Once you have made the decision to invest in physical gold, the next question often asked is whether you should buy gold coins, gold bars, or a combination of both. Although there is no simple right or wrong answer to this question, the type of gold you buy should be determined by your investment objectives, liquidity needs and risk tolerance.

 

Investors simply looking to acquire as many total ounces of gold as possible may prefer to stick to bullion bars. Gold bars can oftentimes carry the smallest over spot premiums and may, therefore, allow the buyer to acquire more total gold for the price. With newer fractional gold bars, investors no longer need to purchase one or more ounces at a time. These smaller bars are sized in fractions of an ounce and can, therefore, allow the investor to purchase a half ounce, quarter ounce or even smaller size switch as 1/10th ounce. As the price of gold again approaches the $2000 level, fractional gold bars may be a great choice for investors on a budget or with limited funds to invest.

 

Gold coins can also be a great investment. Coin values can vary wildly, however, based on several key factors. A highly liquid gold coin, such as the American Gold Eagle one ounce coin, may not carry a significant dealer premium. A rare gold coin, on the other hand, could carry a premium that exceeds the value of the metal it contains. Investors interested in buying and holding physical gold may want to avoid such coins, therefore, as more of their investment dollars would go towards collectibility value than to actual gold. Gold coins do also have a face value and may be good, legal tender. That face value, however, is not where the coin’s value comes from. The coin is still valued primarily on its gold content.

 

Whether you should buy gold bars or gold coins depends on your objectives. If your goal is to get as much physical gold as you can afford, then bars or coins with the smallest premiums are your best bet. If you are looking for products that also have collectibility value attached, then coins may be the better option. In our experience, however, coin collecting is best left to professional collectors. This is because gold coin collectibility values can fluctuate significantly, meaning you can lose a lot of money on them even if the price of gold rises.

 

Figuring out whether you should buy gold coins or gold bars is simple if you ask the right questions. These may include: What am I trying to accomplish by purchasing gold? Am I on

a limited budget-what can I afford to spend on gold? Do I know and understand collectable coins and how they are valued? Will I need to sell any of the gold in the near or intermediate term?

 

As with any other type of investment, spending some time upfront to consider your goals, risk tolerance, liquidity needs and other factors can go a long way towards helping you make the right decisions.

The gold market ended the session and week higher Friday as the bulls retook previous resistance at the $1800 level. Spot prices ended the day up over $23 per ounce at $1815. The strong showing today comes on the heels of this week’s FOMC tapering announcement and could be the beginning of a sustainable run higher.

 

Despite the Fed’s plans to taper its monthly security purchases, or QE, the central bank does not appear to be in any hurry to raise interest rates. The lack of higher interest rates may provide stock investors reason to continue getting long, but they may also weigh on the dollar and thus potentially provide the gold market with a boost.

 

It has been discussed for some time now that the Federal Reserve may hold the keys to higher gold. That may in fact be true, but perhaps not in the way that many were thinking. It was thought by many that the central bank’s tapering announcement may give the bears reason to bear their teeth and take the market lower. In fact, however,the opposite seems to be happening. The bulls appeared to be out in full force today, despite the Fed’s Wednesday tapering announcement. This could simply be due to the fear of the unknown now being resolved or the notion that investors may now focus their attention elsewhere. Inflation may now become the center of investor attention, and all signs currently point to rising prices.

 

The period of inflation currently being seen may not be transitory in nature, as the Fed has suggested. It could be not only the beginning stages of a significant rise in prices, but could even point to an extended period of stagflation down the road. Whether stagflation does in fact come to fruition remains to be seen. A rise in prices has already been seen, however, and investors may become increasingly wary of a further rise. The threat of inflation could not only slow the global economy significantly, but could even put the domestic and global economies into a full-blown recession.

 

Markets are currently pricing in a rate hike from the Fed by June of next year. Those policy expectations may see a dramatic shift in the year ahead, however, and the Fed will likely want to keep its options open based on economic activity. Fed Chairman Powell, in fact, made clear in Wednesday’s press conference that rate hikes do not need to follow tapering of QE. It seemed to suggest that Powell is in no hurry at all to start tightening policy and that ultra-low interest rates could be here for quite a while still. This may giove gold investors reason to buy throughout the year and could fuel a rise in the price of gold that exceeds or even far exceeds current all-time highs.

 

Today’s gains have put the bulls back in command on the daily chart. The next major task for the bulls lies in the mid 1830s, however. That level must be breached on a closing basis, in order to provide momentum to any further rally higher.

The gold market is off to a slow start Wednesday as the trading week nears the halfway point. Spot gold is slightly lower in early morning action, trading down some $5.40 per ounce. The decline has not taken the yellow metal far from the $1800 level, however, and the bulls are still very much within striking distance of taking out a key level of technical resistance.

 

Stocks and investor appetite remain well oiled coming into today and hunger for risk remains elevated. Third quarter earnings reports have thus far not disappointed as the majority of them are exceeding expectations. Whether such good earnings will be sustained is another question entirely, however, and may be a source of concern for equity bulls.

 

Some possible bumps have developed and are on the horizon now. The world’s second largest economy, China, has already seen its economy slow significantly. The globe’s second largest economy is dealing with several major issues that have the potential to keep its growth under wraps. The ongoing energy crisis, for one, could keep China from being able to manufacture certain components and parts due to the lack of raw materials. This not only affects China but can also affect the nations that China supplies with these materials. In addition to the energy shortage, China is also dealing with a resurgence of Covid-19 cases in some regions that may also have a significant impact on productivity. The country is also having to deal with an overheated housing market and other issues that could force its central bank to tighten policy and reign in the supply of money.

