Bank Alternatives - Buying Gold Coins
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Historically governments have removed currency from any linkage to gold or other precious metals. Thus paper money has no real intrinsic value except the value people put on it. That is a simplification, but there is no space here but to write in broad strokes. America’s huge borrowings have put the $ under pressure and its value has slid downwards on world markets. When money loses its value, gold has traditionally been the bulwark of real value. As the $ declines in value gold is destined to increase. Not long ago the price hovered towards $1000 per troy ounce before falling back sharply. Gold pundits will tell you that the wisest course of action at this time is to buy gold. You can’t buy gold bullion very easily but you can buy gold coins. An American Eagle is an ounce of 99% pure gold. There are other gold coins like the Canadian Maple Leaf and the South African Kruggerand, but for American residents the best course of action is to buy American coinage, thus the American Eagle is the way to go. If Government’s spend their way into insolvency, you have every right to look after your own best interests whatever governments might say to the contrary.
Value: The Gold coins derive their value from their gold content and sell at a premium above the gold spot price. The American Eagle retails at a premium of approximately 5-6% above the gold price. Maple Leafs are a little lower, but don’t worry, you will get the premium back when you come to sell the coins.
Liquid assets: Gold is a liquid asset. It is portable and easy to sell. That is why it is much favored in India and other places in the developing world. Gold gives status and can be worn decoratively as jewelry but then it can also be sold off when cash is needed. People in these countries have an understandable mistrust of government and have devised a very simple means of self-protection.
The spread: The spread is the difference between the asking and selling price of gold. As I look at the market I see the spread is between the asking price of $934.10 and the selling price of $934.90. Thus there is an 80 cent spread. You will be very lucky to get prices like this, as they are reserved for the bigger dealers. In short expect a 2-2.25% spread in the best instance which is likely to drop to 4% in smaller cities with lower volume markets. If the dealer asks for 5% or more go elsewhere.
Look for bullion dealers: Bullion dealers specialize in the buying and selling of gold, and they know about the gold coins. Coin dealers are specialists in antique coins, and they will deal with current issue gold coins as a sideline. As such they will not offer the best deals.
Hold assets in gold: For US residents holding assets in gold coins is a much better bet than precious stones, rare coins and other valuables. Gold is always easy to sell and it has an intrinsic value. Diamonds are often touted as good value investments. They are not and when it comes to selling you will often be disappointed. Buy gold or even better silver and you cannot go wrong!
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