Top Three Oldest Mints in the World
Posted on- Lydia: 7th century BC
- Monnaie de Paris: AD 864
- British Royal Mint: AD 880
Today the U.S. Mint is the largest mint in the world, producing as many as 28 billion coins in a year. The Philadelphia Mint stands as the largest physical site in the U.S., which covers over 650,000 square feet and can produce up to 32 million coins in a year. However, there is a rich history of coin production that spans thousands of years. Here’s a look at the three oldest mints in the world.
Lydia: 7th century BC
Historians believe the oldest mint in the world existed in the ancient kingdom of Lydia in the seventh century BC. While the name of that mint has been lost throughout history, the oldest coins on the planet were produced there. Today, the coinage of the Lydian kingdom is known mostly for the coins of its last king, Croesus (561–546 BC). Croesus produced both gold and silver coinage. Earlier Lydian kings, however, produced electrum coins, which were made of an alloy of gold and silver with a dash of copper added to harden the coin. The royal Lydian coins created the first known series of coins in the Western hemisphere and these early coins served as a model for all subsequent gold and silver coins throughout time.
Monnaie de Paris: AD 864
The Monnaie de Paris in France is the world’s oldest continuously running mint, founded in AD 864 and it is also the world’s eighth-oldest company. In 864, King Charles II, also known as Charles the Bald, issued an edict to create a Parisian monetary workshop attached to the Crown. The King issued this edict in an attempt to concentrate the power to mint and issue currency under the Throne, making currency production a State Power. Previously, the King shared the power to mint currency with a variety of lords, barons and ecclesiaticals from the provinces. In the early days, the currencies were hand-minted using a hammer. It wasn’t until the reign of Louis XIV at the end of the 17th century that mint production advanced to a screw press, which allowed for the currency minting to become more standardized.
British Royal Mint: AD 880
Similar to the French mint, the British Royal Mint was founded in part to centralize coin production, in this case from all of Great Britain, the United Kingdom and all nations across the Commonwealth. In 880, the Royal Mint produced its first coin: an Alfred the Great silver penny, which was struck during the resettlement of London after the Viking occupation. In 1279, the Mint moved to the Tower of London, which was known as “the little tower where the treasure of the mint is kept.” In 1489, the Royal Mint produced its first sovereign coin: King Henry VII decreed a ‘new money of gold’ to establish the might and power of his reign. Today, the Sovereign coin is still known as the “coin of the monarch” and remains one of the Royal Mint’s flagship coins. In 1662, King Charles II introduced new production methods at the Royal Mint. Coins were then produced using horse-drawn rolling mills and screw presses instead of the previous hand struck method. Notably, in 1696, Isaac Newton Isaac Newton was appointed Warden of The Royal Mint, and he became the Master of the Mint in 1699, a post which he held until his passing in 1727.
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The Indian and Chinese Connection to Gold
Posted onIn 2023, India overtook China as the most populated country in the world, with a total of 1.428 billion people. China is a close second at 1.425 billion citizens. Compare that to the United States of America’s total population at 335 million. This matters to the gold market because Asian demand from India and China make up nearly 50% of global gold demand. 
A Little History
During the last half of the 1900’s, Chinese citizens were banned from buying gold, halting a long-standing cultural tradition in that country. However, as the Chinese government began easing those restrictions in 1990 and by the early 2000’s the gold market was completely liberalized. China’s annual gold consumption surged during that time period from just over 375 tons in the early 1990s to a record high of 1,347 tons in 2013. Since then, China has ranked year after year as the world’s largest gold buyer.
As the Chinese economy grew and modernized that helped provide fuel for fresh gold demand as Chinese citizens became wealthier. “This surge in demand was not just an expression of exuberance by Chinese investors free to buy gold. It was also driven by explosive economic growth, rapid urbanization and the desire for a simple alternative to the limited range of investments available domestically,” the World Gold Council explained.
