Nowhere is the law of 'supply and demand' more evident than in the current gold market. The demand for gold - domestic and foreign - is quickly outpacing the supply. Not only is the demand increasing, but also the production is declining. This decline is also true for other metals like copper and silver.
Increased demand can partially be attributed to a lower gold output from S. Africa, and changing economic situations in India and China where in the latter it is easier for their citizens to sell and import gold.
Purchasing Gold Bullion
The decision to purchase gold bullion - either as coins or bars - will depend on the amount of dollars you want to invest and your access to safe storage.
If your intent is to purchase bullion as a hedge against inflation you need to look for dealers selling gold bars and coins as bullion based on spot value with a minimun premium. One should remember when buying gold coins, you are buying them as bullion and not view the purchase as a numismatic investment. The two attitudes are totally different.
While purchasing bullion will typically carry a low premium (a small percentage mark-up over the spot value), the purchase of a rare gold coin might be many times the value of the coin's face value - or 'bullion' value. If you are looking to diversify your portfolio, you want to focus on bullion coins and bars.