From 14K and 18K ’junk’ jewelry (vintage bracelets, earrings, rings, etc…) to old numismatic and new bullion coins, gold (and to some extent silver, platinum and palladium) has continued to climb in price at an alarming rate … but beware of jumping on the bandwagon, particularly with prices this high and (at least as of this writing) still rising. First, at least ask yourself: why do I want to buy this? Is it an inflation hedge, part of a larger investment portfolio, something I collect or an item to barter at the end of the world?
Gold as an Inflation Hedge: history has shown that gold does indeed ‘hold its value’ (as compared to fiat currencies), particularly during times periods of high inflation. To be fair, real estate and other commodities tend to as well to varying degrees, but few have been quite so persistent as precious metals over long stretches of time.
Gold as an Investment Strategy: studies have come to various conclusions (some of which conflict with one another), but a dominant opinion points toward gold being valuable within a stock-and-bond portfolio only insofar as it adds a non-correlated, inflation-protected component to the larger whole. In other words: gold can make sense as a serious investment, but has to be carefully weighed within a whole investment strategy. If you are just now thinking of buying gold for the first time, consider your motivations: are you chasing past returns or have you seriously studied the pros and cons of your choice?
Gold as a Hobby Collectible: everyone has there hobbies, and if you like having, holding and showing off old coins, so be it. Like any hobby, it can be cheap or expensive and fulfill various needs within your life – of course, this tends to have a lower barrier to entry than most (perhaps you should start with silver and work your way up).
Gold for Survivalist Barter: this is a widely debated topic with no clear-cut answer. In some serious disaster scenarios gold can be virtually priceless, purchasing one’s way out of a war zone or buying survival essentials when local currencies go bust. Beyond a certain point, it may or may not hold its value – a sharp stainless steel knife or pack of salted crackers could save your life in a situation where gold would not. In this case, clarify again for yourself what the role of gold (and/or other precious metals) is within a larger survival plan – this white/yellow metal will do wonders in some cases but without food, water and shelter it is just another shiny rock.
Now comes the tricky part: most people want gold, silver, copper or whatever else for more than one of the above reasons. This is why it is particularly important to be clear about your own purpose for ownership. If you want it for end-of-world scenarios, then holding a paper slip (or digital, for that matter) may not do you much good when lines of communication go down or databanks are destroyed. For investment purposes, though, it is exceedingly impractical due to risks and costs to have gold physically on hand, making stocks, options or other such holdings ideal. Then again, collectors can amass a great deal as well – too much to have in their home – which could make secret hiding spots a tad too risky and a local bank vault (with personal safety deposit boxes) the best bet. The key, regardless, is not to go to extremes – holding just gold will likely end up being a lot like holding just cash … sure, it holds its value, but it doesn’t appreciate consistently or throw off dividends like stocks and bonds. A mix may be best, depending on your goals, and a rule of thumb might be: no more than 5% to 10% of your holdings, regardless.