China’s Central Bank is Steady Gold Buyer
Today, it’s not just Chinese citizens that are buying gold, the Chinese government has been steadily stockpiling gold over the past year. In October, the People’s Bank of China added to its gold holdings for the twelfth consecutive month in a row. In October 2023, the PBOC bought about 740,000 troy ounces, according to official data, which is equal to about 23 tons.
Indian Gold Buying Traditions
In October 2023, Indian citizens celebrated two major Hindu festivals: Dussehra and Diwali. This is a time period when buying gold is considered auspicious. India’s gold imports in October surged to a 31-month high, marking a 60% increase from the previous year. Indian citizens traditionally buy and hold gold. The precious metal is interwoven into the cultural fabric of the nation and is included in marriage ceremonies and other cultural rites.
India is the world’s second largest consuming gold nation behind China. In India, gold is not a luxury item, but a valued asset that is also a basic form of savings and wealth preservation, especially for families in rural areas. In India, even the poorest citizens buy gold. One in every two households in India purchased gold within the last five years, according to an ICE 360 survey. A total of 87% of Indian households own some amount of gold. Two-thirds of India’s gold demand comes from rural areas, where most people live outside the official tax system.
The Eastern Approach to Gold Buying
People in the Eastern half of the world have long retained a world view around gold with the knowledge passed down from their ancestors who saved in gold for centuries. They learned that gold doesn’t lose its purchasing power and is a store of value and a wealth building tool for future generations. This is ancient wisdom that many Americans still haven’t fully acted upon. Have you?
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Benjamin Franklin’s Masterpiece: The Libertas Americana Medal
Posted onThe Libertas Americana medal, conceived and authorized by Benjamin Franklin, was a tribute to American independence and France’s support in that valiant endeavor. The medal’s dramatic imagery on the reverse symbolically retells the story of the American Revolution, with the dates 1777 and 1781 inscribed to represent the two greatest American victories at the Gates of Saratoga and Washington at Yorktown.
Notably, Franklin commissioned the creation of this medal on his own, not on the authority of the Continental Congress. French artist Augustin Dupré designed the medal according to specifications from Benjamin Franklin. The medal was struck in Paris, as our young nation had no minting facility at that time that was able to produce such detailed work. The dies were completed in 1782 and the first medals were struck in 1783.
Today, the exceptional Libertas Americana medal is valuable and highly prized. It is legendary throughout American numismatic circles and beyond, not only for its historical significance and its arresting grandeur, but for the fact that Franklin personally handled each of these medals.
In April and May 1783, Franklin mailed his medals to recipients’ far and wide in the United States, France and beyond, including to members of George III’s government and the Grand Master of the Knights of Malta. Franklin also mailed a bundle of his medals to Philadelphia to distribute to the members of Congress, including a silver one for Congress’ president and future Mint Director Elias Boudinot. Indeed, his postal accounts reveal that in April 1783 he twice hired a carriage to special deliver his medal to the recipients.
Those who received the medals cherished them and Franklin’s mailbox filled up with thank you notes from across the continent. Thomas Jefferson had one on display at Monticello, inventoried as “a medal by Dr. Franklin.” The renowned Dutch artist and mint master Johann-Georg Holtzhey implored a friend to write to John Adams to inquire how he and his friends could obtain one. While not officially a part of the Comitia Americana medals, the Libertas Americana medal has been included in this group ever since Thomas Jefferson chose to place one in George Washington’s set of Comitia Americana medals in 1789.
On the medal’s reverse, the celebrated narrative features the infant Hercules, who represents the United States of America. A leopard, representing England, leaps with two serpents to attack Hercules. A fully armed Minerva, representing France, defends baby Hercules while he strangles the two serpents, under her protection, in fully struck detail.
The medal’s obverse features a head of Liberty with flowing hair, facing right, a freedman’s cap atop a pole in the background. This was used as the inspiration for some of the U.S. Pattern coinage of 1792 and for the first U.S. Half Cents in 1793.
Silver versions of the Libertas Americana medal are extremely rare. Bronze versions are more common but still valuable and highly coveted. Most survivors today were owned by non-collectors who cherished these meaningful medals, and they were often handled, displayed and cleaned, so today few exist in Gem condition.
