Many of us who buy gold bullion coins are motivated by the desire not only to diversify our investments, but also to build up an alternative stash of “money” for times of emergency.
Gold is the kind of money you can spend when chaos strikes, whether the dollar has plummeted in value, the banks have closed their doors, or a natural disaster has wiped you out.
This doesn’t always involved exchanging gold coins for physical goods.
During tough times, you might also want to cash in some of your gold in exchange for paper money.
If this is part of your long-term strategy, there is an important factor you need to consider.
Not all gold bullion coins are equally liquid.
That is to say, if you approach a gold dealer either here at home or abroad, while they will be happy to give you cash for one type of gold coin, they might refuse another.
For example, many people buy Austrian 100 Corona and Hungarian 100 Corona bullion coins because they tend to sell at the best price over spot. In other words, you get more gold for your money.
However, these coins are not at the top of the pile when it comes to liquidity. So you might find dealers who simply refuse to buy them back. They do this not because there are concerned about the coins themselves, but because they worry they won’t be able to find buyers.
Buyers are more comfortable buying better-known coins.
By the same token, you don’t want to invest in commemorative or special edition gold coins. Not only will you pay way too much when you buy them, but they will also prove to be almost useless in an emergency if you need to convert gold into cash.
Few dealers will accept them, and those that do will offer a very low price compared to what you paid to buy them.
That’s why, for liquidity purposes, you’re better off buying some Krugerrands. These are recognized and welcomed the world over. As is the British Sovereign, which is still used as a universal, emergency currency by British Special Forces abroad.
During normal times it doesn’t much matter which bullion coins you buy. And there is nothing wrong with maximizing your holdings by buying coins which are sold at lower prices over spot.
But if part of your plan in emergency preparedness, you’ll need some of your holding in coins which offer maximum liquidity.
As always, your best bet is to spread the risk and opportunity by building a holding that balances a variety of different types of gold bullion coins.
Some you buy to maximize your capital return when prices go up. Others you buy specifically for emergency use in times of disaster or social unrest.
About the author: DH Kenrick is a student of world economics and a committed gold enthusiast. Follow me on Google+
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