For as long as I’ve been writing this blog, and for at least two years before that, I’ve been interested in gold. Over this period I’ve maintained a roughly 10% allocation to gold in my portfolio – I’ve done this through two ETFs: GDX and GLD.
Even though I’m not a hardcore gold bug, I’ve recently come to believe that “paper” gold is not really gold. Unless you hold physical gold, you miss out on several advantages of gold ownership. In addition to its properties as an investment, gold also provides some protection against really nasty things like hyperinflation, confiscatory governments, and major counterparty failure for COMEX gold. Not to mention that it’s a completely untraceable form of wealth (unless you blog about it).
And the final reason: there is a growing disconnect between the physical and paper gold markets. Many coin shops and even the US Mint have completely sold out of physical gold. And there is a growing spread between what you pay for gold and the spot price.
So today, partly because of my investment thesis and partly out of curiosity, I purchased my first gold coin. I called all of the coin dealers in the Raleigh/Durham area and eventually found two that had gold coins. One shop had two coins – an American Eagle and a Canadian Maple Leaf – but wanted $140 over spot! Eventually I found a dealer who had a single American Eagle for sale at $80 over spot. I bought the coin and also had an interesting conversation with the owner of the store. In the end, it was a fun experience…. I’m hoping for a continued decline in gold prices so I can buy more!