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How Emerging Markets Will Support Gold’s Future
Posted onToday, close to two-thirds of the global demand for gold comes from emerging markets. The two largest players in this segment are China and India. China’s annual gold consumption averages about 1,120 tons per year while India’s is roughly 800 tons.
This means that understanding the future of gold as an investment requires a clear picture of what the future of these two countries holds.
Here, we look at the major economic initiatives driving the development of China and India and the implications of those plans for gold investors.
India
India’s ascent remains strong. At their current trajectory, they are well positioned to surpass the US and earn the title of the second-largest economy on the globe in the coming decades according to research from PwC.
The researchers project that India’s share of world GDP will surge from 7% to 15% by 2050.
A key trend underpinning this growth is the mass urbanization of the country. Research from McKinsey supports this idea with the authors explaining that “it’s clear that when urbanization rates in districts or in states cross the threshold of about 35 percent, that’s when we start seeing productivity benefits kick in.” This phenomenon fuels emerging economies because large city centers are what tie a country into the global economy and ultimately lead to a rise in GDP per capita.
Moreover, with increased urbanization comes robust infrastructure growth as demand rises for schools, housing, and hospitals. Bringing these kinds of infrastructure projects to life creates additional jobs for manufacturers, contractors, suppliers, and builders.
Cumulatively, this outgrowth tends to increase spending power among consumers which, in turn, leads to increased demand for luxuries like electronics and jewelry both of which require gold.
China
China’s economic growth has exceeded the global average for much of the last 15 years. Recent projections from the IMF show that the country could become the top growth source for the world in the next five years with “the nation’s slice of global gross domestic product expansion is expected to represent 22.6% of total world growth through 2028,” according to reporting from Bloomberg. Like India, this growth is likely to increase the spending power of the considerable consumer base in the country.
However, at the same time, some believe that China’s economic future is uncertain given the collapse of the real estate market. And yet herein lies the power of gold; it can perform well in good times and in bad.
Consider that Chinese gold prices recently reached record highs as part of an extended rally as more citizens seek to offset the depreciating value of the yuan against the dollar. This comes amid the Chinese government’s decision to ask their largest banks to reduce deposit rates, in an effort to boost the economy. This action has prompted more citizens to seek other ways to preserve their money. Additionally, greater control over the purchasing power of the U.S. dollar has accelerated gold purchases.
The developments occurring within these countries can be just as influential to gold prices as many of the more talked about economic factors unfolding in the U.S. like inflation, interest rates and robust GDP growth.
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The Relationship Between the Price of Gold and the 10-Year TIPS Yield and Why it Matters
Posted on — 1 CommentFor more than 15 years, there has been a stable, inverse relationship between gold and US bond yields adjusted for inflation. Typically, higher Treasury yields have the effect of bringing gold prices down because gold, which has no yield, is less attractive in comparison.
Between 2006 and 2021, the correlation coefficient between the two has been -0.933 indicating an almost completely opposite relationship.
Today, that’s changing.
The breakdown of this correlation seems strangely fitting in today’s setting of anomalies. Consider, for example, that bonds, which tend to rise as stocks fall, are now rising alongside equities. The combination of higher rates and lasting inflation has disrupted this tendency and today the correlation of returns for the S&P 500 and long-term Treasury bonds is at a two-decade high. North is South. East is West.
The normally reliable correlation between gold prices and the 10-year TIPS yield has deviated as real yields have risen while, at the same time, gold prices have climbed amid increased geopolitical risk brought on by the bloody Hamas-Israel conflict.
Adding to this is the fact that in 2022 central banks bought a record-breaking 1,136 tones of gold, worth roughly $70 billion. As the Financial Times remarked, this staggering amount of purchasing occurred because “countries aimed to reduce their reliance on the dollar after Washington weaponized its currency in sanctions against Russia.”
The change in this historical relationship has prompted some to ask, where do things go from here?
