Quora Answer: Is Purchasing & Holding Gold Coins a Viable Investment Strategy?

The following is my answer to a Quora question: “Is purchasing, and holding, gold coins a viable investment strategy?”

If you mean only gold, then no, it is not a viable investment strategy.  Gold, in its various forms, and gold certificates, are purchased for two reasons: as a hedge against a currency crisis, and as a form of speculation.  The latter is not investment, but gambling; and the former is a sort of insurance.

Gold is an excellent addition to a portfolio, and helps mitigate some of the currency and political risk of the portfolio.  It is also an excellent hedge against runaway inflation.  Gold is a commodity in itself, which means that its price is subject to intense speculation as well.  This makes the price volatile in certain conditions, such as in an anticipated financial crisis.  However, over an extended investment horizon, it accumulates value at a slower rate than other instruments when the economy is doing well, and the price may even be depressed.  This means a gold-only investment portfolio will underperform the market over an extended investment horizon.