Precious Metals
Ongoing concern about the future of the economy has spurred precious metals safe haven buying that has boosted both gold and silver prices to record high levels. Awareness of precious metals and the role they can play in helping safeguard wealth is growing, and more and more people are starting to think about precious metals and the role they could play in their portfolios.
For many people, once the decision to buy gold has been made, the question then becomes what type of gold to buy: gold coins or gold bars?
It’s not necessarily an easy question to answer, but it’s an important one. If you’re looking to spend thousands of dollars adding physical gold to your asset portfolio, you want to be sure that you’re making a decision that makes sense for you.
Keep reading to learn more about the differences between gold bars and gold coins, and to figure out which form of gold makes the most sense for you.
Owning gold can offer numerous benefits. Here are three to keep in mind.
Gold can help diversify your portfolio, as it can alter the risk profile of your portfolio and can help offset losses elsewhere. How much of your portfolio you want to allot to gold may depend on your risk tolerance, aversion to losses, and overall financial goals.
As with any financial decision, you may want to discuss with your financial advisor and tax advisor the implications of buying gold for your portfolio.
Not only is gold popular for wealth protection, it also has the potential to make great gains, during good times as well as bad.
During the 2008 financial crisis, gold gained nearly 25% in value in the period that markets fell more than 50%. And the gold price kept on climbing, nearly tripling from its 2008 lows to its 2011 highs.
But gold isn’t just for rainy days and economic downturns. Since 2000, gold has significantly outperformed the S&P 500 Index, even despite the meteoric growth in markets over the past decade.
With fears of a pending economic downturn growing, could gold perform as well today as it did after 2008? And will Americans who didn’t take advantage of gold’s growth over the past 25 years decide to take advantage of gold’s potential for the next 25 years?
Gold has also long enjoyed a reputation for being a hedge against inflation. While the US dollar has lost 87% of its purchasing power since President Nixon closed the gold window in 1971, the gold price has risen over 10,000% since then.
During the entirety of the 1970s stagflation, when inflation reached into double digits, gold’s annualized rate of growth was over 30% per year, and over 20% per year even after adjusting for inflation.
Gold has been used as money since the Bronze Age, but the oldest known gold coins date back to the 6th century BC, nearly 2600 years ago.
Gold coins come in a variety of sizes and weights and are almost always round. Coins produced in the US generally feature a coin alignment, meaning that when the obverse (front) of the coin is right side up, the reverse is upside down, and vice versa.
Coins produced in the UK, Europe, and other countries are often produced in a medal alignment, in which the obverse and reverse are both right side up when the coin is flipped along its vertical axis.
But not all round gold objects are coins. In addition to gold coins and gold bars, there are gold rounds which, as the name suggests, are round and gold. Gold rounds often contain high amounts of gold and are created with designs that can mimic those of gold coins.
What makes a gold coin a coin is the fact that it is issued under the authority of a government and is given a legal tender value for use in commerce.
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Advantages of Gold Coins |
Disadvantages of Gold Coins |
| Liquidity: Smaller size means lower cost and more easily sold than larger, expensive gold bars. | Higher Premiums: Gold coins generally have higher premiums than gold bars. |
| Ease of Storage: Gold coins are a compact store of wealth, with $100,000 of gold able to fit in the palm of your hand. That makes it easy to hide lots of valuable gold relatively easily. | Risk of Theft or Destruction: If you store gold coins at home, there’s a risk that they could be stolen or destroyed in a house fire or natural disaster. |
| Availability: There are dozens, if not hundreds, of different types of gold coins available for purchase. | Storage Costs: If you don’t want to store your gold coins yourself, or if you buy your gold with a gold IRA, you’ll have to factor in the cost of storing your gold and insuring it against loss. |
| Government Backing: Because gold coins are issued under the authority of a government, you know that they’ll contain the amount of gold they’re supposed to. | Counterfeiting Risk: Counterfeiting of gold coins has been an age-old problem. But you can minimize your risk of buying counterfeits by buying gold coins from reputable vendors or through official channels. |
Gold bars are blocks of high purity gold that are produced for various purposes, whether for trade, investment, or industrial use.
These bars can be either stamped or cast, and can come in various sizes. The standard size gold bar for the international gold trade is a 400-ounce bar.
For individuals looking to buy gold bars, they are commonly available in sizes ranging from 1 gram up to 1 kilogram.
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Advantages of Gold Bars |
Disadvantages of Gold Bars |
| Good for Bulk Purchases: If you’re looking to buy millions of dollars of gold, it can be more convenient to buy a few large bars than to buy hundreds of coins. | Less Liquid: Because gold coins have a large and liquid market, selling them can be easier for individuals, particularly if you’re looking to sell smaller amounts of gold. The market for large gold bars that can sell for tens of thousands or even millions of dollars apiece is naturally more limited. |
| Efficient Storage: If you’re buying and storing large amounts of gold, the shape of gold bars can allow for more efficient stacking and use of space than round coins. | Counterfeiting Risk: Gold bars can be subject to counterfeiting too. If you don’t know what to look for, and have no experience buying gold bars, you could be exposing yourself to the potential to acquire counterfeits. |
| Potential for Lower Premiums: Premiums tend to be higher for smaller units of gold, so you might expect to pay smaller premiums to the spot price for large gold bars than for smaller gold coins. | Storage: Storing gold bars will impose a cost too, particularly if you need to store large amounts of gold. |
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Gold Coins |
Gold Bars |
| Since gold coins are issued under the authority of a government, they have some legal tender value in their country of issuance, albeit normally a value below the melt value of the gold in the coin. | Gold bars have no monetary legal tender value as they are not issued by governments. |
| Gold coins are almost always round. | Gold bars are normally rectangular, with larger bars often having a trapezoidal cross section. |
| Most commonly available in weights from 1/20-ounce up to 1-ounce, although larger and smaller weights are available. | Most commonly available in 1-gram to 1-kilogram sizes in the retail trade. |
| Older gold coins that circulated in commerce were minted with 90% to 91.67% gold (.900 to .9167 fineness). Most modern gold coins for the retail market are minted to at least .999 fineness, if not .9999 (99.9% to 99.99% pure). | Most bars today are available with a minimum purity of 99.5%, with many being 99.9% or 99.99% pure (.999 or .9999 fineness). |
| Gold coins come in a multitude of designs, from traditional designs emulating circulating coinage to special commemorative designs. | Gold bars tend to have more muted designs than coins, and are often limited to identification of the manufacturer, weight and fineness, and serial number. |
| Gold coins are minted by either government mints or private mints, but are issued under the authority of a government. | Gold bars are produced by private mints or refiners and are issued and sold by private firms. |
If you’re new to buying gold, or deciding whether to buy gold coins or gold bars, you’ll probably have some concerns about your decision. Here are some common concerns many gold buyers may have.