While it’s not clear if the two trend lines will realign, there are several reasons to believe that the price of gold could remain high. One such reason is that the gold market was very short. In other words, many investors held positions that stood to gain if gold prices fell. As the price of gold resisted that expectation, those same investors were forced to cover their positions. As a result, short positions recently dropped by 31,096 contracts to 89,605. In fact, this was the second-biggest ever short-covering rally on record.
Additionally, heightened levels of gold purchasing in China have led to a dramatic premium over international prices. In some cases, this premium was over $100 per ounce. This surging demand stems from falling property values, a major store of value for many Chinese citizens. The declining yuan has likely also contributed to increased gold purchases.
The key takeaway for investors is that the power of gold to serve as a safe haven in periods of instability and uncertainty is strong enough to break a decade-and-a-half trend that would normally see gold declining in price today.
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Top 5 Gold Bullion Coins for Investors
Posted on- American Gold Eagle
- American Gold Buffalo
- Canadian Gold Maple Leaf
- Australian Gold Kangaroo
- Austrian Gold Philharmonic
For thousands of years, people around the world built wealth with gold. Today, gold remains a proven strategy for investors to diversify their portfolios and protect and grow their wealth.
Owning physical gold has many benefits over “paper” gold like exchange-traded funds (ETFs) or mining stocks. ETFs and mining stocks do not always follow the price of gold and you never take physical ownership of gold. Notably, there are sometimes outside forces at play that move paper investments at different rates and in different directions than the spot price of gold. For example, gold mining stocks can be impacted negatively by workforce strikes, political strife in the countries where minors operate, poor company management, and accounting issues. Gold could be performing strongly and a mining company’s stock may not reflect the commodity’s performance. ETFs have their own set of unique issues, including management fees, marketing fees, and storage and insurance fees. Investors putting money into ETFs also do not take possession of the gold they’ve invested in. Physical gold does not have these same downsides.
There are many different gold coins to choose from. We outlined the five best gold bullion coins for investors to consider. All of these gold coins are recognized around the world for their purity, and authenticity and are easily bought and sold.
Another benefit to the top five gold coins on our list is that they are all approved by the Internal Revenue Service (IRS) to use in your IRA account. Let’s take a look at the five best gold coins to use in investing.
1. One Ounce American Gold Eagle 
One-ounce American Gold Eagle coins are hands down one of the most popular and widely recognized gold coins around the world. The U.S. Mint produces these coins, which are made of 22-karat gold, and offers investors a rock-solid investment in an ever-changing economy. The value of American Gold Eagle coins moves independently of the stock and bond markets, which offers investors strong portfolio diversification value. Indeed, historically, when the stock market crashes, the price of American Eagle gold coins soars higher. In 1986, President Ronald Reagan signed into law the program to mint American Eagles, which became the global standard for bullion coins. These coins are 100% American-made. Like all the coins on our list, you can buy and store the one-ounce American Gold Eagle in your self-directed precious metal IRA account.
2. One Ounce American Gold Buffalo
Another coin proudly produced by the U.S. Mint for investors and collectors alike is the American Gold Buffalo coin. This stunning gold coin is an homage to our nation’s early history and heritage. For many years, investors could only buy 22-karat gold. But, amid growing interest in even greater purity levels, Congress authorized the creation of the American Gold Eagle, which debuted in 2006, minted in 24-karat gold. You may recall the famous Buffalo Nickel designed by James Earle Fraser. This arresting gold coin pays homage to that era and features a Native American chief’s profile on the obverse side and an American buffalo on the reverse.
3. One Ounce Canadian Gold Maple Leaf
Moving beyond the United States, the one-ounce Canadian Gold Maple Leaf is one of the most prestigious and highly sought-after gold bullion coins after the American coins mentioned above. The well-respected Royal Canadian Mint introduced this coin in 1979 and it was the first bullion coin to feature 99.99% pure gold. The one-ounce Canadian Gold Maple Leaf coin represents extraordinary craftsmanship, featuring the iconic and cherished Canadian maple leaf.
