008/09 financial crisis, as well as the Y2K period – when premiums for historic US gold skyrocketed to many multiples of current levels. All told, and given their current undervalued condition, historic US coins represent one of the most compelling choices for asset-preservation/safety-net oriented owners – as it is specifically during ‘safe-haven’ situations that owners are most likely to benefit from both the enhanced privacy and liquidity of this genre, as well as the increased investment potential.
Historic fractional gold coins
Historic fractional gold coins are an ideal option for those seeking to combine the negotiable/divisible advantages of small-denomination gold coin ownership with added insulation against the risk of a future government intervention in the gold market. Often referred to as ‘Historic Bullion’, their vast mintages and consistent availability make these the least expensive fractional gold coins available in the market. They simultaneously offer buyers the ‘most gold for your money’ option in the pre-1933 genre, track the gold price directly, and typically price below their modern equivalents on a per ounce basis – a truly, ‘two birds, one stone’ vehicle for the safe-haven, asset-preservation minded investor. The most popular choices include British Sovereigns, Swiss 20 Franc and Netherlands 10 Guilders, though the market is remarkably diverse, with numerous accessible and affordable options.
Disclaimer – Opinions expressed on the USAGOLD.com website do not constitute an offer to buy or sell, or the solicitation of an offer to buy or sell any precious metals product, nor should they be viewed in any way as investment advice or advice to buy, sell or hold. USAGOLD, Inc. recommends the purchase of physical precious metals for asset preservation purposes, not speculation. Utilization of these opinions for speculative purposes is neither suggested nor advised. Commentary is strictly for educational purposes, and as such USAGOLD does not warrant or guarantee the accuracy, timeliness or completeness of the information found here.