Are Gold Coins Profitable Investments?

Gold investment is one of the world’s oldest and most practiced forms of investment. People have been buying gold for centuries to secure their wealth and prepare for the future. Many consider gold an excellent investment because it is rare, durable, and has a long history of holding its value.

Today, there are several ways to invest in gold, such as through gold bars, coins, and ETFs. Gold ETFs have become a popular investment option because investors do not have to worry about owning, storing, or insuring physical gold. They invest in the gold ETF and hold it in their investment portfolio.

But are gold coins a good investment? How do they differ from other forms of gold investment, and how profitable could they be? This article will discuss gold coins investment in detail.

Why You Should Invest In Gold Coins

Gold coins have several advantages that make them a wise investment choice. Gold has proven to be the go-to option for hedging against economic downturns and inflation. Here are some reasons that make gold coins a profitable investment:

They Are Liquid Assets

Gold coins are easy to buy and sell, making them liquid assets. That is because they’re recognized by dealers and investors all over the world. You can, therefore, easily convert your gold coins into cash when you need it, unlike other investments, such as real estate, that can take months or even years to sell.

The liquidity of gold coins makes them a good investment when taking advantage of market swings to make profits. For example, if the price of gold rises and you expect it to continue going up, you can buy gold coins and sell them when it reaches your desired level. It will be easy for you to sell your gold coins because the demand for gold is always high.

They Are A Good Store Of Value

Over the years, gold has proven to keep its value despite economic fluctuations. It makes it a good store of value for investors who want to preserve their wealth. For example, during the economic recession of 2008, the price of gold rose while the stock market and other investments fell in value.

Additionally, gold gained value strongly against other currencies during the COVID-19 pandemic and reached a decade-high of USD $2063.19 per ounce in August 2020. It means that if you had invested in gold coins during that period, you’d have made huge profits, unlike when investing in other commodities.

Hedge Against Inflation

Inflation is the general increase in the prices of goods and services in an economy over time. When inflation increases, the purchasing power of your money decreases. That is because you can’t buy as much with the same amount of money as you could have a few years ago. Inflation is one of the most considerable constraints against assets backed by fiat currency because while you may make profits on paper, the value of your money may have decreased.

Gold is a good hedge against inflation because it’s not affected by printing more money. Gold often increases in value when there’s high inflation in the economy. It makes gold coins a good investment for people who want to preserve their wealth during periods of high inflation. It always has a negative correlation with the US dollar, meaning gold prices tend to rise when the US dollar weakens.

Increasing Demand And Supply Constraints

Gold has kept its value over the years because of increasing demand and supply constraints. The demand for gold is always high because it’s used in various industries such as jewelry, electronics, and dentistry.

Additionally, gold is a popular investment choice for people who want to hedge against economic downturns. It means that the demand for gold increases during periods of economic uncertainty.

At the same time, there’s a limited supply of gold. That is because it takes a long time to mine and process gold. The cost of finding and mining new gold is increasing as the easy-to-find gold is already gone. It means that the price of gold will continue to rise as the demand increases and the supply remains constrained.

So, if you invest in gold coins today, you can be sure of selling them at a higher price in the future due to their limited supply. It will make it one of the most profitable investments in the long run.

Portfolio Diversification

AdobeStock 507503814 1

Your portfolio needs to be diversified to reduce risk. It means you shouldn’t put all your eggs in one basket by investing only in stocks or real estate. You should diversify your portfolio by including other assets, such as gold coins.   

Gold is an excellent asset to include in your portfolio because it correlates poorly with other asset classes. It means that when the stock market crashes, gold prices often increase. It makes gold an excellent asset in your portfolio as it can help offset losses in other investments. Moreover, gold has been shown to provide stability to portfolios during periods of volatility. It makes it a good investment for risk-averse people who want to preserve their wealth.

Tax Benefits

Gold coins are only taxable when you sell them. That is because they’re considered long-term investments. You’re eligible for the long-term capital gains tax rate when you hold gold coins for more than 12 months. It is much lower than the short-term capital gains tax rate, which you’re taxed at when you sell an asset that you’ve held for less than 12 months.   

So, if you’re looking to invest in gold coins, you should do so to hold them for the long term. This way, you can take advantage of the lower long-term capital gains tax rate and maximize your profits. 

Things To Know Before Investing In Gold Coins

As gold coins could be a profitable investment if done at the right time, and after proper research, there are a few things you need to know before investing in them. They include:

The Right Time To Buy

Timing the market correctly is crucial to making a profit from your investment. You want to buy gold coins when the price is low and sell them when it is high. You can look at a few things to help time the market correctly.

