How to Overcome the Fear of Making Your First Gold Coin Investment
The idea of pursuing something new is always a bit scary. Of course, when it comes to making an investment, and especially in the case of a substantial investment, the stakes are a bit higher. Although, new can also be exciting, as it’s oftentimes the start of a new journey or path. We like to joke that we’re a coin dealer and part-time therapist and find ourselves spending a good deal of time addressing questions and trying to alleviate fears and concerns with new investors looking into their first gold coin investment.
These concerns, however, are not unwarranted, as there’s a substantial amount of information available online, a large portion of which is either inconsistent and/or inaccurate. Furthermore, expert marketers are attempting to prey on your emotions. This is done through fear, oftentimes referred to as the Fear of Missing Out (FOMO) or greed, by promising incredible returns if you just hold your investment for a stated period of time. We recommend that you avoid all this noise.
There’s a reason that you want to invest in gold coins, and that’s likely to preserve your wealth, maintain your purchasing power, and keep up with the ravaging effects of inflation.
If you agree with any of the reasons we mentioned or something similar, but don’t know where to go from here, keep reading, as we’re going to provide some helpful advice to help you overcome the fear of making your first gold coin investment.
Buy Gold Coins Now
Okay, so we mentioned FOMO in our introduction, but the best time to start is now.
Of course, taking the first step is typically the hardest. It’s much like trying to ride a bike. The first time is a bit nerve-wracking, but once you do it, you start to build some confidence, and once you get the hang of it, you can quickly master it if you dedicate the time to learning this new skill. Gold coin investing is no different.
We have met in the past with customers that were on the fence about investing in gold coins, ended up not making an investment, and shortly thereafter saw a spike in prices. These same customers decided to wait until prices pulled back to make that leap into gold coin investments.
The issue with this approach is two-fold…
One, when there’s strong demand for gold coins, they may be difficult to come by. Two, even if there’s a pullback in the spot price of gold, that doesn’t mean that the price of physical gold coins will decrease in value. In other words, premiums may increase to offset the lower spot price.
With that being said, we recommend that you begin your investment regardless of the gold price.
If the spot price of gold is high and coin dealers are flush with inventory, you’ll be in a better bargaining position to negotiate a lower premium – especially when making a large purchase. If the price of gold is low, or other words “on sale,” consider yourself lucky and take advantage of the discounted rate.
This last point is important, as a drop in the price of gold can cause just as much hesitation on the part of first-time buyers as an increase in the gold price. There’s always the fear that the price could drop further. The drawback with this approach is that the price may just as easily increase while you’re waiting for a further decline.
Furthermore, it’s nearly impossible to time your investment just right so that you buy at the market bottom. If you do, it was likely just luck. Hesitating may cause you to wait until the price pulls back again, which may or may not happen, and may ultimately be a stumbling block to making your first purchase.
If this is your first gold coin investment, and you’re overwhelmed with the prospects of making your first purchase, you might want to dip your toe in the water and start small.
After all, it’s unlikely that the gold price will become out of reach in the short period of time that it will take to make your second purchase. The key is to get started. While getting started is the key, keep in mind that many coin dealers have a minimum, so you should expect to purchase at least a ½ oz gold coin. If your budget doesn’t allow this size purchase, you might want to consider an initial investment in silver or wait until you have the budget to make at least a ½ oz purchase.
Once you make your first purchase and feel comfortable with the process, you’ll likely be ready to add to your gold coin holdings. In many cases, that first purchase replaces customers’ fear with excitement.
We recommend that you take physical possession of your gold coin as opposed to having a coin dealer store it for you. While most coin dealers are honest and trustworthy, there’s counterparty risk whenever someone else has physical possession of your coins. As we like to say, if you don’t hold it, you don’t own it. There’s a similar saying in the cryptocurrency industry: “not your keys, not your coins.”
Gold coin options abound, so which ones are best?
We’ll address a few different options, which may help to narrow down which coins are best for you, your long-term goals, and your circumstances.
Gold Coin Options
Many different types of gold coins exist, but if we were to boil it down, we would say that there are three primary classifications. The most common and suitable for most investors are gold bullion coins. Before we continue, it’s important to define what we mean by a gold coin. A gold coin differs from gold bullion, as it is government-issued, is legal tender, and is guaranteed by the country of issuance to meet all weight and purity specifications.
Gold Bullion Coins
Gold bullion coins are simply government-issued coins that are bought and sold primarily for their underlying gold value. The most common size and cost effective on a per ounce basis are 1 oz coins. The South African gold krugerrand, first produced in 1967, is highest produced modern gold coin in the world. Other popular gold bullion coins, including their first year of issuance, are the 1 oz Canadian gold maple leaf (1979), the 1 oz American gold eagle (1986), the 1 oz Austrian gold philharmonic (1989) and the 1 oz American gold buffalo (2006).
Semi-Numismatic Gold Coins
For folks unfamiliar with the term, numismatic refers to a coin that has collectible value. Semi-numismatic coins are coins that have both bullion and collectible value, with the gold value being the primary driver of the coin’s worth.
Examples of semi-numismatic coins are common date pre-1933 U.S. gold coins. $20 Liberty Head, St. Gaudens, $10 Liberty Head, $10 Indian Head, $5 Liberty Head and $5 Indian Head gold coins. Premiums will vary based on the condition of the coin and the market for the coins at your time of purchase. These coins are especially popular among investors who are concerned about government confiscation.
Numismatic Gold Coins
These are coins that are valued based on their collectability as opposed to their underlying gold coin. The value of numismatic coins can run the gamut from a few hundred dollars upwards of hundreds of thousands of dollars.
