Buying gold coins is a great way for the average investor to slowly build up a position in gold. They are sold in a variety of sizes from the standard 1-ounce bullion coin to a variety of fractional coins.
It’s been a while since I last purchased any physical gold, but I recently took the plunge and purchased a 1/4 ounce pure gold bullion coin that’s produced every year by the Royal Canadian Mint. These coins are among the highest quality, pure gold investment coins in the world.
As I’ve said in a prior post on investing in physical gold, I believe that the only way to “invest” in gold is to own it physically. I leave things like GLD and other so-called “paper gold” ETFs and depository receipts to the speculators.
The main reason for this has been my concern about a number of reports that suggests that there is far more “paper gold” circulating in the market than there is actual physical gold that’s supposed to back it.
So if anything ever were to happen that we needed our gold, I don’t want to be that guy holding a worthless piece of paper…I want the real piece of gold.
Now I don’t see gold as a particularly great investment, but I still buy it for its “insurance” value. Some finance gurus like Warren Buffett hate gold and think it’s an idle non-productive asset that doesn’t pay any dividends or interest.
Other billionaire investors like George Soros, Jim Rogers and the “Bond King” himself, Bill Gross, have advocated the need to own gold in an investment portfolio to protect against inflation and even deflation. Their rationale has to do with all the money that central banks around the world have been printing since the Global Financial Criss of 2008-2009.
In their view, all that money has inflated the prices of paper assets (bonds, stocks, T-Bills etc) and that eventually investors will retreat into hard assets like real estate, gold and other commodities.
My own view is that I like gold as an asset class because it is usually negatively correlated to the stock market. That means when stocks go down there is usually a lot of fear in the market so people buy gold, causing it to rise in value.
As a rule of thumb investors are told to keep no more than 5% of their assets in gold. I’m not really a trader, but more of a buy and hold kind of guy so I tend to slowly accumulate my investments of a long period of time. My strategy with buying gold is no different.
My goal is to keep about 5 to 10% of my total assets in physical gold. I do this to protect from currency debasement.
Why I Stack Gold and Silver
See Also the Ultimate Guide to Canadian Gold Coins