4. One Ounce Australian Gold Kangaroo
Traveling farther around the globe, the esteemed Perth Mint has produced the one-ounce Australian Gold Kangaroo since 1986, which is another highly after coin by investors. The original version of this coin was known as the Australian Gold Nugget. However, in 1990, the Perth Mint redesigned the gold coin, which now features an iconic kangaroo design paying homage to Australia’s natural heritage. The reverse highlights a magnificent kangaroo with intricate detailing, revealing both the dignity and brawniness of this beloved marsupial. The obverse reveals Queen Elizabeth II, highlighting the country‘s connection to the British monarchy.
5. One Ounce Austrian Gold Philharmonic
Last but not least, the one-ounce Austrian Gold Philharmonic gold coins are easily one of the most popular bullion coins traded in continental Europe. The Austrian Mint began producing these elegant coins in 1986, which pay homage to the thriving musical history in Austria’s capital city of Vienna. Sometimes called Vienna Gold Philharmonics, investors gravitate to this coin for its widely recognized depiction on the obverse of the Great Organ, an iconic instrument that sits in Vienna’s esteemed Musikverein concert hall. The reverse features a collection of musical instruments, including the cello, violin, harp, flute, and horn, which represent the many sounds that meld together to create a symphony.
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Gold Climbs to 2-Week High as Middle East Conflict Escalates
Posted onGold climbed to a two-week high after military conflict and violence escalated between Israel and the Palestinian group Hamas. Investors turned to
gold as the heightened geopolitical unrest increased the precious metal’s safe–haven appeal. Throughout history, during war and military conflict, gold has been used as a safe store of value.
Gold jumped from a low of $1,822.70 early in October to as high as $1,873 mid-week. If the Middle East violence continues to escalate, Wall Street strategists point to $1,900 as the next quick upside target for gold to hit. How could the Middle East conflict impact the economy and markets?
Oil Prices: Another Inflation Spike?
If the Middle East conflict widens and begins to impact oil production in the region, the price of crude oil could trade higher for longer. As we saw with the Russia-Ukraine war, the impact of higher energy prices can be severe, impact inflation, and slow the economy, in addition to causing pain to consumer’s pocketbooks.
Interest Rates
As investors begin to price in expectations that the Middle East conflict will put the brakes on the U.S. and global economy, the odds of a Federal Reserve interest rate hike in November are falling. Only 8% of traders now expect the Fed to hike rates at its November 1st meeting, according to the CME Fedwatch tool.
2024 Presidential Elections Around the Globe
We will see presidential elections in many key countries around the globe in 2024. Of course, we have a presidential contest here in America in 2024. But, beyond our borders, Russia’s President Vladimir Putin will face a presidential election in 2024. Also, Taiwan faces a key presidential election vote next year, which could have implications for China which claims the island democracy as its own territory.
Elsewhere, many African countries will also hold elections in 2024. Africa is increasingly becoming a geopolitical hotspot. We’ve seen several military coups there recently. There are also strong China-African relations as many nations there signed on for China’s Belt and Road Initiative, which could increasingly shine a global spotlight on that region.
Turbulence Ahead
The recent surge in violence in the Middle East adds to an already complex and volatile global geopolitical situation. The Russia/Ukraine war is still consequential, U.S.-China tensions remain high and the world is facing a spate of critical elections next year. We are heading into one of the most unstable and turbulent times in the post-World War II era. Gold has served as a safe-haven investment and store of value for thousands of years. In today’s era of increasingly volatile and often unstable governments, it’s worth a look at your portfolio to see if you could benefit from an increased allocation to gold. The price of gold is going up fast—so the quicker you make your moves—the better investment you can make for the long-term.
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The 1850 $5 Baldwin & Co. Gold Coin is a Throwback to the Era of Private Minting
Posted onThe NFTs and cryptocurrencies of today might signify a growing desire to move away from government-issued currency. However, as modern as these innovations may be, the independent spirit behind them has long been part of American history dating back to the California gold rush. During that era (1848–1855) private minting was legal.
