Investments in Gold – Chapter 4: Guidelines for Investing in Gold

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Updated: Mar 5, 2019, 13:14 UTC

This is chapter number 4 out of 15. Read the rest: Read Investments in Gold – Chapter 1: Introduction Read Investments in Gold – Chapter 2: Advantages of

Investments in Gold – Chapter 4: Guidelines for Investing in Gold

This is chapter number 4 out of 15. Read the rest:

Read Investments in Gold – Chapter 1: Introduction
Read Investments in Gold – Chapter 2: Advantages of investing in Gold
Read Investments in Gold – Chapter 3: Disadvantages of investing in Gold

In the last two years, gold coins have appreciated tremendously to the extent that they have become extremely costly. Before buying any gold coins, there are several that you should look out for. With the internet at your fingertips, you are no longer restricted to the local dealer but instead have the entire repertoire of dealers who are listed online. Although you might get better bargains, that are also several additional factors to take into consideration as well when purchasing on the internet.

Regardless of whether you are buying online or from a physical store, always check the reputation of the dealer first. If you are buying from a store, check with the local Better Business Bureau anything regarding the business dealing of the store in question. See if the dealer is also a member of the Professional Numismatists Guild (PNG). The PNG is a non-profit body of experts in rare coins, paper money and precious metals. The primary objective of this body is to maintain a standard of professionalism among its members. Thus if the dealer is registered with the PNG, it mean that he has to follow a code of ethics laid out for the PNG.

If you are thinking of buying from Ebay, always check the feedback of the seller. Negative feedback should raise some warning bells. Even if the feedback is all positive, scrutinize carefully as some sellers may be selling low value items just to build up their reputation before moving on to high value items. For high value items, check if the seller is willing to use Escrow.com. With escrow, your funds are not released to the seller until you are satisfied with the item. Although there might be a fee involved in using escrow services, the peace of mind is well worth the fee payable especially when it comes to large sums of money.

One of the foremost difficulties in buying gold coins for collection is grading. Many gold coins have a big difference in value between the different grades. Furthermore, your perception of MS65 grading can be entirely different form that of a dealer. To avoid this problem, only purchase coins which have been graded by an impartial third party providing grading services. The major bodies providing grading services are ANACS, NCG, PCGS, NCS, ICG. Avoid the lesser known grading services whose grading may be questionable. In addition, make sure that the grading is current as past grading standards might have evolved into a different standard today. For example, what used to be MS65 several ago might be classified as MS63 or 64 nowadays.

Ensure that the seller practices a return policy which allows for a refund if you are unsatisfied with your purchase. This is extremely important especially if you are purchasing a non-certified coin- it doesn’t matter if the seller is an offline or online seller. You will want to have the option of returning the item and a refund when your grading service gives you a lower grade than what the seller advertised.

Always try to buy the rarest coin that is in mint condition which you can afford. The prices of collectible gold coins are also subjected to the laws of demand and supply. Many of these collectible coins sell at almost the price of the metal itself as there are more than sufficient supply to cover demand. For example, the South African Krugerrand is selling for about 5% above the price of gold. However higher grade coins are less in circulation and thus the demand for them will extract a premium very much higher than the current price of gold.

Like the equities markets, it is difficult to tell if you have reached the peak or trough of the coin market. Therefore be consistent in your investment. Over a period of time, you can better average out the cost of your investments rather than one lump sum in a single instance.