Holding Physical Bullion and Bullion Coins

Pros: There is peace-of-mind knowing that "the goods" are secure and in your possession. There is no middle-man between you and your precious metals. The most liquid form of money. Go anywhere in the world and someone will be willing to exchange goods or services for your gold or silver. Another bonus is that currently there is no capital gains tax on bullion transactions as there are on most other assets. This may change in the future.

Cons: It is somewhat of a liability to hold large amounts physically in your possesion or in your home. As a practical solution, I advise holding enough bullion to get you through 4-12 months of living expenses should all hell break loose and financial chaos insue. This is INSURANCE. It's something you hope you will never have to use, but you'll be glad it's there when you need it. Again, the actual amount is entirely under you discretion and should correlate in some part to how paranoid you feel about the current state of the financial markets. In short, if you are having trouble sleeping at night for whatever reason, then make the necessary adjustments whether it be accumulating more or sending some bullion off to storage. (I'll go over this in another article)

Holding Physical Bullion and Bullion Coins
There are several ways to invest in gold. The most secure and necessary form, in my opinion, is to keep a private stash of bullion close at hand. Preferably hidden where only few know where it exists, and those few in the know should be trustworthy, for obvious reasons. The bullion can be in the form of bars or coins. There are several reputable firms that deal in the metal. You can buy them over the phone, online or by going to the actual store and handing over your cash. I prefer going to the store to get my coins and bullion since there is no paper trail. Coin brokers are very understanding about ones’ wishes to remain anonymous.

As far as bullion is concerned, there’s not much to be said. An ounce of gold is worth an ounce of gold. You will typically pay a bid/ask spread of between 2-5% of the price of gold at the time. Anything more and you’re getting ripped off. As an example, let’s say you want to purchase a one ounce bullion bar. Gold is trading at $900. When you buy that moment, you could purchase at $912 and sell back at $894. The difference would be $18, which would be the spread. That $18 equals 2% of the $900 price. Typical gold bullion bars will have much smaller spreads since there is a lot less effort that goes into their production, whereas considerable effort is put into creating the beautiful bullion coins. So expect to pay higher “collector premiums” for bullion coins.

What type of bullion coins should I be looking for?

There are several types of bullion coins that governments around the world mint every year. The most popular and widely accepted coins are as follows: (in no particular order)

1. American Eagle from the US

2. Krugerrand from South Aftica

3. Canadian Maple Leaf


There are several others such as the Chinese Panda, British Britannia, Australian Gold Nugget but I deal mainly with the 3 mentioned above since they are very well recognized. In the end, however, it is a matter of preference. Some of the coins that are produced are truly a sight to behold.

All come in the one ounce form and some come in ½ oz 1/4oz and 1/10 oz forms.

As a side note, I should also mention that silver versions of the bullion coins are available as well and there should be a good mix of silver in your portfolio as well. I will go into the investment case for silver in detail in another article but as it currently stands with gold at $906/oz and silver at $17.28/oz silver looks highly undervalued. The historic relationship between the two is 16:1. So based on historic trends, an ounce of gold should be worth 16 ounces of silver, and silver should theoretically be trading at $56.62, which would be above it's 1980 high of $49.45/oz. This makes sense considering that gold has broken through its’ historic 1980 high of $850 and is now trading upwards of $900. Platinum has broken through its previous record of $1,563 and is pushing near $2000.

I believe these present a strong case for diversification into silver, especially at these prices. There’s much more coming….

Editor for Gold-Speculator.com
Pip Tradewell

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