There were several reasons for this. First, at the time, the western frontier of the US had very little government oversight. Few laws at both the state and federal level regulated coinage or minting. Second, gold, in the form of dust or nuggets, was difficult to trade without some form of standardization yet there was little government-issued currency in the region. Third, free market principles were a primary influence of the American government at the time giving private enterprises unfettered access to markets.
As a result of these conditions, many private mints emerged. Many of these businesses were reputable and highly regarded. One such example was Baldwin & Co., a private minting company operated by George C. Baldwin, a prominent entrepreneur during the Gold Rush period. Originally, the company existed as a jewelry and watchmaking business on Clay Street in San Francisco in 1849. Their minting business started when they purchased it from F.D. Kohler who was starting his tenure as an assayer for California’s new State Assay Office.
The company struck various denominations of gold coins between 1850 and 1853. These coins were widely used in the local economy and played a crucial role in facilitating trade and commerce during a time when official U.S. Mint branches were not yet established in California.
The 1850 $5 Baldwin & Co. gold coin shows the head of Liberty with BALDWIN & CO. and 13 stars with the year 1850. The obverse shows an eagle with an olive branch in the right talon and three arrows in the left talon. The letters “S. M. V.” stand for Standard Mint Value. Uncirculated Baldwin & Co coins are exceedingly rare. From 1850 to 1851, Baldwin struck 4 different coins including, $5 (1850), $10 (1850), $10 (1851), and $20 (1851). In their time, the Baldwin & Co. name carried so much weight that their coins were accepted as federally sanctioned pieces. Eventually, that name was tarnished when some assayers claimed that Baldwin & Co. coins had an intrinsic value that was less than their face value. Soon after, Baldwin & Co. ended their minting operation.
Unfortunately, the private minting era in California didn’t last long. In 1853, the United States government established an official branch mint in San Francisco to regulate and standardize the coinage system. With the introduction of official U.S. Mint coins, the need for privately minted coins declined.
Today, the coins minted by Baldwin & Co. remain as valuable artifacts from the Gold Rush era, sought after by collectors and historians alike.
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The Alaska RRC Bingle: A New Deal Era Coin Used by Farmers
Posted onImagine you were struggling financially during the Great Depression. In that scenario, a government offer to move you to Alaska to farm a 40-acre plot of land could have sounded like a good deal.
Indeed, 203 pioneer families did just that in May 1935 as part of President Franklin D. Roosevelt’s New Deal plan to help move the country out of the Great Depression through massive public works projects.
The adventuresome pioneers moved to Matanuska Valley, about 45 miles northeast of Anchorage, Alaska, hoping to start a new and more fruitful life. The farmers were chosen from Minnesota, Wisconsin, and Michigan as the government theorized that those folks would be well suited to Alaska’s harsh climate, given the cold winters they were already used to.
The Alaska Rural Rehabilitation Corporation (ARRC) governed the new farming colony and the U.S. government issued coins that were legal tender and could be used in the ARRC stores. This included the one–cent Alaska RRC Bingle minted in 1935 and 1936.
The one-cent Alaska Bingle is not only one of the shortest-lived coins in U.S. history, it is also one of the most unusual.
Three factors help make this one of the most unusual coins ever minted by the U.S. government.
The first is its shape. The one-cent Bingle is an octagon, meaning it is an eight-sided coin. The second unusual factor is that it is made of aluminum. Until the government struck the one-cent Bingle, only pattern coins had been produced in aluminum. Finally, the same design is evident on both the front and the back of the coin!
This historic coin with eight sides features a large number “1” with the words: “Good for one cent in trade ARCC” encircling the coin.
The one-cent Alaska Bingle was struck along with a series of other RRC coins including the five-cent, 10–cent, 25–cent, 50–cent, one-dollar, five dollar, and 10 dollar denominations. Only the one–cent Bingle was not round. Because legal tender currency was so scarce in rural Alaska during the Great Depression, it is believed that these coins were also used as currency outside the ARCC stores.
