Gold is wealth.
Why invest?
There was a time when money and currency were a synonym. But it is no longer true.
Why it is no longer true? If you don’t know, I’m sorry for waking you from the “money simulation world”. Please check what was a Bretton Woods system, what is fractional-reserve banking, or https://wtfhappenedin1971.com/. Banks do create money out of the air (literally!) and you can do nothing about it. Besides having real money in case of currency failure. The currency holds only because people believe it is worth something.
Gold is not an investment per se. It does not give dividends and does not give a fixed amount of cash every month like flats renting. But it is good for maintaining purchase power. For having a backup plan. Especially in high inflation times like today. But gold cannot be printed (at least the physical one). The amount of gold on the Earth is small and can’t be created on demand. It has always been a synonym for wealth.
An indisputable advantage of physical gold is keeping your money outside of the banking system. Buying, storing, selling, and if done correctly, no evidence left.
The idea of having something that will always be worth something resonates with me (heh, you will get that joke later in that article). Maybe, just maybe, you think the same.
Purity indicators & ounce definition
You might have heard names like “24 carats gold” or “999.9 pure gold”. Let me explain that.
999.9 is a millesimal fineness value. This means how much metal out of 1000 parts is in the alloy. Krugerrand is 916.7 gold, which means in the coin there is 91.67 % gold and 8.33% something else (in the Krugerrand, it is copper).
Carats/karats are simply 1/24 fractional indicators of gold purity. 22 karats (22 out of a possible 24) indicator means 916.7 (22/24) gold purity. Don’t mix it with carats for diamonds where it is a unit of mass (0.2 gram).
And one more thing. Saying “an ounce” when talking about gold or any other precious metals, in 99.9% of cases, it means troy ounce (31.10 grams), not the ounce (28.35 grams). Keep that in mind. Even in the United States and Great Britain, they do use standard ounces for weight.
Sometimes, the coins that we are talking about are called “bullion” coins.
Why 1-ounce gold coin is the best choice?
We need to explain two price shares.
A spot price is simply the money amount you would get for selling coins as scrap metal.
A premium is everything over the spot price, what you pay for the coin in the shop. Premium share includes tax, manufacturing process, seller margin, shipping, etc.
Buying coins with a weight closest to 1 oz [troy ounce], (31.1 grams, but get used to that ‘ounce’ name) would have a reasonable, small premium. The smaller the coin, the higher the premium. The cost of coin manufacturing is almost constant, so for the bigger coin that cost is more diluted.
But you don’t want to buy a 1-kilo bar. It is also about liquidity. It will be harder to sell the bar for $59,000 (today’s price), instead of 1 oz Britannia for $1850 (again today’s price). Also, if necessary, it would be better to sell smaller parts of the collection for current needs, instead of selling everything you have in one shot. And the same goes for buying.
Now we know we want 1-ounce gold coins. Here’s a list of the 6 most common ones.
- 1 oz South African Krugerrand, 917 gold, mixed with copper.
- 1 oz American Eagle, 917 gold, mixed with silver (3%) and copper (5.33%).
- 1 oz British Britannia and 1 oz Canadian Maple, 999.9 gold with amazing, modern security features.
- 1 oz Australian Kangaroo and 1 oz Austrian Philharmonic, 999.9 gold, but without any security features.
Google them and take a look at each of them. Buy the one you like. Or the cheapest one, available in your zone.
I don’t know all tax systems all around the world, but as far as I know, in most countries, gold investment objects are tax-free.
Certificates & Bars
Don’t bother with the certificates for coins. Some dealers offer to sell them for an additional small fee. Don’t bother. There is no direct connection between that exact coin and the certificate. Unless there is a number or id like it is with the bars. But this is not the case with coins. Someone can swap the coins and sell the fake ones with a genuine certificate. A buyer would verify the coin anyway, so why waste money?
Don’t go with the bars. They are more complicated to verify on your own without breaking the Certipack. Unless you have a spectroscope costing hundreds of thousands of USD. If you break the Certipack you just lose money. A bar without Certipack is a scrap. Also, it is easier to fake a bar with different metal rods, like tungsten which has almost gold density.
How to verify?
