The Coin Craze?

Welcome to the world of bullion coin investing, a business that has soared alongside the popularity of gold despite its disadvantages…

MarketWatch (emphasis added liberally throughout)

This certainly caught my eye.  I wondered, just what were the disadvantages?  Surely, I could read on and be informed of these.

The coin craze is part of gold’s growing investment allure, based on fears of currency debasement, inflation, a debt debacle in Europe, and rising debt levels in the U.S.

Something that even might protect me from currency debasement sounds good to me.  Still – a coin craze?  Is that what we have?  Is everyone you know buying as many gold coins as they can?  Are financial news outlets recommending gold, or still bashing it despite 10 years of incredible gains?

The article goes on for a while, roughly comparing those would buy coins to those who might speculate in penny stocks.  And yet, who will step forward and actually explain the disadvantages?  Wait for it…

“Coins are unable to give you the most bang for your buck,” said Jon Nadler, an analyst with Kitco Metals Inc., a dealer of coins and other bullion products.

Ahh, our old friend Jon Nadler.  Just when you thought a coin dealer would try to sell you coins – enter Kitco.  And yet, it sure makes you wonder about the “other bullion products” bit, doesn’t it?

“Secondly, you are going to have questions about liquidity … it’s not going to be as easy as you think to sell them.”

While it’s difficult to predict the future, for past few thousand years gold coins have been an extremely liquid investment.  Establishments in every medium-sized city have been willing to provide local currency for a little gold.  Unlike complicated modern transactions, you don’t even need to speak the local language… a little pointing and grunting should suffice.

Coin owners are also exposed to total loss in case something happens with their storage arrangements, Nadler said.

I suppose investors should… buy stocks and government debt to avoid exposure to total loss then?  What a joke!  Or maybe he is touting Kitco’s gold pool account – which can never be stolen by virtue of the fact that the gold probably doesn’t actually exist.

But just when you want to say that the article is simply encouraging investors to avoid higher-margin coins in favor of bars, we get this:

The financial breakdown scenarios invoked by some die-hard gold coin and bar buyers also don’t work for Nadler. With the collapse these scenarios envision, “you probably need lead, not gold. And who’s going to make you change?”

No bang for your buck there, eh?  So, gold is a good investment – but not actual real gold that you can hold in your hand.  After all, that won’t save you anyway.  What you want is the world to collapse just enough that gold goes up and you can make money in your Kitco pool account, but not enough that you wish you had bought the real thing.  And think of all those storage costs you save on by owning virtual gold!

And while I guess it’s true you can’t eat your gold, you certainly can’t eat an electronic entry in a Manhattan computer that says you lent a bankrupt nation money at no interest and are due federal reserve notes of unknown value.