A “How To” if You are Buying Gold

Owning gold, though seemingly quite simple on its surface, carries significant political risks and thus deserves careful thought, preparation, and planning. Consider the following:
 
Paper or Physical Gold?

“Paper Gold” is gold you own that is held on your behalf by a custodial financial institution. Your claim is evidenced by paper, be it a certificate, a storage receipt, a deposit slip, or any other financial instrument. Paper gold ownership exposes you to risks of loss (known as “counterparty risks”) due to bankruptcy, confiscation, nationalization, or outright fraud on the part of your custodial financial institution. In the event of a bank failure or currency collapse it is unlikely that paper claims on gold assets would be honored, and in perilous times like these paper gold ownership (with specific exceptions) is ill-advised. Physical gold ownership provides more peace of mind, eliminates counterparty risks, and protects against the inexorable devaluation of paper money. You should always buy physical gold, and never paper. 

Gold Bullion or Gold Coins?

The words “bullion” and “coins” are sometimes used interchangeably, but there are important differences. “Gold Bullion” coins are worth only the market (or “melt”) value of their constituent metal, but some coins have additional “numismatic” value, which means they have “collector” value in excess of their melt value. Most gold dealers offer both bullion coins and numismatic coins, and use those terms to differentiate them. Valuing numismatic coins requires more specialized knowledge than does valuing bullion coins, and is thus more complicated. Numismatic coins, on the other hand, provide better protection against potential capital controls and/or political confiscation, as history attests. In April, 1933, pursuant to Presidential Executive Order 6102, all privately held gold bullion in the United States was confiscated by the government in what it deemed “a national…

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