If you're new to gold, you may think that apart from their size and design, gold coins are all essentially the same. However, this couldn't be further from the truth. There are a variety of different classes of gold coins, each of which can help you achieve a specific financial goal over a different amount of time. Learn more and follow along as we detail why gold bullion coins, in particular, may have impressive short-term upside potential.
The basics of gold bullion coins
“Bullion” refers to “precious metals in bulk form.” Accordingly, the market value of a bullion coin is based primarily on its weight in gold. Gold bullion coins, like the Gold American Eagle, Canadian Gold Maple Leaf, and Krugerrand are a great choice for novice gold buyers because they're easy to understand, buy, and store, as we'll detail below.
Why bullion coins can be ideal for short-term growth
Gold bullion coins act like commodities, helping reduce portfolio risk
In short, a commodity is a basic good that is interchangeable with other commodities of the same type. “The basic idea,” writes Investopedia, “is that there is little differentiation between a commodity coming from one producer and the same commodity from another producer.” Commodities include all types of natural resources including oil, gold, grain, copper, timber, coffee, and zinc.
So far this year, strategists have been “piling into commodities, sending the value of commodity assets under management rising to levels not seen since 2014,” writes CNBC.
Why? Perhaps because “commodities are an insurance policy,” says Vic Sperandeo, president and CEO of EAM Partners. According to him, a broad basket of commodities offers a hedge against inflation, and gold in particular is a hedge against both inflation and geopolitical chaos.
And since “the prices of commodities tend to be uncorrelated with the prices of other assets such as stocks and bonds, the overall volatility of a portfolio tends to be lower. And because most [people] define risk as volatility, when it is lower there is less risk,” reports U.S. News & World Report.
Gold bullion coins tend to act more like commodities than most other types of gold coins (like proof or certified) because their price is tied so closely to their weight in gold. By following the spot price of gold, gold bullion coin owners (or potential buyers) can typically follow the upside potential of their holdings by looking at the current state of the gold market.
Gold bullion coins react quickly to the economic climate, so you can, too
If you follow the spot price of gold, as well as economic events at home and abroad, you may be able to purchase gold bullion coins at a moment when their upside potential is greatest.
During periods of market stress, gold bullion coins can act as an advantageous means of wealth protection—like insurance to help you weather the economic storm. For instance, after Britain voted to leave the European Union, the price of gold skyrocketed while U.S. government bonds plummeted, Asian share markets fell, and the pound stumbled to a three-decade low, reports Fortune. Gold prices stayed strong and “gold still finished 2016 up 8 percent,” adds CNBC.
While you can certainly diversify your portfolio with gold, you can also take your efforts further by diversifying within gold. When market conditions change, as they're prone to do, correlated assets will move in the same way. Bullion closely follows the spot price of gold, but proof coins react to factors also related to supply and demand in the rare coin marketplace. By diversifying with each, you can maximize reward, minimize risk, and better protect your portfolio from multiple angles. Sign up to receive U.S. Money Reserve’s Free Gold Information Kit to learn more about this strategy today!
When markets are quiet, it could be an equally opportune time to buy. When the gold market is receiving little attention, gold prices could be lower and the type and variety of gold bullion coins available for purchase may be greater, giving you an opportunity to buy a higher volume and a wider variety.
Due to their accessibility, gold bullion coins give you the opportunity to react to market fluctuations in real-time, helping you stay in control of your holdings.
Gold bullion coins are easy to buy, sell and understand
Most importantly, many gold bullion coins are highly liquid assets with strong secondary demand. They're widely recognized and internationally traded.
They're minted by sovereign governments who guarantee their weight and purity, and are conveniently sized in various denominations for easy storage, transport, and trade. Most gold bullion coins, especially the Gold American Buffalo Coin and the Gold American Eagle, are universally recognized.
There's risk associated with buying an unknown coin that you simply won't find with a government-issued, legal tender bullion coin. For instance, let's say Joe's Coin Shop designs and sells their own gold round, emblazoned with the American flag on one side and the Lincoln Memorial on the other. Sounds patriotic and official, but will it retain its market value? Maybe, maybe not. If you bought this round, you could end up stuck—stuck selling it back to Joe's Coin Shop or to another dealer at a much lower price.
Wait, what do you mean “round?” Coins are minted by a sovereign government, are legal tender, and have a minimum face value. In most countries, their designs must be approved by a legislative body and advisory committee. Rounds, on the other hand, are minted by private mints, are not legal tender, and have no face value. They can be produced with nearly any design.
U.S. government-issued gold bullion coins come with additional security and peace of mind that you likely won’t find with a privately produced round. In the case of the Gold American Eagle Coin, for example, you know that the coin is backed by the U.S. government for its gold content, weight, and purity. Can Joe’s Coin Shop provide the same quality guarantee?
Why buy gold bullion coins?
If you're buying gold to add the risk protection offered by hard assets to your portfolio while still maintaining the flexibility of easily adjusting your holdings, gold bullion coins could be the right route for you.
Unlike some other liquid assets that are generally held for a short period, like a variety of stocks, gold is a hard asset that won't evaporate during times of turmoil. If a financial catastrophe sent the stock market in a downward spiral overnight, some people would see their life savings and decades of earnings disappear. Gold bullion owners don't face that same degree of risk. Call 1-844-307-1589 to learn more and find out which type of gold could be the best choice for your goals. Experienced and knowledgeable Account Executives are standing by to take your call!
