Who Buys Gold Coins?

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.