 

Although U.S./Chinese relations have been good for the most part, tensions have been ratcheted up this week. The U.S. recently banned Chinese telecommunications giant, China Telecom, from doing business in the U.S. There may be more to come on this story, and it does have the potential to set off a tit for tat showdown between the world’s first and second largest economies.

 

The price of gold is in a month old uptrend on the daily chart. The bulls are in control, but will need to extend the recent rally soon in order to stay in control. The $1800 level remains an important chart point. Resistance in the mid-1830s may be even more important at this point, however. If the bulls are able to take this level out on a closing basis, it could set the stage for additional buyers to enter the market and for prices

to rise further. A lack of a rally above this level, on the other hand, could pave the way for the bears to take over. If the market tries and fails to move higher once again, it could signal an overall weakness for the bears to seize and take advantage of. The first major target on the downside is $1750. A breakdown below this level, on a closing basis, would almost certainly point to more downside ahead and a significant leg lower.

The gold market had an interesting day, running sharply higher before seemingly running out of gas and falling back again. The market still finished the day session up modestly, but the day was a loser from a technical standpoint. After rising to well above the $1800 level in earlier action, the bulls found reason to quit on the day’s rally and prices closed below the technically key $1800 level.

 

The reason for the bulls running out of steam today seems to be clear. Commentary from Fed Chairman Jerome Powell seemed to deflate the rally and market optimism as he threw a bucket of ice cold water on the day’s price action and rally higher. In an online conference held by the South African Reserve Bank, Powell suggested that the central bank is still on track to begin cutting its monthly security purchases, or QE, before the end of the year. The Fed’s monthly purchases are now likely to end by mid-2022 as the Fed seeks to return policy to a degree of normality.

 

The gold bulls heard Powell’s commentary loud and clear as gold declined by $30 per ounce from the session highs in the aftermath of his comments. Powell did suggest, however, that inflation could possibly remain elevated through 2022 as supply bottlenecks are worked out. The working out of these bottlenecks could fuel a drop in inflationary pressures, with the annual rate declining back towards the central bank’s desired 2% target. Such a scenario seems to be more of a best case scenario, however, and inflation still has the potential to remain longer and/or creep even higher.

 

The Fed’s monetary policy has been a major factor

for gold in recent months. Although no changes have yet to be made, the anticipation of change has kept markets on the move with a degree of volatility sprinkled in here and there. Despite the Fed’s ongoing opinion that inflation is transitory in nature, the threat of rising prices could keep buyers going to gold and alternative asset classes such as crypto. Bitcoin, for example, made new all-time highs this week hitting over $67,000 per unit. The search for alternative assets could keep a bid going in both gold and Bitcoin for the time being. These assets could see drastically higher price levels in the months and years ahead if inflation pressures remain. Despite what Powell said today, the Fed could already be far behind the inflation curve and that could make higher prices here to stay.

 

The lack of a close above the $1800 level may give the bulls reason for pause early next week. If the bulls are able to mount a challenge of $1800 and take it out on a closing basis, the path could be set for a run towards resistance in the mid-1830s. If that area were breached on a closing basis to the upside, lookout as prices could potentially run sharply higher in short order, possibly even challenging the $1900 area within days or weeks.

 

A failure to close above $1800 could reignite bearish excitement, however, and could encourage more bulls to throw in the towel and more traders to play the short side of the market. In that case, a quick decline towards the $1700 level could potentially be seen.

The gold market is seeing some upside in early action Tuesday as the International Monetary Fund, or IMF, trimmed its global growth forecast. The organization cited numerous reasons for the cut that included supply chain issues, the Delta variant and price pressures. The forecast for 2021 now stands at 5.9%, down from 6%. There were no changes made to the 2022 forecast.

 

The IMF described the revision as modest while it said that the effects for some countries would be large downgrades. The IMF said the outlook for low-income developing countries has declined significantly, largely due to the ongoing viral pandemic. The outlook for developed nations also signifies difficulties due to supply chain constraints and other factors. Such supply disruptions caused a decline in the U.S. forecast from 7% to 6%. The report went on to suggest that if the U.S. does not pass the Biden infrastructure plan, it could cut its forecast even further.

 

The IMF discussed its views and said that the effects of Covid-19 may fuel increased risks to the economy. It also said that it was concerned about the possibility of a divergence in economic prospects across nations. This makes sense, given the fact that some 96% of the population in low-income countries remains unvaccinated.

 

The report pointed out inflation risks that may be skewed to the upside while growth risks are pointing to the downside. This could lead to central banks being forced to move and move quickly if inflation remains stubbornly high.

 

The report fueled some buying in the gold market which saw double-digit gains following it. The buying pressure was likely partly alleviated by a stronger dollar, however.

 

The threat of rising inflation remains at the center of investors’ attention. With inflation reports due for release tomorrow and Thursday, traders appear increasingly nervous. These reports will be closely scrutinized and could be market moving if any significant data is seen. Markets are not only worried about inflation, but are also still concerned over Chinese company Evergrande. The massive property company recently reportedly missed another large debt payment. This is causing some fear of contagion in the marketplace and any new developments will be closely monitored by market participants.

 

As the next several weeks unfold, markets are likely to pay very close attention to the data stream. Any data strength may give the Fed further reason to announce tapering at its meeting next month. Any weakness could, however, keep the central bank on hold until sometime next year. Any uncertainty surrounding the Fed and its plans could keep volatility on the rise into next year and could fuel demand for safe haven assets such as gold.

 

For the time being, gold remains in no man’s land. The bulls will look to target the $1800 and then the mid 1830s on a closing basis to build momentum. The bears will target further downside to $1700 and then $1670 on a closing basis to build their case.