Gold coins: Time To Buy or Sell?...continued...
Is it time to buy or sell your gold coins now? I started talking about this on May 12th. I said I'd talk more about gold ongoing, so that's what I'm going to do now.
Buying gold coins is strange for many people. But what's really strange is the very fact that people think it's strange. You see, gold and silver coins were once considered money - not paper dollars or the "slug" coins we now have. (In case you didn't realize it, there's no longer any precious metal - specifically silver - in U.S. quarters or dimes. In fact, there's no nickel in nickel coins or copper in penny coins.)
But that's the way the world has gone. Few people today remember when gold and silver coins were the only money that people trusted and held on to. As a matter of fact, most people, if they even know that the only money people trusted at one time was money made from gold, silver or copper, think that's only because people back then were ignorant and unsophisticated.
Who can blame them? Is any of this taught in school? So how are people supposed to know anything about or understand anything about money. They just go about their business and assume the money they use is - well, real money.
Of course, the money we use is "real" - if by real you mean that you can use it to buy things. In fact, if you were to try to buy something in a store with a gold coin, you probably couldn't. The person you offered the coin to wouldn't know what to do with it.
But money is more than just a medium of exchange (meaning something you use when buy or sell something). It's also supposed to serve as a store of value.
When you look at the money we use strictly as a medium of exchange, it works just fine. But what about when you look at the money we use as a store of value? It doesn't really work very well.
In fact, since 1970, the money we use now has lost around 90% of its value. So if you took your money in 1970 and stuck it in your mattress, you would have lost about 90%. Not a very good store of value.
I was going to say "not a very good investment" but money as a store of value isn't supposed to be an investment. An investment - even a safe investment - entails some sort of risk. But money - specifically money in its role as a store of value - is not supposed to entail any risk.
Think about this. Doesn't it make sense? If you earn some money and decide you don't want to risk some portion of it, shouldn't you be able to just put it somewhere (yes even your mattress) and expect that it will be worth the same when you take it out someday?
Oh, you're wondering about inflation? Well, sure, we all know about inflation. As a matter of fact, so many of us know so much about inflation, we just assume that's it's a normal part of life, just like the sun rising and setting every day. But it's really not.
For example, all through the 19th century, there was basically little or no inflation. If you stuck some money in your mattress in 1801 - say enough to buy a good suit - and left it to your kids and they left it to their kids, your grandkids would have enough to buy a good suit a hundred years later. Your money would have served as a good store of value.
Try that now (actually, don't try it!). If you had put $37.95 - the price of a decent suit (I checked an old catalog) - in a mattress in 1970, what could you buy with it now? A few pairs of socks?
What about gold. Well, gold in 1970 was priced around $35/ounce - roughly the price of a good suit. If you had stuck a 1 ounce gold coin in your mattress in 1970, it would have cost you around $35. (Actually you couldn't have bought the coin, since the U.S. government outlawed gold coins at that time - a story for another post!) Now, you could get over $1,100 for that coin.
I don't know where you shop, but $1,100 would buy me a pretty fancy suit these days - a lot more fancy than what I typically wear.
Anyway, the point here is that when it comes to buying or selling gold coins, you have to get some understanding of gold coins as money - not just some fancy or weird investment. If you understand something about gold coins and how they were money and think about money as a store of value, then I think you can conclude that it wouldn't be good idea to sell your gold coins now (if you even have any). It's probably a lot better idea to buy, don't you think?
Buying gold coins is strange for many people. But what's really strange is the very fact that people think it's strange. You see, gold and silver coins were once considered money - not paper dollars or the "slug" coins we now have. (In case you didn't realize it, there's no longer any precious metal - specifically silver - in U.S. quarters or dimes. In fact, there's no nickel in nickel coins or copper in penny coins.)
But that's the way the world has gone. Few people today remember when gold and silver coins were the only money that people trusted and held on to. As a matter of fact, most people, if they even know that the only money people trusted at one time was money made from gold, silver or copper, think that's only because people back then were ignorant and unsophisticated.
Who can blame them? Is any of this taught in school? So how are people supposed to know anything about or understand anything about money. They just go about their business and assume the money they use is - well, real money.
Of course, the money we use is "real" - if by real you mean that you can use it to buy things. In fact, if you were to try to buy something in a store with a gold coin, you probably couldn't. The person you offered the coin to wouldn't know what to do with it.
But money is more than just a medium of exchange (meaning something you use when buy or sell something). It's also supposed to serve as a store of value.
When you look at the money we use strictly as a medium of exchange, it works just fine. But what about when you look at the money we use as a store of value? It doesn't really work very well.
In fact, since 1970, the money we use now has lost around 90% of its value. So if you took your money in 1970 and stuck it in your mattress, you would have lost about 90%. Not a very good store of value.
I was going to say "not a very good investment" but money as a store of value isn't supposed to be an investment. An investment - even a safe investment - entails some sort of risk. But money - specifically money in its role as a store of value - is not supposed to entail any risk.
Think about this. Doesn't it make sense? If you earn some money and decide you don't want to risk some portion of it, shouldn't you be able to just put it somewhere (yes even your mattress) and expect that it will be worth the same when you take it out someday?
Oh, you're wondering about inflation? Well, sure, we all know about inflation. As a matter of fact, so many of us know so much about inflation, we just assume that's it's a normal part of life, just like the sun rising and setting every day. But it's really not.
For example, all through the 19th century, there was basically little or no inflation. If you stuck some money in your mattress in 1801 - say enough to buy a good suit - and left it to your kids and they left it to their kids, your grandkids would have enough to buy a good suit a hundred years later. Your money would have served as a good store of value.
Try that now (actually, don't try it!). If you had put $37.95 - the price of a decent suit (I checked an old catalog) - in a mattress in 1970, what could you buy with it now? A few pairs of socks?
What about gold. Well, gold in 1970 was priced around $35/ounce - roughly the price of a good suit. If you had stuck a 1 ounce gold coin in your mattress in 1970, it would have cost you around $35. (Actually you couldn't have bought the coin, since the U.S. government outlawed gold coins at that time - a story for another post!) Now, you could get over $1,100 for that coin.
I don't know where you shop, but $1,100 would buy me a pretty fancy suit these days - a lot more fancy than what I typically wear.
Anyway, the point here is that when it comes to buying or selling gold coins, you have to get some understanding of gold coins as money - not just some fancy or weird investment. If you understand something about gold coins and how they were money and think about money as a store of value, then I think you can conclude that it wouldn't be good idea to sell your gold coins now (if you even have any). It's probably a lot better idea to buy, don't you think?
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