Thursday, September 2, 2010

Should You Buy Gold Coins?

I have in the past commented on gold as an inflation hedge because the Federal Reserve will be hard-pressed not to monetize the huge debt, and that’s bound to augment future inflation.

I have also commented on gold as an investment. Gold is a good holding in dire emergencies. Excellent in rare coin form, for example, for refugees fleeing catastrophes. But their value can be erratic and gold pays no interest if just sitting around.

I told readers to look at gold prices over the years. The price today is really not very much higher than that of the 1980’s. With simple compound interest, gold ought to be much more than what is today. At least 30% more, if held over the past thirty years. It’s big move has been only in recent years.

There are many ways to beat inflation. But if your decision is to buy gold, and you decide on gold coins, which do you choose?

Gold comes in different forms: Plain coins, rare coins, and bullion, all of which must be safely stored; with sellers, in bank vaults, or at home. That can be costly or entails potential theft.

Furthermore, there is a big spread between the price one gets when selling coins and one pays when buying, or the bid and ask prices.

My suggestion: No matter what the choice, select by coin condition, in addition to rarity. Condition is sometimes very subjective, depending on whether you are the buyer or seller, but it is a rule of thumb to keep in mind.

No comments:

Post a Comment