Is it Better to Invest In Gold Coins or Bars
When people are new to to investing in gold and precious metals, this is one of the most common questions that they ask. We generally steer people towards buying gold coins over bars for a variety of reasons which we will detail below, but the truth is that there is no blanket answer for everyone. Here are some differences, benefits, and drawbacks to each.
Key Differences Between Gold Coins and Gold Bars
The most obvious is that gold coins are, well, the shape of a coin. They are small flat circular metal objects. What you may not realize is that an investment grade gold coin is actually legal tender and produces by the treasury of the issuing country. For instance here at Gramercy we sell American Buffalo coins, Canadian Maple Leaf Coins, and South African Krugerrands.
These legal tender coins are actually produced by their respective countries’ governments. This gives consumers an extremely high degree of certainty of the purity of the gold (or other precious metal) inside of the coin. Coins also have recognized value separately from the value of the metal contained in the coin, because they are legal tender for exchange. Normally the actual denomination of the coin is of lower value than the metal contained inside of it. For instance, the American Buffalo coin has a treasury marked denomination of $50.
Coins usually contain 1 ounce of gold, but some may contain less or only be plated in gold instead of pure gold throughout, depending upon what the consumer wants.
Gold bars are rectangular shaped molds of gold with .999% purity gold. They come in many sizes and weights that you can own, depending upon the preferences of the buyer. Gold bars need not be produced by the treasury of a country, but are often created by private gold minters. As long as you are buying from a reputable source, you can be confident in the purity of a gold bar.
Gold bars have no value outside of the metal contained in the bar, which is unlike gold coins. Due to the larger sizes of many bars, small buyers of gold are less likely to own them.
Advantages of Gold Coins
Coins have many advantages over gold bars. For one, they are typically more portable and more readily accepted as an alternative to currency if you are conducting transactions in gold. If you need to travel with your gold, coins can easily be put into a backpack, coin purse, or lock box and taken with you.
Because coins are minted by government treasuries, they are also more recognizable and many people have more confidence in their purity and value if you are conducting exchanges away from commodity markets.
Some coins even become more valuable than the gold they contain. This most often happens when coins are especially old, or especially rare. Because some people collect coins apart from investing in gold, they may have another buyers market. Really old gold coins, like those from hundreds of years ago, can be worth a fortune. While it is unlikely you will come into possession of any of those, if you happen to get a rare run of a certain gold coin it may go up in value.
If you are a first time buyer or a smaller investor, you may also want to invest in a gold plated coin, or coins that are not 100% purity. This can be a less expensive means of acquiring some gold coins.
Advantages of Bars
Bars are made for bulk trade and storage. If you are a large investor or you conduct many transactions in gold, especially in established markets, you probably want to invest in gold bars.
Gold bars can be much larger and contain much more gold than coins. They can also stack, and you can store a very large quantity of gold in a relatively small space.
You also have the advantage of owning gold in the form that trades on the commodities markets. These trade for a very low premium over spot price because of their bulk nature. You may pay a slightly higher premium over spot when you invest in coins. Most bars are marked with the brand of the company that minted them, along with the .999% pure (assuming they are of that purity).
Does it Matter Which One You Choose?
At the end of the day, not really. If you are a large buyer you will probably want to invest in bars because they usually trade at a lower premium over spot. You may have reasons for wanting coins, such as the collectibility, or you may want a mix of both. At the end of the day an investment in gold is an investment in a quantity of metal and it doesn’t really matter what shape that metal happens to sit in. Only if you are a large buyer or are planning on using gold for currency will you want to more carefully plan how you buy. We recommend that you put some thought into it and do what’s right for you!