Gold Coin Investment: American Anniversary Edition

Gold coins have always been a part of traditional investment plans. They are a good investment option for collectors and investors alike. Gold coins are a tangible asset that can be easily liquidated. They are also a good investment option because they are indispensable in industries such as engineering, electronics, health, and the environment. Gold coins are also a good investment option because they resist corrosion, can be stored in a relatively small space, and hold their value well.

Gold as a store of value

Gold has been used as a store of value for thousands of years. Its rarity, coupled with its non-corrosive and non-consumable nature, makes it an ideal store of wealth.

Gold has been used as a medium of exchange since ancient times, with the ancient Egyptians using gold for jewellery and religious artefacts. Around 560 B.C.E., gold started to be used as a currency, with merchants creating a standardised and easily transferable form of money by stamping gold coins with a seal.

Gold's importance as a store of value continued to grow, with the metal being used as a medium of exchange by the Greek and Roman empires, and later by Great Britain, which developed a gold-based currency in 775 A.D. The British pound, shillings, and pence were all based on the amount of gold or silver represented.

Gold's role as a store of value was further solidified in the 19th century with the emergence of the gold standard, which was adopted by the U.K. in 1821 and later by many other countries, including the U.S., Australia, Canada, and Germany. This system ended at the outbreak of World War I in 1914, but attempts were made to resurrect it after the war.

Today, gold is still recognised as a store of value, with central banks and multilateral financial institutions holding almost one-fifth of the world's supply of above-ground gold. Gold has successfully preserved wealth throughout thousands of generations, which cannot be said for paper-denominated currencies. For example, one ounce of gold in the early 1970s was equivalent to $35. Today, that same ounce of gold has increased in value, while the purchasing power of $35 has been eroded by inflation.

Gold is also a hedge against inflation and a safe-haven asset during economic uncertainty. Its value is expected to appreciate in the face of rising inflation, and investors often flock to gold as a safe investment during times of political and economic turmoil.

Gold's enduring value, coupled with its role as a safe-haven asset, makes it a compelling investment, particularly in volatile or unpredictable markets.

Gold as a safe haven

Gold is widely considered a safe-haven investment in times of economic and political uncertainty.

Gold is a finite resource that has been recognised as a means of trading and storing wealth for thousands of years. It is also impervious to the actions of centralised institutions, making it a good hedge against inflation and a store of value through market ups and downs.

Gold is a safe-haven asset that is uncorrelated or negatively correlated with other assets or portfolios during market stress or turmoil. In other words, when the market is volatile, gold retains or increases its value while other assets decline.

Gold's safe-haven status also makes it a good portfolio diversifier. Adding gold to a portfolio decreases exposure to risk, even if it doesn't necessarily increase returns.

However, gold's safe-haven features may change over time, and it is not a safe investment against any particular asset class. It is also important to note that gold does not pay dividends or interest, so investors could lose money if their fears of economic turmoil do not come to pass.

There are several ways to invest in gold as a safe-haven asset:

• Exchange-traded commodities (ETCs)
• Physical gold, such as coins or bullion bars
• Gold shares
• Gold funds

Gold as a diversifying investment

Gold is a valuable asset that has been sought after for thousands of years due to its scarcity, durability, and widespread acceptance as a store of value. In modern investment portfolios, gold is a unique asset class that can offer several benefits. Here are some reasons why gold is a good diversifying investment:

• Hedge against inflation: Gold has historically maintained its value during periods of inflation, making it an effective hedge against rising prices. As the purchasing power of fiat currencies declines, gold's value tends to rise.
• Portfolio diversification: Gold often exhibits a low correlation with other asset classes, such as stocks and bonds. This means that gold's price movements are not closely linked to those of other investments, which can help further diversify your portfolio and reduce overall risk.
• Safe-haven asset: Gold is often viewed as a safe investment during economic uncertainty and geopolitical turmoil. Investors may flock to gold during market downturns, increasing its demand and value.
• Currency hedge: Priced in US dollars, gold can be a hedge against currency fluctuations for investors holding assets in other currencies.
• Low correlation with other assets: During economic uncertainty, gold often shows a low or negative correlation with other investments. When other assets in your portfolio experience volatility, gold's price may move independently, offering a buffer against potential losses.
• Opportunity for growth: Different assets perform well under varying market conditions. Diversification allows you to capitalise on opportunities for growth in different sectors or regions, potentially maximising your long-term returns.

Gold can be a valuable addition to an investment portfolio, providing diversification, a hedge against inflation, and a safe haven during uncertain times.

Gold's volatility

However, gold's volatility also comes with risks and costs. The price of gold can fluctuate significantly over short periods, making it difficult to predict its value and potentially leading to losses for investors. Therefore, investing in gold requires caution and thorough research, especially when considering the various investment options available, such as physical gold, gold funds, gold stocks, or gold futures and options.

Overall, gold's volatility is a double-edged sword, offering potential gains and a hedge against inflation but also carrying the risk of significant price fluctuations. Investors need to carefully weigh these factors before making any investment decisions.

Gold's liquidity

Liquidity refers to how easily an asset can be sold at a widely recognised fair price on the open market. Gold, like cash, is a very liquid asset. There are always active buyers and sellers for gold, including refiners, dealers, banks, and individuals. Gold is always in demand, whether for investment, jewellery, or other industrial uses.

Government-minted coins, such as the American Eagle, are widely recognised and can be sold or purchased in most parts of the world with relative ease. These coins are also backed by their respective governments, providing an additional layer of trust and security for investors.

The high liquidity of gold makes it an attractive investment option, particularly for those seeking to diversify their portfolios and protect their assets during market volatility and economic uncertainty.

Frequently asked questions