Investing in gold and other forms of gold like bullion or bars as a means of hedging against inflation has been around for a very long time. You can expect to pay a premium to own a historical piece that is a collector's item, but you typically get back that premium when you sell your gold coins.
The market value of gold coins closely tracks the spot market, but has the premium added on. As with stocks, you should expect to pay a "spread" between the buying price and selling price when investing in gold coins
. This spread can range from a few pennies (in the case of small fractional ounce coins, for example) |to 5% or more, depending on the dealer.
Gold as an inflation hedge
The reason gold collector's coins are such a great investment vehicle to protect against inflation is that gold for thousands of years has been a safe haven form of currency. It doesn't depend on banks for its value, the Federal Reserve, the International Monetary Fund, the European Union, or anything else. It's value is purely based on supply and demand.
As paper currencies (i.e., currencies that are not backed by gold or other precious metals) are manipulated by politicians, the value of those currencies fluctuates. Gold prices can vary dramatically relative to those policy changes, so as a fiat currency becomes worth less the value of gold denominated in that currency can go up dramatically.
Using gold to hedge against bank failure
Many analysts are predicting a dramatic worldwide banking collapse. If that happens, it is a very good thing to invest in gold because you can use gold coins as items of value to barter with. This means you can buy and sell daily necessities between private parties using gold if the monetary system ever fails. If you believe the banks are in danger of failing, then investing in gold
is probably a good choice for you.
Next: Open a Forex Trading Account