Should You Buy Gold Coins?Posted on September 20th, 2010 William No comments
If you were to ask us flat out, "is gold a good investment?", we'd have to say no. Historically, gold has vastly underperformed the stock market; indeed, if you had invested in gold 30 years ago, you'd have about the same amount of money now as if you'd just bought government bonds. Not exactly outrageous earnings, there!
However, if you do decide to buy gold, we want to make sure you get the best deal. Perhaps the most popular way to buy gold is with gold coins; aside from the value of the metal, you also get a nice collectible. Additionally, because coins are standardized in a way that gold bars are not, it's much easier to assign the correct value to them, and they are also more difficult to fake.
Gold coins have been around for a long time; the first known example is the coins minted in 670 BC by King Gyges of Lydia in Turkey. Generally investors will buy gold bullion coins, which have their gold content guaranteed; while these coins are legal tender, their real value is based on the current value of its gold content; as such, a 1-ounce gold bullion coin will generally sell for the same price as one ounce of gold, plus a small premium. Again, the main draw of a gold bullion coin is that it's an easy-to-obtain form of pure gold whose authenticity is guaranteed by the country minting it.
There are a lot of fraudulent companies trying to sell gold coins, so it's important to do your homework; most importantly, never let a salesman rush you into a purchase.Once you've purchased your coins, if they are not bullion it's a good idea to have them graded as soon as you get them; even if they come with a certificate, the certification may be from a dishonest grader or one that uses looser standards than commonly accepted. Bullion coins do not need to be graded because they are being purchased for the gold value, not any collector value. As with any major purchase, always comparison shop to be sure you're getting the best price.
Another thing to be aware of is that dealers will likely quote appreciation rates from the Salomon Brothers Index, which is a legitimate index that used to be compiled by the New York investment bank Salomon brothers and can show very high appreciation; however, this list was based on very rare coins, not the more common ones the average investor is likely to purchase. Again, the value of gold bullion coins is based on the market price for gold, rather than any particular rarity of the coin.
There are a few professional organizations you may find useful as you get started in coin collecting. The American Numismatic Association offers a number of educational programs for collectors, while the Professional Numismatists Guild consists entirely of coin dealers who have a minimum net worth ($250,000 in coins) and number of years of experience and who have agreed to submit to binding arbitration through the PNG in case of complaints.