Gold has traditionally been seen as one of the best protections against inflation for people who want a simple investment. Buy a few gold coins now, let them sit and gain in value, and if paper currency suddenly tanks and there's inflation, you'll get more cash when you sell a coin. But are you better off holding onto a large store of gold coins, or should you sell some of them and convert part of your stash into something like gold jewelry, or coins made of other metals like silver? Gold is still a great investment, but diversifying away from solely gold coins may be a sensible path.

Banned Currency Is a Risk

One issue with having only gold coins in your precious metal collection is that the type of coin could be banned or otherwise made unsellable. This happened with the South African Krugerrand, which was essentially banned (the U.S. Congress voted to prevent the sale of Krugerrands from South Africa to the United States) from 1985 to 1994. While Krugerrands were eventually welcomed back, their value as a coin to keep dropped because investors were now more interested in Gold Eagle coins. So it's possible that one day, a type of gold coin you have could sell for less than it does now due to political issues.

Or, your coins could become niche collectors' items that sell only to people who are interested in that particular coin. That sort of happened with the gold Liberty Dollar, a private currency issued by a U.S. citizen. The Liberty Dollar and its compatriots were for sale on online auction sites, but the Secret Service banned at least one site from selling the coins. This ruling was later revised to allow the sale of newer silver versions of the coins that had modifications made to them. The older gold coins were relegated to waiting for collectors to buy them privately. There is likely gold scrap value in the coins, but you may find buyers less likely to want these because they are not official government-backed coins.

Of course, these two situations focus on particular types of gold coins, and not all gold coins, but you can see how an investment that you paid for could quickly lose its appeal among buyers.

Executive Order 6102

But you're still not that well off if all you have are gold coins, even different types of gold coins. In the 1930s, then-President Roosevelt issued Executive Order 6102, which required citizens to turn in most of their non-jewelry/non-home-goods gold. So, people with large stashes of gold coins had to give up the coins. People were eventually allowed to buy gold coins for themselves again, but imagine being ordered to give up all of your gold coin investments. People were compensated with cash, but that cash itself wasn't going to increase in value while sitting in people's homes like gold would have.

Don't let these events scare you away from owning or buying gold coins; the chances of the Canadian Maple Leaf or Gold Eagle becoming pariah coins, or the chances that the government will again confiscate gold coins, are not really on the radar. But let history be your guide. It may be time to sell gold coins and increase the types of metals you own.

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