More and more Americans today are expressing an interest in buying gold and silver to help protect their wealth. Gold and silver have served for centuries as safe haven assets and hedges against inflation, economic crises, and financial turmoil. But for first-time buyers of gold and silver, diving into the world of precious metals can seem overwhelming.
Many people who buy physical gold and silver decide to buy gold and silver coins. That’s only natural, as billions of these coins have been produced over the years, and many millions more are produced every year. But if buyers aren’t careful, they could end up making mistakes that cost them dearly.
When it comes to gold and silver coins being purchased for investment purposes, they can be classified into two general categories: bullion coins and collectible coins. Each type of coin has its own advantages and disadvantages, and it’s important to understand them.
What Is a Bullion Coin?
A bullion coin is a coin that is either produced with the intent of selling it for its metal content, or an older coin that is valued only due to its metal content and not due to its rarity, condition, design, etc. Examples of bullion coins include French and Swiss 20 Franc coins, Austrian 100 Corona coins, American Gold Eagle and American Silver Eagle coins, Canadian Maple Leaf gold and silver coins, etc.
As with all gold and silver coins, these coins sell at a premium to the value of the gold or silver they contain, but it’s a premium that’s generally less than the value of the metal content of the coins.
What Is a Collectible Coin?
A collectible coin is a coin that derives its value not from the value of its gold or silver content, but rather from its desirability to collectors. This can be the result of rarity, condition, minting errors, specific dates or mint marks, etc.
Collectible coins are very often older coins that have relatively small production numbers and are in high demand from collectors. Premiums on these coins generally bear no relation to the value of their metal content, but are influenced rather by demand from collectors, and can often be many multiples of the metal value in the coin.
For instance, Morgan silver dollars contain about $15 of silver at current silver market prices. Common dated Morgan silver dollars are valued at $30-50, which isn’t terribly expensive for collectible coins. But rarer coins of that series can be valued much higher. The 1880-CC, for example, is currently valued at $275,000 in its highest condition.
Why Bullion vs. Collectible Coins Matters
The primary reason you would want to distinguish between bullion coins and collectible coins is if you decide to buy gold and silver coins for a gold IRA or silver IRA. Gold IRAs and silver IRAs are just like any other IRA except that they hold physical gold or silver coins or bars. And like any other IRA, they are prohibited from investing in collectibles.
In the US Code (26 U.S.C. 408(m)(2)), a collectible is defined as:
(A) any work of art,
(B) any rug or antique,
(C) any metal or gem,
(D) any stamp or coin,
(E) any alcoholic beverage, or
(F) any other tangible personal property specified by the Secretary for purposes of this subsection.
But specifically exempt from the definition of collectible (26 U.S.C. 408(m)(3)) are:
(A) any coin which is-
(i) a gold coin described in paragraph (7), (8), (9), or (10) of section 5112(a) of title 31, United States Code,
(ii) a silver coin described in section 5112(e) of title 31, United States Code,
(iii) a platinum coin described in section 5112(k) of title 31, United States Code, or
(iv) a coin issued under the laws of any State, or
(B) any gold, silver, platinum, or palladium bullion of a fineness equal to or exceeding the minimum fineness that a contract market (as described in section 5 of the Commodity Exchange Act, 7 U.S.C. 7) requires for metals which may be delivered in satisfaction of a regulated futures contract,
if such bullion is in the physical possession of a trustee described under subsection (a) of this section.
This means that a gold IRA or silver IRA can hold American Gold Eagle or American Silver Eagle coins, or any gold coin with a minimum fineness of .995 or any silver coin with a minimum fineness of .999. To learn more about fineness of gold and silver coins, read our primer on fineness of gold and silver coins.
Older bullion coins like the French and Swiss 20 Franc coins, or bullion coins like the Austrian 100 Corona coins which are restruck every year with the same 1915 date, have finenesses less than .995, so even though they’re bullion coins and not collectible coins, they’re not eligible for purchase through a gold IRA.
The same goes for older silver coins like Morgan silver dollars, Walking Liberty half dollars, etc., whose finenesses are less than .999, thus not making them eligible for purchase through a silver IRA. Attempting to purchase these bullion coins with a precious metals IRA would be treated as a distribution of IRA assets, and thus would incur potential taxes and penalties.
While these bullion coins may not be eligible for purchase by a gold IRA or silver IRA, they’re still able to be purchased for investment purposes outside an IRA. You could purchase these coins directly with cash and store them at home, in a safe deposit box or, if you purchase a significant number of coins, a bullion depository. Bullion coins that are IRA-eligible may also be purchased directly, allowing you to benefit from storing gold at home and having immediate access to your gold and silver coins.
The distinction between bullion coins and collectible coins may seem esoteric when you first encounter it, but it can have real ramifications for you if you try to buy the wrong coins with the funds in your gold IRA. You don’t want to risk losing money you’ve saved for years to potential taxes and penalties just because you bought the wrong type of coins.
Goldco’s experts have helped thousands of customers over the years navigate the gold purchase process. Our coins are IRA-eligible, and you can purchase them for a gold IRA or purchase them directly with cash so that they can be shipped to your door. We have established relationships with numerous mints around the world so that we can guarantee that the gold and silver coins you buy are 100% authentic.
Whether you’re interested in starting a gold IRA, rolling over assets from existing retirement accounts into a precious metals IRA, or buying coins to store at home, Goldco can help you get what you need. If you’re ready to get started buying gold, want to learn more about how gold can benefit you, or want to learn more about IRA-eligible gold and silver coins, call Goldco today to talk to one of our precious metals experts.