Is It Crazy to Buy Gold Coins For Investments?

Have you ever considered gold as an investment? Or maybe just as a hobby?

In the days of instant online stock trading and financial accounts, sometimes money seems almost make-believe. Many of us no longer see our money as a tangible object.

That’s why there’s something very satisfying and solid about investing in and wanting to buy gold coins. There’s nothing like going to a coin shop, coming out with a small-but-heavy paper bag, and then taking it home and feeling the weight of each coin.

But is it crazy to invest in gold coins in 2024 and beyond? Let’s look at some advantages and disadvantages of buying gold coins as an investment.

At a glance:

• Investing in gold can stabilize your portfolio during market declines and safeguard against inflation.
• Investing in tangible objects such as gold comes with a risk of theft and no perks of dividends or interest payments.
• Alternatives for investing in gold include purchasing mining stocks or buying gold with your IRA investments.

Advantages to buying gold coins

Gold and other hard metals have always been a time-honored part of traditional investment plans. Here’s why:

• Gold tends to go up when other investments decline, providing a stabilizing effect for your portfolio.
• Gold is a safeguard against inflation.
• You don’t have to pay capital gains tax until you sell.
• Nobody must know you have it — if that matters to you.
• In worst-case financial scenarios, such as massive currency devaluation, you can use gold and silver to buy and sell. That may sound crazy, but it has happened in other countries.

Disadvantages to buying gold coins

On the other hand, there are some disadvantages to buying gold:

• A thief could take your gold if you’re not careful.
• Unlike stocks and bonds, a purchase of gold is not an investment in company growth. You won’t get dividends or interest from tangible gold.
• You may have to wait years for gold to go up in value.

How to buy and keep gold coins

If you decide to buy gold coins, it’s best to get them from a reputable dealer or financial institution. We wouldn’t recommend buying gold coins on Craigslist, for example (but you do you). If you buy gold coins from individuals or from anyone else you’re not sure of, have their authenticity verified first. You don’t want to unwittingly end up with a collection of gold-plated lead!

U.S. gold coins come in one, one-half, one-quarter, and one-tenth ounce denominations. You pay a premium over the price per ounce when you buy gold coins, which is how the dealer makes a profit. You may pay a higher premium if you buy gold coins that are less than one ounce each. You should generally buy bullion coins, such as the American Gold Eagle, Canadian Gold Maple Leaf, or South African Krugerrand. Collector’s coins, called numismatic coins, are a different game than bullion gold coins. They can sell at a very high premium, and their prices are dependent on more factors. Basically, unless you are very knowledgeable about collector’s coins, stick with bullion coins.

Don’t get carried away buying gold, either. Perhaps 5-15% of your portfolio should be in hard assets like gold coins. Most investors want most of their portfolios to be in growth funds, stocks, or other investments. That’s a good way to get the best balance of risk and return.

Where to store gold coins

Once you buy gold coins, make sure to keep them in their cases, away from scratches and fingerprints.

Don’t even think of hiding gold in your house, unless you have a safe! Thieves know where to look, or they can find it with a metal detector. Instead, consider renting a safe at a bank where you can keep your gold and other valuables.

Investing in gold coins in other ways

Did you know you can even buy coins with your Individual Retirement Arrangement (IRA)? There’s just one catch — you won’t be able to take these coins home. Instead, your IRA administrator will keep them in a vault for you. Coins must meet standards of purity to qualify as IRA investments.

There are other ways to invest in gold without actually bringing home any gold coins. By purchasing gold mining stock, gold certificates, or exchange-traded products, for example, you can gain the advantages of gold’s hedge against inflation without lugging heavy gold coins around or worrying about where to keep them.

The bottom line

Gold coins can be a unique, tangible addition to your investment portfolio. While they come with their own set of risks — like storage concerns and the lack of dividends — they also offer stability during market downturns and act as a hedge against inflation. Whether you’re drawn to gold coins for their weighty presence, their financial benefits, or just the satisfaction of holding something valuable, they’re an option worth considering.

As with any investment, the key is balance. Do your research, buy from reputable sources, and think carefully about how much gold makes sense for your portfolio. Whether you invest in gold coins directly or explore alternatives like mining stocks or IRAs, gold can help you diversify and solidify your financial plan — in more ways than one.

This article is for informational purposes only and not legal or financial advice.