Some of the most popular options include:
- Proof American gold eagles
- Dahlonega, Charlotte and Carson City-issued pre-1933 gold coins
- Obsolete denominations, such as $1 and $3 gold coins
- High-end professionally graded or certified coins
These coins are most suited for collectors as opposed to investors. We recommend that you educate yourself before delving into this category. The reason is two-fold. These are the highest margin or commission items that a coin dealer sells, giving them financial incentive to recommend these coins. Secondly, the price that you pay for these coins will determine when or if you’re able to realize a profit in the future when the time comes to sell.
Once a new gold coin investor decides which category is best for them, they often get hung up on which gold coin to purchase. They want to know “which coin is best.” The nice thing is that there’s no right or wrong coin to purchase, especially in the bullion and semi-numismatic categories.
Generally speaking, U.S. gold coins trade at higher rates than foreign gold coins. This is because the U.S. Mint charges coin dealers higher rates than foreign mints charge. Furthermore, there’s a home country bias, and in some cases, demand may outstrip supply, which will push up premiums. The most popular and widely traded 1 oz gold coins in the U.S. are American gold eagles and American gold buffaloes.
However, that doesn’t mean that the foreign gold coins we highlighted above, including others, aren’t sound investments. In fact, from a worldwide perspective, some of the other coins may be as recognized, if not more so, than the American gold coins. Furthermore, they trade at a lower premium, and typically only nominally above gold bar rates, which makes them more affordable.
You really can’t go wrong with any modern-issued 1 oz gold coins from a recognized mint. In addition to the coins we highlighted above, we regularly trade and deal in 1 oz Australian gold kangaroos, 1 oz British gold britannias, 1 oz Mexican gold libertads, and 1 oz Chinese gold pandas. We suggest that you steer clear of some of the more obscure gold coins, as the market may not be as liquid for these coins when the time comes to sell.
One other point regarding diversification is that some of our customers are concerned about gold coin confiscation, as there’s precedent for this in the United States. In 1933, FDR signed executive order 6102 making it illegal for U.S. citizens to hold gold coins. An exception to this order was numismatic or collectible coins.
Considering pre-1933 gold coins are semi-numismatic; the belief is that these coins won’t be subject to confiscation if we saw a repeat of executive order 6102 in the future. Because of this, some of our customers choose to purchase these coins for diversification purposes, and for those individuals who are extremely concerned about confiscation, choose to solely invest in this category of coins.
Buy Gold Coins Locally
There’s the misconception that buying online is always cheaper than buying locally. That certainly appears to be the case with many products. For example, if I want to buy an ink cartridge for my printer, I know that I can purchase it from Amazon for nearly half what my local electronics store will sell it for.
However, when it comes to coins, most local coin dealers, at least those that keep their finger on the pulse of the market, know what the major online dealers are selling items for and do their best to compete with these prices. Some local coin dealers view online dealers as direct competitors, as we do, while others are more focused on what other coin dealers in their local vicinity are charging for various gold coins.
Find a local coin dealer that is willing to compete price wise with online dealers. Granted, some major online dealers sell north of a billion dollars of product a year, and benefit from economies of scale, so your local dealer may be slightly higher, but it’s well worth the additional expense, if any.
When purchasing gold coins online, there’s no one there to answer your questions or address your concerns. This is extremely important, especially if you’re a first-time buyer, as inevitably you’re going to have a few questions before making your purchase. This is expected, and most local coin dealers are ready and willing to assist.
Another positive in dealing locally is that you can take immediate possession of your coins. This helps to eliminate the stress of tracking your package, making sure that you’re home to sign for it, and running the risk of the shipping company leaving the package on your front porch, which has been known to happen.
Consult with a Local Coin Dealer
While coin experts are happy to assist, it’s important to be respectful of their time, as they have a business to run. If you’re a first-time buyer, coin dealers expect you to have some questions, but if you have more than a few questions or are interested in getting an education in coins and bullion, you might want to consider scheduling a paid consulting session. Note that this doesn’t necessarily apply if you’re making a substantial purchase, as the coin dealer will be receiving a fee in the form of brokerage fees or commissions.
Assuming that you’re making a small to moderate size purchase, a paid consulting session will allow you to sit down with a coin expert and have all your questions answers. Most coin dealers are likely receptive to offering a consulting session, and on average, will charge a few hundred dollars per hour.
It’s similar to seeking the advice of any expert in their field, such as a CPA a doctor, or an attorney. While a coin dealer may not have a PhD in numismatics, they have specialized knowledge that has taken years to develop. Their time is valuable, and in most cases they’re happy to help, but also need to be compensated for their time.
If you’re going to invest the time and money to pay for a consulting session, we recommend that you jot down all your questions in advance.
Granted, some additional questions will likely arise during the conversation, but this will help to keep your conversation on track and will ensure that you have all your questions answered.
The order that you choose to go in is not as important as taking the necessary steps to begin an investment in gold coins. You may be completely new to the process and need someone to hold your hand, in which case a paid consulting session might be your first step.
On the other hand, you may have done your research, are ready to pull the trigger and have just a few questions for your local coin dealer. Most folks fall somewhere in between, so disregard those steps that aren’t applicable to you and your situation.
If you’re overwhelmed by all the options and sizes of gold coins, start small.
Choose a coin that will allow you to get your feet wet, but be warned, there’s something about holding a physical gold coin that is irresistible. Furthermore, when you compare it to your Federal Reserve Notes, which today looks like monopoly money, you’ll likely want to quickly move toward converting your fiat currency into real money, as the Founding Fathers intended, and in fact, is clearly stated in the Constitution.
The gold coin experts at Atlanta Gold & Coin Buyers are highly qualified to answer all your questions. Furthermore, we regularly carry a supply of all the gold coins noted above, including others. Remember, the best thing you can do is to act now! Call us today at 404-236-9744 to begin your journey to accumulating real money and financial freedom.