The first thing you should do is look at the economic conditions. When there’s economic uncertainty, the demand for gold will be very high, so buying gold at this time won’t be so profitable. You should wait until the economy is recovering and the USD is strong before purchasing gold. When the demand is low, the price is also common. Buy at that time and hold long term, or sell again when the demand is high.

Difference Between Gold Coins And Non-Physical Gold

One key difference between gold coins and gold ETFs is that they are physical assets, meaning you can hold them in your hand. Gold ETFs are a type of investment that tracks the price of gold.

Gold stocks are a type of equity investment that represents ownership in a gold mining company.

Gold stocks are more volatile than gold coins and ETFs, but they offer the potential for greater returns.

Gold coins may not provide as much upside potential as gold stocks because they are not dividend-rich assets.

Drawbacks Of Gold Coins

Another critical factor you should know before investing in gold coins is the risks that come with it.

Gold coins are susceptible to the market’s uncertainties, just like any other investment option. First, investing in gold coins does not generate income like investing in gold stocks. It will mean that you’ll only earn after selling your gold coins.

You may be forced to wait several years before selling your coins to make meaningful profits.

Secondly, the associated storage and insurance costs of gold coins are always high and could affect your profits.

Remember, gold is very precious and in high demand and can easily be lost or stolen. If you invested in gold stocks or ETFs instead, you wouldn’t have to worry about insurance and storage costs.

How To Invest In Gold Coins

When investing in gold coins, you must ensure that you do it correctly. How you invest determines how successful your investment will be. Here’s a guide on how to do it correctly:

Buy Coins From A Reliable Seller

The first thing you should do when investing in gold coins is look for a reliable and trustworthy dealer.

It is crucial because the value of your investment depends on the quality and purity of the coins you purchase.

First, check on the reviews other buyers have given about the dealer. Are the reviews positive or negative?

You should also ask around for recommendations from people you trust.

Secondly, when buying from companies such as Infinity Coins and other online dealers, you should visit their sites and check their credentials.

They include the Better Business Bureau (BBB) rating and whether they’re members of professional organizations such as the American Numismatic Association or the Professional Numismatists Guild.

These professional organizations require members to adhere to a strict code of ethics.

Check The Purity Of The Coins

The purity of a gold coin refers to the amount of gold present in the coin. It is measured in karats, with 24 karats being the purest form of gold.

Most gold coins have a purity of 22 or 24 karats.

The next thing you should do is check the weight and dimensions of the coin.

The standard gold coin weighs one troy ounce, equal to 31.1 grams. The dimensions of a gold coin also differ depending on the type of coin.

For example, a Gold American Eagle coin is 1.287 inches in diameter and 0.117 inches thick, while a Gold Maple Leaf coin is 1.18 inches in diameter and 0.113 inches thick.

Choose The Right Type Of Gold Coin

There are many different types of gold coins available for investment purposes. Some popular options include Gold American Eagle coins, Gold Canadian Maple Leaf coins, and Gold South African Krugerrand coins.   

Gold American Eagle coins are a good choice for investors because the United States government backs them. It means the coins are guaranteed to be of a certain purity and weight. Gold American Eagle coins are also easy to buy and sell because dealers and investors widely recognize them.

Gold Canadian Maple Leaf coins are another popular choice for investors. These coins are produced by the Royal Canadian Mint and backed by the government. Maple Leaf coins are widely recognized and are easy to buy and sell.

There are other different gold coins, and you should therefore ensure you do your research on what coin you want and the backing it has before investing.

Get The Full Cost Upfront

After you’ve found your ideal gold coin dealer, you should get a quote for the total cost of the investment. The dealer should give you the entire cost upfront, including shipping, insurance, and storage fees.

You should also ask about the buy-back policy if you want to sell your investment. A good dealer should be willing to buy back your coins at the current market value.

Insure Your Gold Coins

Investing in gold coins is smart, but you should also insure your investment to protect yourself against loss. Gold is a valuable commodity; insurance is vital if your coins are lost, stolen, or damaged.

Store Your Coins Safely

Finally, you should think about storing your gold coins in a secure place. Many investors choose to keep their coins in a safety deposit box at a bank. Others opt for home storage using a fireproof and waterproof safe. Alternatively, you can ask your gold dealer if they offer storage services.   

When storing your gold coins at home, it’s best to keep them in an area that’s not accessible to children or pets. You should also make sure that your insurance policy covers your home storage.

Bottom Line

Investing in gold coins can be a very profitable business if it’s done correctly. First, you must understand how and where you can buy your gold coins, the type of ones, and how to insure and store them. Once you get this right, your investment will be worthwhile, as you’ll have security against inflation, store value, and tax benefits.

However, you should also consider the drawbacks of investing in gold coins, such as not generating revenue until you sell. Also, the risk of the coins getting lost or being stolen. Having all this in mind will make your investment worthwhile.