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How to invest in gold

In the sixth of our Six Keys to Successful Gold Ownership, we discuss making product choices and avoiding some of the pitfalls commonly encountered by unsuspecting first-time investors.

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. Save for a few product classes you should absolutely avoid (see our pitfalls article), gold investing is actually quite straightforward, once you know how to approach it. 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.

Modern gold coins & bullion

Modern gold coins & bullion are typically the most popular choice for clients looking to gold as a shorter term holding. They are also the preferred choice when purchasing gold for a self-directed IRA. The term ‘bullion coin’ 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, bullion coins are preferred due to liquidity concerns with bars, i.e, the authentication procedures often necessary 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 offer the same exposure price fluctuations. Modern bullion coins are also available in fractional denominations.

Modern silver coins & bullion

photo of American Eagle and Canadian Maple Leaf silver bullion coins, one ounceSilver has become an increasingly popular inclusion in precious metals holdings. Silver is typically purchased either in one-ounce bullion coins or one hundred ounce bars. Even though the bullion coins are typically more expensive to acquire, they can also fetch a premium at the time of sale. As with gold bullion, silver coins are usually more liquid than bar alternatives for those taking physical possession.  Silver is at times undervalued when compared to gold, and when that is the case, it can offer more in the way of upside potential in an advancing market. Generally speaking, when the gold/silver ratio is anywhere from 72:1-85:1, it can be considered a reasonable opportunity to buy/add silver. Anytime the ratio is less than 52:1, it may be considered a better time to forestall silver purchases and/or transition to gold.

Historic U.S. coins

photo of United States $20 St. Gaudens and $20 Liberty gold coinsAs a genre, historic U.S. coins uniquely can 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 many common-date examples of these items is driven primarily by the underlying price of gold itself. But due to an inherently limited supply, the ‘premium’ (the added value above and beyond the gold content) can also expand during times of increased demand. During past flight-to-safety episodes, like the 2008 financial crisis or the Y2K scare, premiums for some historic, common-date U.S. gold skyrocketed to many multiples of current levels. All told, and given the historically lower premiums available at present, this genre represents one of the more compelling choices for asset preservation gold owners. It is specifically during times of economic uncertainty that owners can benefit from both the enhanced privacy and liquidity of these items, as well as their increased investment potential.

Historic fractional gold coins

photo of German 20 mark and British sovereign queen gold coins, pre-1933, historicHistoric fractional gold coins can be 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 possible government intervention in the gold market. Frequently referred to as ‘Historic Bullion’, their vast mintages and consistent availability often make these items the least expensive fractional gold coins available in the market. They simultaneously can offer buyers the ‘most gold for your money’ option in the pre-1933 genre while tracking the gold price directly. Often prices run equal to or below their modern equivalents on a per ounce basis – a truly, ‘two birds with one stone’ opportunity for the safe-haven 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.

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A word on USAGOLD – USAGOLD ranks among the most reputable gold companies in the United States. Founded in the 1970s and still family-owned, it is one of the oldest and most respected names in the gold industry. USAGOLD has always attracted a certain type of investor – one looking for a high degree of reliability and market insight coupled with a professional client (rather than customer) approach to precious metals ownership. We are large enough to provide the advantages of scale, but not so large that we do not have time for you. (We invite your visit to the Better Business Bureau website to review our five-star, zero-complaint record. The report includes a large number of verified customer reviews.)

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Disclaimer – Opinions expressed on the 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.