Gold Coins: The Current Overview

A special report to CNBC.com by Shelly K. Schwartz published on August 9, 2011 talks about how the current market is witnessing a sudden rush for gold coins. Gold coins are being considered as a strong investment option. “We are still arguing that people should add gold to their portfolios as part of a diversification strategy. There’s still quite a bit of concern about the structural integrity of the financial markets, so there are still plenty of folks looking for hedges against continued weakness in the global growth story,” explains Katherine Klingensmith, a strategist for UBS Wealth Management Research.

Other financial analysts are also pitching a case for gold, as it’s being seen as a relatively safe investment option. "Having a portion of your investments in gold is not a bad idea,” says Jim Wyckoff, senior technical analyst with Kitco Metals in Montreal. "Gold is a haven against inflation and uncertainty. People are feeling very uncertain and want something in their hands they know has value," adds Blaine Shiff, owner of CyberCoins.net in Dormont. Gold coins have again found a booming market as the dollar continues to weaken. "If we keep printing money, it’s going to decrease the value of each dollar out there," Shiff says.

Gold Coins: Analysis

There have been several reasons for shifting from traditional financial products to gold coins and other related products. Some of the reasons cited by analysts and experts are:

1. Economic Stimulus: As the global markets plunged following the bursting of the US housing bubble, world economies starting pumping economic stimulus packages to restore the financial markets. This raised the prices of goods and services and caused inflation in many nations. Paper money weakened and investor confidence plunged. This led to an increased interest in gold coins as a hedge against inflation.
2. Volatile Stock Markets: Due to stock market volatility, regular financial products no longer enjoyed the investor confidence they did previously. Gold coins and other gold products started being considered as more prudent options for preserving and increasing wealth.
3. Downturn in Real Estate: Real estate has historically been considered as one of the best investment options. The subprime crisis led to a shift of investments from real estate to gold products.
4. China: Over the last few years, the Asian dragon has developed a huge trade surplus with the US as well as Europe. Due to this, China has been purchasing US debt and diversifying its resources by investing in gold. These large investments are creating a global supply shortage, causing an upturn in the value of gold.
5. Environmental Controls: Rising levels of global warming and other environmental issues have forced governments to put controls on mining companies. Due to these controls, new supplies of gold have been hard to discover. This has also created a demand and supply divide, boosting gold prices.
6. Low Interest Rates: It has been observed that whenever interest rates are low, investors have preferred gold over other paper assets. This has led to an increase in demand for gold coins.
7. US Credit Rating. On August 2, 2011, Standard & Poor’s, one of the world’s largest credit rating agencies, decided to downgrade the US credit rating that it had held for the last 70 years. This led to a decline in the value of bonds and stocks amidst rumors of the world lapsing into another recession. This resulted in a surge in the value of gold coins, which can be stored and transported easily.