They say that the best defense is a good offense. This is true in the world of investing, just as it is in other areas of life. While many financial analysts have their clients in defensive mode, individual investors are eschewing the lousy advice of the stuffed shirts and going on the offensive by buying gold coins in record amounts. Though Wall Streeters may dismiss it as irrational behavior, it amounts to nothing more than outstanding financial self-defense.
Buying gold coins is a way to circumvent some of the other pratfalls of regular investing. Unlike paper stocks, additional gold coins can’t be created with the stroke of a board member’s pen. Unlike real estate investments, gold coins don’t get termites or have leaks in the roof. Best of all, unlike dollar-based investments, gold coins can’t be inflated at the whim of a central government agency.
All these whimsical moves and housing disasters are some of the primary reasons why investors have pushed gold to record highs. Investors are sick of getting screwed over on investments where the rules can be changed after the fact. Gold coins represent a fixed quantity that can’t be altered in essence once it has been sold, and buying gold coins therefore represents a deft defensive maneuver in like of the actions of the establishment.
Buying gold coins is easy to reconcile with an overall defensive strategy, even though it represents offensive buying behavior. For thousands of years, kings, generals, and nobles have stocked up on gold at the first sign of major trouble on the horizon. From the Gulf oil spill to the issues in the Middle East theater, things in this world have moved well beyond the first sign of trouble and into major red flag zones. Thus, it is only in keeping with international tradition that the truly smart money is loading up on gold coins.
High price levels for gold seem to be a testimony to the demand and not a sign of speculation. Most gold investors aren’t buying gold coins because they want to flip them next week for a 10% profit like some home rehabber from a past era. Instead, many individual gold investors plan to hold onto their gold coins as a blocking wall between the troubles of the outside world and the lifestyle they have worked so hard over the years to build for themselves and their families.
It’s a good defense. The price of gold has generated returns of more than 25% for those buying gold coins over the last two years. As a financial strategy, it simply makes sense on both paper and out in the real world. As a way to get out of dropping 401(k)’s and disappearing pensions it is an exceptional offensive financial move. Why hang on the sidelines and wonder why others are buying gold coins? Understand the desire for financial self-defense, and get in the game as soon as possible.