Not everybody is in a position to buy gold. If you are living from paycheck to paycheck, gold is not for you. If you have discretionary money available beyond all your goals, then you might consider buying some silver and gold to protect that extra nest egg. If you have retired and perhaps you have some wealth, you should buy gold to protect your retirement. These stages and situations are common places to buy gold in our lives. For safety reasons, there is a certain percentage to allocate toward buying gold.
Generally advisors and portfolio managers have recommended investing 10% to 20% of your total net worth into precious metals. Suppose with property and investments your net worth is $750,000. If you had 20$ of your net worth in gold you have $150,000 of your money in gold. That’s about 88 Troy ounces at today’s spot price of $1,660 per ounce. With this $150,000 you could buy about 90 ounces of slightly circulated gold coins in $20 Liberties.
Many advisors and analysts are now saying gold may quickly be on the way to $5,000 to $10,000 an ounce. With the conservative side of this, gold at $5,000 per ounce times 88 ounces equals $440,000. In the event that our dollar fails, gold will go out of sight. This is how gold stabilizes and grows your net worth, because gold demand spikes in times of dollar value losses.
In times of dollar value losses, you want to increase your percentage of gold holdings. One good rule is whatever you don’t want to lose, put in gold. Financial institution risk is usually higher than risk with gold. Keep what you have and can’t afford to lose out of financial institutions. Use financial institutions only for what you can afford to lose, when considering safety in economically troubling times. Gold helps to preserve and compactly store value in your portfolio. Silver as a lower priced commodity is easier to sell in small amounts and barter. Typically 90% percent of your precious metal investments should be in gold, with 10% in silver.
Types of Gold
Of the two types of physical investments, gold bullion usually comes to mind first. Most people think about bars of gold stacked in Fort Knox. This is gold bullion. One of the most common forms of bullion investments are the one ounce gold coins. The Canadian Maple Leaf, Mexican gold Pesos, American Eagle, Chinese Panda, South African Kruggerand, and the Austrian Philharmonic to name a few have been coined by their respective realm as gold bullion investments, and have not circulated as legal tender. Other countries offer gold coins that have been legal tender, such as the British Sovereign, the Swiss Franc, the French Franc, the German Marc, and the Finish Markkaas. America exempts the American gold coins and silver coins as numismatic investments rightfully held as investment by citizens. Around the world, 49 countries allow their citizens to hold the coin of the realm as numismatic gold investments. It preserves the country’s history and offers collector’s a way to safely keep their cherished investments without fear of confiscation.
Bullion bars outside of Fort Knox, are available for investments, typically by speculators looking to buy it cheaply and when the price of gold goes up quickly sell it to make money. Most gold buying clients are interested in long term preservation of their wealth. Bullion has the insidious risk that it may be confiscated by the government in times of economic instability. Currently the government has gold in its books at $50 per ounce. If they confiscate your gold bullion how they value it with respect to this book value of $50 or market value is only guesswork shaped by the demand of economic hard times. This is not the kind of risk most clients want to take.
A solution to invest long term is to buy lightly circulated numismatic gold coins. The $20, $10, ad $5 Liberties, and $20 St. Gaudens are collectible coins in the U.S. and are not considered to be subject to confiscation. Numismatic gold coins having an instrinsic value of gold and a collectible value are also non-reportable.
Rare gold coins require esoteric knowledge of coin antiquity and ability to make quality determinations. Unless you have unique esoteric knowledge of rare numismatic gold coins, this type of gold coin is probably not an investment for you. Mint State (MS) numismatic gold coins are unique and can vary widely in price. Depending on quality of slightly circulated coin categorized as MS65 to MS67 the price may differ by a factor of 6 to 25 times price. The only thing rarer than a rare coin is a buyer for a rare coin.
Recommended gold coins for long term investment are the lightly circulated coins labeled as Very Fine (VF), Extra Fine (XF), and the Almost Uncirculated (AU). These coins are valued greatly on their intrinsic value with some collectible value and premium. The coins will appear almost perfect and with a beautiful gold shine to the untrained eye. The trained eye expects slight wear and understands the premium is lowered compared to the high premium MS coins. Both MS and light circulated coins are considered collectible and not subject to confiscation. It makes sense to put your investments in lower premium collectible.
A quick final note on delivery is to ask before you purchase what is the delivery time frame, and specifically how long it will take to obtain your coins. More than two weeks, look for another dealer.