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Stock Market Slide is Big for Gold Sellers

October 10, 2011

As the stock market slides and people remain uncertain about the stability of the global economy, many investors are becoming gold buyers as they seek a measure of safety in the most widely recognized of the precious metals. For those who are in the market to buy gold, three common ways to do so are to buy gold coins, buy gold bars, or buy gold jewelry.

There are generally two kinds of coins that gold buyers will purchase as an investment vehicle: bullion and numismatic. Bullion coins are valued strictly for their gold content, two examples of which are the South African Krugerrand and the American Gold Eagle. Numismatic coins are valued as collector’s items and will sell at a premium above the melt value of the coin, depending on its quality and rarity.

Traditionally, people who want to buy gold for investment purposes will buy gold bars, which tend to sell at less of a premium above the market price of un-minted gold. However, because a gold bars greater volume, they are more prone to counterfeiting and “salting” with tungsten, which has the same weight as gold.

Perhaps the most common way that people purchase gold is in the form of jewelry. Jewelry may be the most expensive form of gold investment as it is often priced far above the melt value of the gold content. However, with the recent skyrocketing of the price of gold, the jewelry premium has shrunk as people come to value gold content more than craftsmanship or sentimentality.

Whether you are an investor looking for a safe harbor in a troubled equity market, or someone who simply wants to own something that will retain it’s value no matter how bad the economy gets, then buying gold in the form of coins, bars, or jewelry might be viable option.

Keep in mind, however, that owning physical gold is only as secure as the place it is stored. If you plan on owning gold, you also have to plan for its storage, especially if you are interested in keeping gold in the volume of gold bars.

For investors who don’t want to deal with storing gold physically and prefer the liquidity of equities, there are exchange traded funds (ETF) that have been established to track with the price of gold. However, ETFs can have risks associated with them that are entirely independent of the underlying price of gold. To have the purest exposure to gold is to own gold.