Diversifying and Protecting Your Portfolio with Gold Coins


Gold is considered to be the world’s first currency. Well before the creation of paper money, around 550 BC, gold metal was melted into gold coins and circulated in many economies. Today, Western investors view gold not only as an alternative asset, but as a portfolio diversifier and an inflation hedge as well.

In recent years, many have invested in gold to protect against the global gloom-and-doom scenarios. Regardless of the reasons, experts all agree that the average investor might greatly benefit from gold, and specifically rare gold coins, to diversify and protect their portfolios.

Why Coins, Why Now?q

Coins have often soared during the historic decades of global depression or deep recession – like the 1930’s and the 1970’s. In fact, coins were one of the few and little known safe havens and positive investments in those trying times.

Could we be at the beginning of another such decade in the new millennium? The evidence is in. We haven’t seen this level of continued deep financial concerns since the 1930’s. Where we go next in the world is anyone’s guess; but having a heavy counterweight in rare coins will help your portfolio to survive.

Looking at long term charts of coin values, it is the rare time we see coins do worse than stay at one level. It is the norm for coins to increase to a new plateau…only to again rise. A look at the findings of the World Gold Council will confirm that. Even today, with the increasing number of eyes on the collectible coins, we still see increasing values.

Even when commodities drop significantly, coins still hold or increase in value. It’s important to note, however, that we are talking about superior coins here; average and lower grade coins fluctuate more and do not hold their value. Again, coin charts can easily confirm this.

When we do see coins dropping in value, it is usually due to an increase in the supply of a given issue. This is extremely rare with older coins, and even less rare for modern coins as new issues hit the market constantly. Knowing when and how to buy modern issues is the key.

Editor’s Note: How to avoid today’s most common gold scams.

Gold Coins Deliver Collector Value and Base Metal Value

Investing in gold offers two benefits; gold coins obviously have their own intrinsic base metal value, (measured in light of varying alloy compositions), but they also have collector value. For example, by collecting gold coins, you can stay one step ahead of inflation or stay afloat during market corrections; but you can also benefit from their intrinsic value, mainly due to the fact that they are collectors’ items. And rare coins can play a major role in diversifying your portfolio.

But with all the contrasting investments available, how does one settle on one or two particular choices? Novice collectors should look first to gold coins minted by recognized national mints.

2For example, Gold American Eagles are the #1 most popular gold coins in the world. American Eagle coins can even be put into individual retirement accounts, or IRAs. The 22 Karat Gold American Eagles from the U. S. Government Mint sell at the prevailing price of gold plus small manufacturing and distribution costs. And most importantly, Eagle’s gold content and purity are guaranteed by the U.S. Mint.

The next most popular gold coins are produced by the Canadian Mint (24K Maple Leaf), the Austrian Mint (24K Philharmonic) and South African Mint (22K Krugerrand). There are other countries producing similar coins but with a lot of counterfeiting going on globally, stick to more well known coins for now.

It is absolutely imperative that you find and settle on a dealer whom you trust as the source of your investments. In my next article, I will show how to find a trusted dealer.

Overall, American Eagles are easy to buy and sell at most coin and precious metals dealers and they are welcome in major investment markets worldwide. Many buyers demand the high degree of liquidity and lower dealer buy-sell spreads that American Eagles offer.

If you buy gold coins, it is best to store your American Eagles or Canadian Maple Leafs in a safety deposit box or a home safe rather than with a dealer. Physical possession is best to avoid dealer scams.

Comparing Your Gold Coin Options

Gold coins are internationally recognized forms of pure gold or near pure (22 karat) gold in concentrated form. With silver coins, most are at least 90% silver, even the ancient types such as the Spanish ‘treasure’ coins of the New World. Most modern day mints put out .999 to .9999 fine silver. If melted down, these coins would produce near perfect silver or .9999 fine silver. The gold coin dealer or national mint is your guarantee of authenticity. The disadvantage is however, that you can experience small gains, or losses much greater than bullion prices, unless a low mintage bullion coin becomes popular later and develops into a collector premium. Premium is simply, the value added by the market over actual bullion or ‘melt’ value.4

Numismatics is the study or collection of currency, including coins, tokens or paper money. While numismatists are often characterized as students or collectors of coins, the discipline also includes the broader study of money and other payment media used to resolve debts and the exchange of goods.

Numismatic coins are the concentrated forms of wealth so that more value can be saved in smaller space. Over time, quality numismatic coins generally grow faster than common coins in price. According to a recent 30-year study by Penn State economics professor Raymond Lombra a basket of 3000 rare coins (called the PCGS 3000 index) far outperformed gold and common coins during the 1970 to 2013 era. Gold Eagles are eligible for Individual Retirement Accounts (IRA) and appreciate tax-free until liquidated.

Tips for Buying Your Gold Coins

Before investing in gold coins, understand all the caveats. Prices fluctuate wildly, and gold coins aren’t meant for trading. Experts agree that you should hold them a minimum of three years.

In addition, dealers typically don’t take credit cards for gold purchases, and may only accept cash. Many times, you must use a bank wire or cashier’s check to pay for the coins. This is always risky as you may not be able to get your money back, should the dealer prove to be a scammer.

Here are some more tips to buying gold coins.

  1. Avoid the Scams if any dealers are offering free storage or delayed delivery, beware. Once you buy your gold coins, not trust anyone who says they can “store them” for you in lieu of you taking possession.
  2. Compare dealer prices aside from the proof version, the U.S. Mint doesn’t sell American Eagle gold coins directly. But there is a dealer location tool on the Mint’s website. Because coins sell at a premium above gold’s spot price, comparing prices among dealers is easy, too. There are several precious metals exchange sites to help you in your comparison. And whatever you do, do not pay more than 5 percent premiums for gold bullion coins.
  3. Avoid buying gold on auction sites which due to emotions and desire to own, one can often brush aside good thinking.  Have a maximum price in mind so you are not ‘pulled’ into an undesirable premium and don’t exceed it. Usually that item can be obtained in other venues.  Many auctions have buyers’ and sellers’ premiums added AFTER the auction, which can be excessive. .
  4. If at all possible, buy 1-ounce coins American Eagle coins are issued in four denominations: 1-ounce, half-ounce, one-quarter ounce and one-tenth ounce. But the fractional coins carry higher premiums above spot prices vs. the 1-ounce versions.
  5. Carefully Pack and Track if Selling if you are selling coins and shipping them back to dealers, make sure you pack them in coin protectors, wrapped in bubble wrap. Then, make sure to track the package by sending it via registered mail, Express Mail, or use a service such as FedEx or UPS. And most of all, make sure you insure the coins for their full value.

Happy Gold Hunting,

Brian Bobbitt

 Brian Bobbit, is an avid coin collector and agent, a former Precious Metals Broker for International Precious Metals Corp. in Pompano Beach, Florida, and a former Commodity Broker for International Trading Group in Coral Gables, Florida. He is a Member of PCGS, the Professional Coin Grading System (2nd largest and 2nd most respected coin grader) and NGC (National Grading Corp., Grader for American Numismatic Assoc.), as well as a Member of the Palm Beach County, Fort Lauderdale, Hallandale, and Melbourne Florida Coin Clubs. 

*Editorial Contributors’ Disclaimer
American Eagles are not subject to the United States broker reporting requirements while Maple Leaf gold coins, Krugerrands are. However, I am not a tax consultant; therefore, please consult your own tax adviser for ANY tax consequences of numismatic investing.