Dr. Sol Taylor

Why Not Gold?

By Dr. Sol Taylor
"Making Cents"
Saturday, April 5, 2008

hen the price of gold passed the $1,000 an ounce in early March 2008, a record high for the precious metal, it revived the argument of the worthiness of investing in gold.
    As any investment counselor would tell you, "Keep no more than 4 percent of any one asset in your investment portfolio."
    The usual arguments against even keeping gold bullion or coins in an investment portfolio vary but include these common elements:
  1. Gold doesn't earn dividends or interest.
  2. Gold requires safekeeping in a vault or safe.
  3. Gold is heavy to lug around.
  4. Gold requires assaying to be sure of its purity.
    The arguments for gold ownership include some of the following:
  1. Gold can be bought and sold without the use of a broker. There are no commissions to pay on either end of the transaction.
  2. $1 million in gold can be carried in a briefcase.
  3. Gold can be accepted worldwide as money and easily exchanged for euros, yen, Swiss francs or pounds.
  4. Gold doesn't require a paper trail (with some exceptions).
  5. Gold coins do not require assaying and are readily accepted by dealers.
  6. Gold is a good hedge against inflation and recessions.
    Gold also can be used as jewelry, usually in 10K, 14K or 18K forms; 24K is pure .999 gold. In some countries such as India, gold jewelry is a form of family assets. Gold can be changed into foil, ingots, or any shape.
    Gold makes a fine gift for a special event such as a golden anniversary or a birthday. As a youngster many years ago, my bar mitzvah gifts of choice were a few $2.5 gold coins from various relatives. An equivalent share of stock would have been much less appreciated — although perhaps some stock would have done exceptionally well over the next 60 years.
    Aside from gold bullion coins and ingots, there are numismatic gold coins — that is, coins of rarity well above their gold value. In fact, among the highest value of all coins, the royalty include the 1933 double eagle ($20 gold piece) at $7.59 million and the Brasher doubloon and 1927-D double eagle at more than $1 million each, and at least a dozen other gold coins passing the $500,000 mark in recent auction sales.
    For those gold coins of more modest value but well over their $1,000-per-ounce metal value, almost all uncirculated U.S. gold coins fill that niche, while many scarce and rare dates easily rise into the five-figure range.
    With gold in the news, many people will decide to unload their family gold jewelry while others will stock up of gold Maple Leafs, U.S. Gold Eagles, Krugerrands and other forms of gold bullion. In a conversation with a coin dealer Tim Lenk at Goldcoast Coin Exchange in Woodland Hills in early March, he stated, "It hasn't been this busy since late 1979 when gold approached $1,000 an ounce and silver passed $45 an ounce. ... When the dollar falls, gold rises accordingly."

    Dr. Sol Taylor of Sherman Oaks is president of the Society of Lincoln Cent Collectors and author of The Standard Guide to the Lincoln Cent. Click here for ordering information.