When I was younger, my mother used to call me and beg me to buy golden eagle coins for ‘my future’. I would roll my eyes and laugh at her as she started to accumulate them in the 80’s. Why would I want a bunch of lunky coins floating around? What would I do with them? Afterall, my credit card was working just fine. I had *money*.
The golden eagle coin is the official gold bullion coin of the United States. The market value of the coins is generally about equal to the market value of their gold content, not their face value. So even though the coin says $10, it could really be worth $400. Like all commodities, this value fluctuates with market forces. Their actual selling prices vary based on the current spot price of gold.
Now that I’m older and wiser, I have realized my Mom was right (again! ugh!) She sold a few eagles recently and bought a new car. I, on the other hand, made a nice payment on my credit card bill. Although I do invest in stocks and the market has been great, recent market whipsaw reactions have put many of us on edge. What goes up, will come down. This is where gold comes in as a safe ‘hedge’.
When Should You Buy Bullion?
Over the last 10-15 years, gold has been much less volatile than other worldwide equities, indices, and commodities. Even now, with various economic and socio-political problems on the horizon, gold and other precious metals like palladium, platinum and silver are still fairly stable. This means there’s no real need to time your gold buying, whether it’s some 1oz bars from Golden Eagle Coins or an entire 400oz Good Delivery bar. You might, however, want to watch out for a sudden small dip in price that could save you some dollars, but there are no huge swings, either way, these days.
Silver is a bit more volatile and so it’s something you might want to think about if you’re diversifying. It also tends to rise faster than gold when economies are rough, so it could work well as part of a portfolio.
Gold is something of a safe haven
Gold has always been seen as a safe haven, or a safe bet when the global economy is going through an unstable patch or even a recession. In recent decades, because equity markets have been quite buoyant, then investors have turned towards the more conventional investments and gold has tended to fall in price. With more austerity coming up and currencies in for a rough ride, the bullion markets are looking good once more; don’t forget, central banks are always net buyers when it comes to gold.
Emerging economies look golden
The emerging economies of India and China have been upping their investments into gold in recent years so that they’re no longer so reliant on the euro and the US dollar. Even European countries like Germany, Switzerland, and France are turning back to it, especially with the European Union seeking to close off tax loopholes and an unstable-looking forecast. Wealthier investors are taking their money out of circulation and tying it up in bullion, with gold purchases going up by several hundred percent each year.
Of course, investments can go down as well as up – as you almost certainly know – so you do need to know what you’re doing even when it comes to gold. You need to look at chart patterns (and understand them…), the moving averages of metals, the prevailing market trends, and the general economic cycle.
It doesn’t hurt to delve into macroeconomics a bit, either, which will take you beyond just the figures and trends. This can help you to look a year or more beyond your immediate future and make some educated guesses about how well your gold investment will perform.
Gold is becoming increasingly scarce
The discovery of new gold reserves is slowing down year on year now – unless we manage to mine asteroids sometime soon – and production peaked back in 2003. Almost 40% of the world’s gold is now recycled rather than newly-mined. Platinum might seem like a good idea, but you’d be competing with big industry for a very rare resource. Palladium is even rarer, 15 times rarer than platinum, and what there is gets grabbed pretty pronto by dentistry and the automotive industry. Gold and silver are still much more accessible, so if you want a relatively affordable and safe investment, you know where to look.