First things first, DO WEAR GLOVES. Cotton, latex, or rubber gloves are fine. You want your coin to be clean. If you touch it with your hands, you will leave on it spots of oil and sweat. Yes, that is bullion without numismatic value. But you want the coin to be clean and look brand new. Everybody likes the new look, not tired or worn-out. If you damage it, you won’t be able to sell that for the full price anymore.
20 years ago, to check the authenticity of a gold coin you could check the diameter, calculate the area, multiply by the thickness, and remember about unifying units of measure. Now weigh your coin and then compare the calculated volume and weight with the gold density (19.3 g/cc). And pray for no tungsten in the coin (19.25 g/cc).
Also, you can switch volume calculation to the usage of Archimedes’ principle.
Nooo. There has to be an easier way.
Sure. There is Fisch’s ruler. One special ruler for one coin contains dedicated holes to verify thickness and diameter, together with a scale-like mechanism to verify the weight. But it won’t be a collection if you buy only one coin type.
Someone even found out that coins can be verified by measuring the time that takes to go down on a magnetic slide (really, search for that on the internet). As gold and silver (but copper too) are diamagnetics, the coin slides slower than a fake with no magnetic effect. And magnets will attract if a coin contains iron.
Old school jewelers are using test liquid. They rub a coin on a touchstone and add test liquid to the filings. Depending on the metal, the liquid would change color. But it can be dangerous for you and it is highly destructible. Rubbing destroys the condition of a coin. Applying the liquid directly to metal leaves, not removable spots.
But I wouldn’t write that article if that would be so complicated, right?
The easiest way I know, to verify a coin, is a resonance (sound) test. But you did not hear thousands of coins to be able to verify that using your ear. Here’s when you can finally use your smartphone for something more than scrolling Medium. Download an app that would do it for you. Try searching for “Bullion test”, “Precious Coin Tester” or something similar. Install, find your coin, and test. Put a coin on your finger in a balanced position and slightly hit that with a pen, another coin, or anything similar you have handy. You will hear the long sound, dinggggggggg. It is a beautiful sound. The app will analyze the sound and let you know if it coincides with the pattern for the selected coin.
Of course, one type of test could not be enough, so make sure you test using a few different methods if possible. Take it to the hand, it should be surprisingly heavy. Check weight and size and compare that with the manufacturer's standards. Watch a video with the coin presentation. Pay attention to the details. Any mismatch is a red flag and a no-go.
Let’s do a small exercise here. There are two American Eagles 1 oz Silver below. Don’t worry these are silver coins, the game rules are the same. Verify on your own which one is fake and find as many mismatches as you can.
What are the specifics? What are the special signs, like the mint sign? Should the coin have a mirror effect or not? What is the font size and distance from the edge? Pay attention to the font, like the letter “U” on the tail. But also, don’t be too cheeky, that is the cheapest fake I have found.
Where to buy your first gold coin?
If you are a beginner, I suggest buying in worldwide known shops, e.g. you can check for Perth Mint distributors at https://www.perthmint.com/customer-care/find-a-distributor/.
Make sure the shop is verified and has a maximum of 72 hours for shipment. Don’t gamble buying from unverified sellers with a month's delay. They can disappear with your money.
You have to be 100% sure of the coin's authenticity. Investing in precious metals is a marathon. You won’t be able to go to the dealer after ten years and argue.
More experienced investors can try checking local announcement portals. Of course, the buy/sell lifecycle in the shop is against us. When you buy, you buy with the whole premium. When you sell, a dealer would like to buy as close to the spot price as he can. Or even below the spot price, if you encounter a very unfair guy or you live in a very tax-intensive country.
That’s where you can meet with other investors. You want to buy with a lower premium, the other investor wants to sell with a higher premium than the dealer’s 0%. Try meeting halfway. Been there, done that. Trust, but verify.
Confidentiality!
Don’t make a halo about your latest buy. The fewer people know, the better. Money loves silence. Real money likes it twice. Find your secret spot to hide your gold and don’t post photos on Instagram.
Other precious metals
Gold is not the only precious metal. The most common besides gold are silver, platinum, and palladium. But in most countries, they are subject to the VAT tax. But that is an intro to a completely different story.
Feedback needed
If you have a question, leave a comment, and I will answer, or even enrich this article with the description. Thanks!
