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Commodities Investments in the 21st Century


Posted: Wednesday, October 28th, 2020

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When thinking of alternative investments, people associate them with commodities. Commodities investments are an alternative to a portfolio and are made up of various assets.

A quick definition of commodities is that they are physical products. In this category, we include precious metals, but also energy or agricultural products.

Gold has long been viewed as the perfect alternative investment. Because it kept its value over the years, it outperformed each and every fiat currency on earth.

However, are there commodities investments that couple the qualities of gold with the diversity of other alternative investments? How about historical gold coins?

Commodities Investments

Gold Coins as Commodity Investments

This week marks one of the most interesting events of the year when it comes to alternative investments. Ides of March, the cap and dagger aureus of Brutus is auctioned this week. More precisely, tomorrow.

The current bid is GBP420,000 or almost $550,000. As a comparison, the record for a Roman coin ever sold is GBP1,200,000.

Commodity investments that combine the long-standing qualities of precious metals with scarcity are a way to reach diversification benefits. On the one hand, the investor gains exposure to the precious metal. On the other hand, it also gains exposure to the collectibles side of alternative investments.

While collectibles do not provide current income, they offer the potential of capital appreciation over long-term horizons. Moreover, the unique diversification benefits obtained by adding collectibles to a portfolio increase its value significantly.

Collectibles as Other Alternative Investments

The main problem with collectibles is that their price may fluctuate dramatically in time. However, it depends on the collectible’s scarcity.

Have you ever wondered why high net worth individuals suddenly acquire a taste of art? How come that all invest in art or have a part of their net worth invested in collectibles? By collectibles, we do not refer here to just gold coins, but to a wide range of valuable products. Think of fine wine, rare stamps, or jewelry as examples.

The biggest drawdown of collectibles is the illiquid market out there. More precisely, in times when liquidity is scarce, investors may have a hard time transforming the collectibles into cash. However, this is exactly the opportunity that other investors wait for, bidding for a collectible when it appears on the market.

One day ahead of the auction, the Ides of March bid exceeds GBP400,000. How much is too much for a gold coin going back centuries, once belonging to the collection of Ferdinand I, the Austrian Emperor?

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