Financial Intelligence Motivation

My First Gold Coin

Mr Life CEO - My First Gold Coin

Here’s my first physical gold allocation for my permanent portfolio.

It’s a beauty isn’t it? It was randomly assigned to my purchase back in 2015 from a pool of maple leafs from various years. My one and only gold maple till today and it still remains my favorite piece.

Dated 1981, this is the last batch of maple leafs from the Royal Canadian Mint to be produced in .999 fineness. From 1982 onward, maple leafs are minted in .9999 fineness.

The Difference Between .999 vs .9999 Fine Gold

Does the extra 9 mean this coin has less gold content?

The answer is no (Thanks to Simon for pointing this out). It turns out that .999 and .9999 gold coins both contain 1 troy ounce of gold. The extra .9 in the newer coins after 1982, means less of the “other stuff” mixed into the troy ounce of gold. More discussion can be found here1Although this thread is about silver, the same goes for all bullion: https://gold-forum.kitco.com/showthread.php?149259-Does-a-1-oz-coin-of-999-silver-contain-a-full-ounce-of-silver-or-999-oz. Alternatively, here’s a great video explaining everything.

Both are considered 24K (karat) fine gold, which is 24 parts out of 24 of pure gold measured using the traditional ratio-based karat system. As it is impossible to achieve 100% purity outside of a lab, when the millesimal fineness system became available — that could measure gold purity up to parts per thousand, you can be sure the last decimal place will not be whole to account for impurities. The greater accuracy pushed refining processes to the edge of diminishing returns, in order to satisfy market demands.

My Gold-en Strategy

My gold investment strategy for my permanent portfolio is very simple. 999 or 9999 purity doesn’t matter. I buy only 1 troy ounce gold bullion coins with the lowest premiums. Why?

  • State minted bullion coins, such as those from the Royal Canadian Mint, are are highly liquid as they can be sold easily due to them being easily recognized
  • 1 troy ounce is just the right affordability with the lowest premium
  • Coins do not come in sealed packages unlike bars, so they can be easily verified for authenticity without breaking them out from their packaging and risk losing their value

Why then, do I only have 1 Canadian Maple leaf? What other pieces am I holding on to?

The answer is rather silly. After I bought my first maple leaf, stock ran out for the pool with various coins the next time I wanted to make a purchase about a year later. Therefore I was left with the choice of the latest 2016 maple leaf and an Aussy kangaroo. At that point, the price was about the same for both. So I thought I would add the kangaroo to my collection for a bit more variety. That was when I found out that kangaroos come in coin capsules for the same price! Each coin capsule costs a dollar from BullionStar, so if I had to buy one for every latest maple I get, kangaroos would give me a much better bang for my buck.

This went on for the next few years until recently, when I realized that I could get a whole bunch of capsules from AliExpress for about $0.15 each. This means that whenever there is the availability of the Canadian Maple Leafs of various years, I should get those as they are as good as the tier 2 pricing of the latest kangaroos, which lowers the premiums even further.

Why is premium important? Because for every % increase in premiums, that is the additional cost your gold will need to appreciate to cover before you can break even on your investment. That’s why I do not get the American Buffalos or the UK Queen’s Beasts. Just look at the price that BullionStar would buy it back for — its the same regardless you’re getting a maple, a buffalo or a beast. If you do not sell them back to BullionStar, they would probably all fetch the same spot price.

This is another reason why I prefer gold to silver. Silver coins comes with much higher premiums, although they are much much cheaper.

Is Gold A Good Investment?

I bought this Canadian Maple Leaf for SG$1,614.72 in 2015. The spot price of gold at the point of writing is SG$1,745.88. This piece has appreciated 8.12% in just a little over 3 years.

When I bought my first 1400 shares of STI index fund in 2015, they were $3.40 a piece. As of today, they are $3.10 per share. An 8.82% loss. Of course, they did pay dividends along the way — a total of $0.454 per share — which puts it at 4.5% in the green.

Despite gold doing nothing, like what Warren Buffet said, it has managed to do pretty well and has done its part in keeping my permanent portfolio stable amidst market volatility.

I do look at it, admire it and fondle it occasionally. In fact, it feels good holding something that represents my time and energy — that is quietly accounting for all the value that has ever been produced and traded with currency created out of nothing. Makes me sleep better at night.

So is gold a good investment? You decide.

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Simon
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Simon

I just wanted to correct a misunderstanding about the weight of gold coins. All 1oz gold coins contain 1oz of gold, no matter what the purity. A 1oz gold coin with 0.95 purity would weigh approximately 1.0526oz, being 1oz of gold and 0.0526oz of other metal.