Scrooge McDuck had it right: An Introduction to Gold Bullion Investing
Remember Scrooge McDuck swimming through his giant pool of gold coins? Well, Scrooge McDuck was a gold bullion coin investor, and judging by the size of his fortune, a very good one. Gold bullion investing can be lucrative, but it doesn’t have to be complicated. Let’s break down gold bullion and gold coin investing to get a better understanding of what it is, and whether it’s right for you.
What is bullion?
“Bullion” is a bulk amount of a precious metal, such as silver, platinum, palladium, and of course, gold. It’s measured by weight and usually cast as bars or “bullion coins,” as Scrooge clearly preferred.
Buying Bullion as an Investment
Just like many investments, the basic goal is to buy when prices are low and sell when prices are high. Of course, it’s not always easy to predict when that’s going to happen. Many people buy gold bullion to hedge against losses in other types of investments such as equities or commodities. Additionally, people often see gold as an investment “insurance policy.” That’s because its supply is steady, and self-regulated by mining production costs. For example, if it costs a mining company $600 to mine an ounce of gold, they will only operate if the price of gold is over $600. When mines discontinue operation because the gold price drops too low, this creates a supply issue. That forces the price back up, again increasing demand.
Gold bullion, or gold bullion coins?
You can buy gold in a variety of ways, but buying gold bullion and gold bullion coins offers some distinct advantages over other gold investment vehicles, such as bullion funds, gold certificates, or gold futures.
For most gold bullion investors, buying and holding physical, touchable gold is attractive on an instinctual level. If you have a hard asset that you can store in your own physical safe, the value will surge should the world take a turn for the worse (whether it be a stock market crash, zombie apocalypse, or any other scenario you can envision). Holding something valuable- you can’t do that with equities! If you do store your gold at home, make sure it’s insured either under your home insurance, or with an additional premium. A safety deposit box can be used at a bank in an insured vault, although the cost is usually about 1.5% of the gold’s value each year. One problem with buying gold bullion bars and storing them at home is that you’ve now removed them from the world’s registered storage system. That means their purity can no longer be guaranteed, which can cause some problems if you need to sell them in a hurry. That’s why gold bullion coins are an excellent choice if you’re going to store your gold yourself. Government-minted coins like the South African Krugerrand or Canadian Maple Leaf are common, and recognized by dealers around the world, making them easier to sell when the time is right. Just make sure you have detailed ownership documentation.
How to buy and sell
Googling “buying and selling gold” provides a massive list of brokers that will happily prey on novice gold bullion investors, or worse, scam you outright. Like any investment advisor, it’s important that you buy gold from a reputable, trusted, long-standing source in the gold bullion industry. (Note: If they advertise on TV, they might not be the best choice.) You also want to make sure that you buy gold from a dealer that will provide you with a transparent, liquid market for buying back your gold bullion or gold bullion coins at rates that do not give you severe penalties.
Gold bullion and gold bullion coin investing may not be right for everyone, but it can play an important role in a diversified investment strategy. It worked for Scrooge!