Is It Better To Have Gold Coins Or Bullion?
Friday, September 22nd 2023
Gold has long been seen as a worthwhile and secure investment, drawing investors of all sorts with its longstanding appeal as an inflation hedge (1), store of value and diversification tool. But when it comes time to put their physical gold investment in action, many people find themselves undecided between bullion or coins. We explore both options in this article so you can make an informed decision regarding which form best meets your individual requirements.
Understanding Gold Coins and Bullion
Before diving deeper into each investment option, it’s crucial to first gain an understanding of what gold coins and bullion are.
- Gold coins: Gold coins are issued and produced as currency by governments worldwide, often bearing intricate designs or inscribing and featuring various sizes, denominations and weights of gold content that range between 22-24 carat purity levels. They typically feature various designs on them to mark different occasions such as currency issues by governments around the globe.
- Gold bullion: Gold bullion refers to pure, uncut bars or ingots of gold in their purest state, typically available as bars weighing anywhere between one gram to 400 troy ounces while ingots may weigh several kilograms. Gold bullion typically possesses at least 99.5% purity with some bars boasting even 99.99% gold purity content.
Pros and Cons of Gold Coins and Bullion
Before choosing between gold coins or bullion as an investment option, it’s essential to weigh their respective advantages and disadvantages:
- Liquidity: Gold coins can easily be bought and sold due to their widespread recognition and standardization, providing more efficient ways of turning gold coins into cash quickly during times of emergency or sudden need.
- Collectability: Many gold coins possess numismatic value, which means collectors seek them out due to their rarity, historical importance, or design – often commanding premium prices above spot gold prices.
- Legal tender: Gold coins are considered legal tender in their home countries, providing significant tax and shipping advantages.
- Denomination options: Gold coins come in various weight categories to make investing accessible for investors with tight budgets.
- Premiums: Gold coins typically command higher premiums over spot price due to production, distribution, and marketing expenses.
- Purity: Although most gold coins may boast high purity levels, their value could be diminished depending on whether they contain pure metals like bullion.
- Purity: Gold bullion boasts an excellent purity standard of 99.5%, making it a reliable investment with highly valuable returns and consistent standards of returns.
- Reduced premiums: Since gold bullion does not possess any numismatic value, its premiums tend to be significantly less than those of coins.
- Returns: Gold bullion investments offer greater returns, making them ideal for investors looking for longer-term strategies and making larger investments.
- Liquidity: Bullion may be less liquid than gold coins due to its greater weight and lack of legal tender status.
- Storage and transportation: Gold bars and ingots can be bulky and costly to store and transport when in large amounts, leading to more expenses for transport than their weight would indicate.
Deciding between Gold Coins and Bullion
When making the choice between gold coins and bullion, various factors should be taken into consideration:
- Goals: Your primary investment goals for holding gold may include protecting against inflation or saving as an asset store of value, both coins and bullion may fulfill that need. However, if collecting coins appeals more, gold coins might be preferable, while for purity-oriented investors and those seeking reduced premiums bullion might be better.
- Budget: Gold coins come in smaller denominations that make them accessible to investors with tight budgets, making them suitable for small investments in gold. If your budget only allows you to afford smaller quantities, gold coins might be your ideal investment vehicle, otherwise, gold bullion may offer better opportunities.
- Store and protect: Gold bullion can be expensive to store and transport. Coins may provide more convenience due to their smaller size and weight, however, either form should always prioritize security to safeguard their investment.
- Tax and legal considerations: Gold coins may provide certain tax advantages depending on where they were originally issued as legal tender, so if tax matters are of great concern for you it would be prudent to consult a tax professional and understand their implication when choosing between investing in gold bullion versus coins. Furthermore, certain countries impose import or export restrictions for bullion which should also be taken into consideration before making your choice.
- Liquidity: Gold coins are widely recognized and standardized, which makes it much easier to purchase or sell during moments of need or urgent need. If liquidity is of great importance to you, gold coins could be the best option. However bullion is also liquid because it is linked more directly with its spot price for gold.
Gold coins and bullion both offer unique advantages and disadvantages that make choosing one or the other difficult, making your best bet depends upon your objectives, budget and personal preferences.
Gold coins offer highly liquid investments with both collectability and numismatic value. They even make easier investing for those on tight budgets due to being available in smaller denominations.
However, purity, lower premiums, and larger investments are top of your mind. Gold bullion might be better suited. Just bear in mind the potential storage and transportation challenges when investing in larger amounts.
Before making your choice, it’s essential to conduct extensive research, consult professionals, and carefully consider both gold coins and bullion as viable investments that protect you against inflation and economic volatility. Ultimately, both investments can offer protection from inflationary pressures while providing valuable returns over the course of their lifespan.
Are you ready to take action today?
Making investments in gold can help you diversify your retirement portfolio. Since gold has little to no connection with equities and bonds, it reduces the risk to you completely. You can invest in gold via specialized gold IRA companies, which you can learn more about below.
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