A window display in a coin shop I passed recently grabbed my attention…a lovely, 1911 U.S. $5 Indian Head gold piece calling out to me from a small velvet tray. It was in excellent condition. Lustrous; the details of its design well defined. So, I popped in on a whim and brought it home.
I’ve always liked the coin, with its design pressed into the metal rather than raised above the surface. It’s unique. But more relevant to the whimsy prompting its purchase is that this coin contains a bit more than a quarter ounce of pure gold. That’s really what I care about. That’s really my point here.
In the 40,000-year history of money, only the metal version has survived the tides—specifically gold and, to a lesser degree of relevance, silver. But I’m not preaching the gold-bug gospel here. I’m preaching about retirement-lifestyle insurance.
See, that’s the story routinely missed amid all the ink splashed about praising or panning gold. The mainstream financial media jabbers about gold largely in terms of investing. And, sure, you can “invest” in gold. Thing is, though, gold’s not really an investment so much as it’s insurance. Always has been. Insurance against economic stress, currency duress, geopolitical dyspepsia. Anytime society or economies or currencies fell apart, gold was always there to protect the lifestyles of those who owned it.
Our lifestyles are defined by a single factor: money. How much we have (or don’t have) determines what we can or cannot afford. But, of course, the problem with money—and I mean specifically the coins and bills we use in the modern world—is that it has no intrinsic value. It has assigned value…and assigned values can be easily reassigned. Indeed, every key currency in the world today has seen its value reassigned by government at various points across history. No currency has ever proven immune…dollars included.
Back in the day, FDR reassigned greenbacks a substantially lower value when he confiscated gold in 1933 and revalued its price to $35 per ounce from $20.67—a 69% adjustment. Nixon accomplished a similar trick when he severed the dollar’s last ties to gold in the early 1970s.
Even currencies backed by gold and silver in the way-back annals of history had their values reassigned by emperors monkeying with the currency to afford wars or fund sops to a surly peasantry.
In every case, investors and savers…well, they got screwed.
Government, of course, made out a like a bandit.
And anyone who owned collectible gold coins…they did well, too.
Think about what all these reassignments mean: In every case, government decided its monetary unit was worth less relative to gold. Which implies that the metal maintained its intrinsic value and was worth more in terms of the money of the day.
For those who owned the money, their lifestyle declined because their capacity to buy goods and services declined. For those who owned the metal, their lifestyle improved because their capacity to buy goods and services increased.
Like I said…lifestyle insurance. And at this particular moment in history, lifestyle insurance seems a grand notion for far too many reasons to name. Let’s just say political, social, economic, and currency turmoil flows in abundance through our world today.
You can buy golden lifestyle insurance several ways. Maybe grab some gold-mining stocks—I own a couple of those. You can buy gold exchange-traded funds (ETFs), though I would caution that, as a paper asset, ETFs come packaged with certain challenges that could see them destroy your wealth even as gold prices explode higher. Or you can wander past a coin shop and stop in to snap up a bit of monetary gold.
That’s my preferred approach—the old, gold coins used in everyday trade for thousands of years. I’ve gathered a bit more than 50 such coins so far. Random Mexican gold pesos from the early 1900s. Austrian ducats from the 1800s. Some old Swiss and French francs. A few Uruguayan golden pesos. A handful of century-old Dutch guilders. All are in quite nice condition.
I regularly walk into coin shops wherever I am in the world, just to have a look around. Or I browse online coin auctions outside the U.S. You never know when or where you’ll find a bargain, maybe spy a nice, old coin selling at barely above the market rate for gold. That’s how I recently snapped up two, low-mintage 1990s-era Soviet commemorative gold coins for a steal. I was the only bidder online; I guess no one really cares about low-mintage 1990s-era Soviet commemorative gold coins. One coin—0.1372 ounces of pure gold—I grabbed for a price about 2% higher than the spot market for gold at that moment. The other—0.2744 ounces of pure gold—I managed to snag at a price 13% below gold’s market value.
What I’m ultimately saying here is this: Don’t be surprised if, in the next crisis, gold is again the ultimate winner. It has survived every crisis history has thrown at it. And it will surely survive the next. In fact, I’d be willing to wager a ducat or two that gold ultimately plays a role in solving government’s addiction to debt, an addiction so pandemic it could very well tear down multiple global currencies, most prominently our dollar. So, next time you wander past a coin shop, maybe pop in and gild your lifestyle.
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