However, after minting these coins for only two years, the government removed their legal tender status and they were recalled. Only several hundred coins were saved from the recall, which means survivors today are incredibly scarce although the few known survivors are almost all in mint condition, or close to it. Imagine the stories that these coins could tell if they could talk: settlers in faraway Alaska, who dreamed of a better life and took the opportunity to try to build that when it was offered.
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Investment Grade Bonds Heading for Third Year of Decline
Posted on — 1 CommentFor decades, the standard advice from investment professionals was to invest a portion of your portfolio in bonds – for safety and security. The general investment idea was that if the stock portion of your portfolio goes down, bonds will go up. In recent years that correlation has failed—leaving investors with big losses on both the stock and bond sides of their portfolio.
Looking back
In 2022, the S&P 500 fell 18.01%. That’s when bonds were supposed to shine. Instead, the bond market also posted double-digit losses. The Bloomberg U.S. Aggregate Bond Index represents the government and high-grade corporate bond market, and the $92 billion iShares Core U.S. Aggregate Bond ETF which represents that index plunged –13.06% in 2022.
Bonds are heading for a third year of declines
In fact, the billion iShares Core U.S. Aggregate Bond ETF, known by its ticker symbol AGG, fell by -1.67% in 2021, -13.06% in 2022 and is now heading for its third straight year of losses in 2023, with a -1.01% market return.
In hindsight, this was a good recommendation.
Looking back, this 2019 Gold Hub research report accurately warned investors of this coming shift:
“Central banks have shifted to a new regime of easy monetary policy, thus reducing expected bond returns. As negative yielding debt increases alongside stock-to-yield valuations to all-time highs, gold may become an attractive and more effective diversifier than bonds, justifying a higher portfolio allocation than historical performance suggests.”
It is evident that, following the pandemic, bonds have become a less reliable portfolio diversifier than in recent decades.
What’s an investor to do?
When seeking replacements, money managers pursue a strategy called “security dispersion” which allows investors to capture an alternative source of return. Security dispersion relates to the difference between winners and losers in the market.
When you are looking for an alternative investment, consider the three D’s of alternative diversifiers:
- Is diversifying to your portfolio,
- Is a durable source of return, and
- Is defensive when you need it
How do gold bullion and rare coins stack up?
Diversification: Gold is a proven stock portfolio diversifier because it negatively correlates to stocks — simply put: when stocks go down, gold goes up. Precious metals and rare coins also react to different market conditions than stocks and bonds, making them efficient asset classes to keep portfolios balanced through economic cycles.
Here’s a snapshot of market performance to show the non-correlation between stocks and gold:
Stocks represent S&P 500, data from NYU Stern School of Business
Durability: Gold and rare coins produce a durable and reliable source of long-term returns. The average annual return of gold bullion from 1979-2022 stands at 5.6%*. For those who invest in rare coins (all types), the average annual return for that time period is even better at 9.5%.
Defensive: Both gold and rare coins act as defensive elements in your portfolio, especially during inflationary environments like we see now. When you evaluate investments to add to your portfolio to hedge against inflation, you want asset classes with the highest positive correlation level.
Here’s a snapshot of the correlation with inflation from 1979-2022*:
- Stocks: .10
- Treasury bonds: -.18
- Gold: .21
- Coins: .57
Both gold and coins have the highest positive correlation, which provides investors the best defensive hedge during inflationary times.
The bottom line
“For investors concerned with downside risk, it makes sense not to solely rely on bonds as stock market diversifiers,” said a Russell Investments research report. “Unlike bonds, the price upside for gold is not limited. In addition, the gold market is sufficiently large for investors to make significant allocations to [it.]”
If you’ve been disappointed in the bond returns in your portfolio, it’s time to explore worthwhile alternatives like gold and rare coins. Increasing your allocation to tangible assets is a proven strategy to help build and protect your wealth, especially during inflationary environments like the one we are mired in now.
*Data from February 2023 research report titled: The Investment Performance of Rare U.S. Coins by Raymond E. Lombra, Ph.D.
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