The Investor
There was a time when the only people who bought gold coins were the so-called “gold bugs.” These people were considered eccentric for buying gold coins back in the 1970s after gold ownership was legalized in the United States of America.
But by the time the 1970s were over, the gold bugs were proven to be pretty darn savvy for having the foresight to protect their wealth with gold coins. In fact, by the time 1980 debuted, the South African Krugerrand gold coin was one of the most popular investments in the world. It wasn’t just gold bugs buying anymore. Investors of all philosophies realized the value of including gold in their diversified portfolios.
Whether someone was looking for aggressive growth or preservation of capital, gold had a role to play because it could both produce profits and protect wealth from high inflation and crisis. So, basically, all sorts of people were buying gold in the period from 1975-1981.
In 1980, gold peaked at $850 per ounce and demand for gold coins also peaked. While many continued to buy gold in the 1980s, especially in 1987 in the wake of a huge stock market crash in America, overall demand for gold waned over the course of the decade and into the 1990s. This was because the price of gold stayed range-bound for extended periods of time.
Once again, gold coins became less popular among investors. In fact, at one point in the 1990s, according to a Wall Street study, American investors, on average, were negatively invested in gold, reflecting the fact that more money was placed on the short side of futures contracts than was on the long side.
In a sense, the few who were buying gold coins during this period were new gold bugs, once again thought of by the rest of the financial world as eccentric.
All of that changed in the 21st century. The first decade of the 21st century proved to be the polar opposite of the 1990s. Periodic crises of both the geopolitical and economic variety rocked paper assets and brought gold back to the forefront of peoples’ minds. The price of gold soared, smashing the $1,000 mark for the first time.
The combination of failing banks, collapsing real estate values, volatility in the financial markets as well as terrorism and war prompted investors of all types to turn to gold coins once again. And their gold has served them admirably.
Today, once again, savvy investors of all philosophies are realizing the wisdom of including gold in their diversified financial planning. Some who were day trading through online discount brokers in the stock market bubble years of the 1990s are now holding gold. But so are families and retirees who just want safety and security. In short, just about every type of investor is buying gold today.
The Collector
In parallel to investors buying gold coins, collectors have been buying gold coins all along since the legalization of gold ownership in 1974.
Unlike investors, collectors buy coins strictly for their beauty and historical significance, without any initial profit motive. To these collectors, gold coins are works of art and historic artifacts from history. The number of coin collectors in America has been growing steadily for decades. Of course, only the most affluent collectors can afford to buy gold coins strictly for pleasure.
This raises an important point.
While collectors may not acquire their coins for profit, the fact of the matter remains that collections of gold coins have historically brought handsome profits for their owners and their heirs. In fact, statistically speaking, the most successful recorded performances tend to be made by collectors, rather than investors. This is because collectors know which coins to buy and buy them according to a plan.
This suggests that investors should seek the assistance of expert collectors in choosing coins.
Tuesday, February 23, 2010
Wednesday, February 17, 2010
Where Can I Buy Gold Coins?
When it comes to buying gold coins, today’s investors and collectors have more choices than ever in terms of where they can obtain coins.
An Historical Perspective on Buying Gold Coins
Today, there are two broad varieties of gold coins from which to choose: rare gold coins, such as the Saint-Gaudens Double Eagle (minted from 1907 to 1933) and gold bullion coins, such as the American Eagle gold bullion coin.
But from 1933 to 1975, there were no gold bullion coins, such as the Gold American Eagle, because, believe it or not, it was illegal for United States citizens or foreign residents in the U.S.A. to own gold. During that period, the only gold coins that were permitted for private ownership, and thus eligible for sale, were “gold coins of special interest and value to collectors”—in other words, rare gold coins.
Even so, during most of the period 1933 through the end of Second World War in 1945, few Americans could afford to buy and own rare gold coins. Rare gold coins were a luxury that just could not be justified during the decade of the Great Depression and the four years of World War II from 1941 to 1945.
The few Americans who could afford to buy rare gold coins during the period from 1933 to 1945 were usually the very wealthy and they obtained their gold coins from a few elite, specialized coin dealers (called “numismatists”). These dealers were often unknown to the general public and traveled in strictly upper class socioeconomic circles. It is no wonder that coin collecting got the label “the hobby of kings.”
After the Second World War, America was transformed. It’s economy was transformed by the rapid industrialization and modernization which had occurred to support the arsenal of democracy and America’s society and culture was transformed by the millions of returning servicemen who had made the world safe for democracy, had been to places that no one in America had even heard of before the war and who wanted to start families and live the good life back at home.
