All About Buying Gold | Gainesville Coins Learning Center

Buying Gold

By Gainesville Coins
Published February 11, 2015

Investing in gold coins and bars has become an integral component of asset diversification for many investment portfolios. Gold has long been sought after for its beauty, monetary value and unique physical properties. Since the beginning of recorded human history, it has been used in jewelry, coinage and industrial production. More recently however, the focus of buying gold has shifted toward owning it as a store of value and investment.

Facts About Gold:

  • Since the beginning of recorded human history, roughly 5.3 billion troy ounces – about 8,500 cubic meters - have been mined.
  • Gold is chemically inert, i.e. it does not react with other elements. As a result, it does not oxidize or “rust” in air or water. It also does not cause skin irritation. If gold jewelry irritates the skin, it is likely that the gold was mixed with some other metal.
  • Gold is used in the production of many modern electronic devices and audio equipment. Its relatively high conductivity makes it the preferred metal for these applications.

While there are many ways to own gold, many buyers of "the yellow metal" choose to do so in the form of gold bullion are shown here:

Why is Buying Gold a Good Idea?

Gold and other precious metals have become a standard asset class in many investment portfolios. Because gold's correlation with other assets, such as cash, stocks and bonds, is less than 1, adding gold to an investment portfolio enhances that portfolio's risk/return profile. The diversification benefits that accrue from owning precious metals is arguably the most significant reason for its inclusion in an investment portfolio.

Gold as an investment benefits from its historic monetary role, and its current reputation as a stable store of value. This is in sharp contrast with the value of "paper" currencies such as the U.S. dollar which has been steadily weakening in purchasing power over the past several decades. The volatility of other asset classes such as equities has also prompted a search for a more stable and less volatile investment option. For instance, in the first week of January 2000, gold traded below $282/oz. On June 18, 2010, an ounce of gold sold for $1,261.90, representing an increase of 347%. Over that same time period the Dow Jones Index decreased from 10,921.91 to 10,450.64. While there were certainly spikes along the way (as high as 14,093.08 in October of 2007), this disparity illustrates that the perception that stocks are the best returning asset for long-term investors is not necessarily true. Investors who diversified into gold and stocks achieved a much higher rate of return with lower levels of volatility. Moreover, the consumer price index (CPI) – the main indicator of inflation - increased 27% in that time period, representing an identical decrease in buying power for all those holding dollar-denominated assets.

Invest in Precious Metals

Recent global political and economic events have proven just how volatile modern investment instruments can be. Investors wishing to lower the level of volatility in their portfolios are turning to gold for diversification.

Gainesville Coins carries a wide inventory of gold coins and gold bonds for you investment needs. You can order gold online, or call Gainesville Coins at (813) 482-9300 to discuss your investment options in gold today. One of our experienced representatives will help you make your decision to buy gold and diversify your investments.

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