This transformation also had an impact on the coin business. In the post-World War II period, more prosperity meant that more people could afford rare gold coins. To be sure, rare gold coins were still not items that the average American could afford to collect, but, nevertheless, more Americans could afford them than ever.
Inevitably, more buyers of rare gold coins meant more dealers of rare gold coins and these new dealers were not always the elite, wealthy individuals that had sole control of the trade back in the 1930s and 1940s.
The post-World War II years saw the establishment of coin shops across America. Not all coin shops could afford to maintain inventories of rare gold coins, but some could and such retail outlets became a viable option for finding at least some lower-end rare gold coins.
Coin shops really boomed in the 1960s and it was not uncommon to find some rare gold coins in just about every shop.
The Legalization of Gold and the Introduction of the Krugerrand
The coin market became even more transformed after 1975, when the law that made it illegal for private collectors and investors in the United States to own gold was suspended.
This was followed by a whole new phenomenon: South Africa’s Krugerrand.
In the late 1970s, the world’s largest gold producing nation, the Republic of South Africa, introduced a new gold coin: the Krugerrand (named for one of the country’s early leaders).
Unlike rare gold coins such as the Saint-Gaudens Double Eagle, the Krugerrand was mass produced on modern, high-speed machinery and was never meant to be rare. Therefore, its value was strictly tied to the one ounce of gold it contained.
A brand new investment category was thus born: gold bullion coins.
Buying Rare Gold Coins and Gold Bullion Coins Today
Today, investors and collectors have several choices when it comes to buying gold coins:
An Historical Perspective on Buying Gold Coins
Today, there are two broad varieties of gold coins from which to choose: rare gold coins, such as the Saint-Gaudens Double Eagle (minted from 1907 to 1933) and gold bullion coins, such as the American Eagle gold bullion coin.
But from 1933 to 1975, there were no gold bullion coins, such as the Gold American Eagle, because, believe it or not, it was illegal for United States citizens or foreign residents in the U.S.A. to own gold. During that period, the only gold coins that were permitted for private ownership, and thus eligible for sale, were “gold coins of special interest and value to collectors”—in other words, rare gold coins.
Even so, during most of the period 1933 through the end of Second World War in 1945, few Americans could afford to buy and own rare gold coins. Rare gold coins were a luxury that just could not be justified during the decade of the Great Depression and the four years of World War II from 1941 to 1945.
The few Americans who could afford to buy rare gold coins during the period from 1933 to 1945 were usually the very wealthy and they obtained their gold coins from a few elite, specialized coin dealers (called “numismatists”). These dealers were often unknown to the general public and traveled in strictly upper class socioeconomic circles. It is no wonder that coin collecting got the label “the hobby of kings.”
After the Second World War, America was transformed. It’s economy was transformed by the rapid industrialization and modernization which had occurred to support the arsenal of democracy and America’s society and culture was transformed by the millions of returning servicemen who had made the world safe for democracy, had been to places that no one in America had even heard of before the war and who wanted to start families and live the good life back at home.
This transformation also had an impact on the coin business. In the post-World War II period, more prosperity meant that more people could afford rare gold coins. To be sure, rare gold coins were still not items that the average American could afford to collect, but, nevertheless, more Americans could afford them than ever.
Inevitably, more buyers of rare gold coins meant more dealers of rare gold coins and these new dealers were not always the elite, wealthy individuals that had sole control of the trade back in the 1930s and 1940s.
The post-World War II years saw the establishment of coin shops across America. Not all coin shops could afford to maintain inventories of rare gold coins, but some could and such retail outlets became a viable option for finding at least some lower-end rare gold coins.
Coin shops really boomed in the 1960s and it was not uncommon to find some rare gold coins in just about every shop.
The Legalization of Gold and the Introduction of the Krugerrand
The coin market became even more transformed after 1975, when the law that made it illegal for private collectors and investors in the United States to own gold was suspended.
This was followed by a whole new phenomenon: South Africa’s Krugerrand.
In the late 1970s, the world’s largest gold producing nation, the Republic of South Africa, introduced a new gold coin: the Krugerrand (named for one of the country’s early leaders).
Unlike rare gold coins such as the Saint-Gaudens Double Eagle, the Krugerrand was mass produced on modern, high-speed machinery and was never meant to be rare. Therefore, its value was strictly tied to the one ounce of gold it contained.
A brand new investment category was thus born: gold bullion coins.
Buying Rare Gold Coins and Gold Bullion Coins Today
Today, investors and collectors have several choices when it comes to buying gold coins:
- Coin Dealers
- Coin shows
- Local Coin Shops
- Banks (Usually banks only sell bullion coins.)
- Brokerage houses (Like banks, brokerage houses customarily only sell bullion coins.)
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