The first thing you may want to know is whether the gold you’re buying is real. How do you know that the gold coins or gold bars you’re buying aren’t counterfeit?
If you’re spending tens of thousands of dollars on a gold purchase, and particularly if you’re buying gold for a gold IRA with existing retirement savings through a gold IRA rollover, you’ll want to make absolutely sure that the gold you’re buying is real.
This is where it can help to work with established and reputable vendors who can ensure the quality and authenticity of your gold.
Goldco works with mints around the world to source the gold coins we sell to our customers, ensuring a steady supply of gold for our customers as well as guaranteed authenticity.
Why risk buying counterfeit gold coins from nameless, faceless vendors when you can work with a company like Goldco who has thousands of satisfied customers?
The second concern you may have with your gold coins or gold bars is their purity. If you’re making a direct cash purchase of gold coins or gold bars to store at home or in a safe deposit box, this may not be a big issue.
If you’re starting a gold IRA, however, the gold coins and gold bars you purchase for your gold IRA must meet a minimum fineness of .995 (99.5% pure gold). Purchasing coins of a lower fineness would be considered a distribution of your IRA assets and could subject you to taxes and penalties.
Goldco offers a wide selection of IRA-eligible gold coins that meet IRS requirements for purity, ensuring that the gold coins you buy from us are indeed eligible for IRA acquisition.
The next concern you may have is how to store your gold coins or gold bars. If you make a direct cash purchase, you can store your precious metals at home or in a safe deposit box, or if you make a particularly large purchase you may be able to arrange for storage at a bullion depository.
If you start a gold IRA, your gold coins and gold bars must be stored at a bullion depository.
You may have read about a “home storage IRA” that allows you to purchase precious metals with IRA assets and store those precious metals at home. These arrangements fall afoul of the tax code and could subject you to significant taxes and penalties.
That’s why it’s always important to consult with your tax advisor or financial advisor before making a decision that could impact you in this way, and to work with established partners like Goldco who have helped thousands of customers navigate the process of purchasing precious metals for their IRAs.
If you’re buying gold bars and gold coins, presumably you’ll want to sell them at some point to hopefully make a profit. So the question you’ll want to ask yourself is, who will buy this gold from me in the future?
It might be fun to own several 10-ounce gold bars, but how many people are going to have large amounts of money sitting around to buy those from you in the future, compared to 1/4-ounce gold coins?
There are numerous ways to buy gold coins and gold bars, from going down to your local coin shop, frequenting online marketplaces, or finding established precious metals companies that can provide you with gold products.
Gold can be purchased as a direct cash transaction, allowing you to take possession of your gold and store it in whichever way you see fit.
You can also buy gold coins and gold bars for a gold IRA, which allows you to own physical gold within a tax-advantaged retirement account.
Gold IRAs can be funded through tax-free rollovers from existing retirement accounts such as a 401(k), 403(b), TSP, or IRA account. And when you take a distribution from your gold IRA, you can take it either in cash or in gold.
How can I tell if a gold coin or gold bar is real?: There are numerous ways to check if the gold coins or gold bars you have are real. One of the first things to do is to check if the coin matches the published dimensions and weight.
Gold coins are also non-magnetic, so they should not be attracted to a magnet. Gold also makes a distinctive pinging sound when it is struck, versus base metals which have more of a thudding sound.
Finally, there are chemical tests that can be done by professionals, although these may damage your gold products.
But one of the best ways to avoid counterfeit gold is to work with trusted partners like Goldco who work with mints around the world to bring you guaranteed authentic gold coins so that you don’t have to worry about possibly buying counterfeit gold.
What is the best gold to buy?: That all depends on your particular needs and how gold fits into your financial planning.
For some people, gold may make up a large portion of their portfolio, and they may hang onto it for a long time. Others may only want to buy gold as a short-term hedge against a possible economic downturn.
And other people may just want to hang onto a few gold coins or gold bars at home in case of a rainy day. How much gold you buy and the form you buy it in will be determined by how you plan to make use of your gold.
How can I keep my gold coins and gold bars safe?: Gold that you buy with a direct cash purchase can be stored at home, in a safe deposit box or, if you’re making a particularly big purchase, can be stored in a bullion depository.
If you’re buying gold through a gold IRA, your gold coins or gold bars will have to be stored in a bullion depository. Goldco works with experienced precious metals bullion depositories to ensure that our customers’ precious metals assets remain safe and secure.
What precious metals can I hold in a gold IRA?: Gold IRAs aren’t limited to just gold. They can also hold silver coins or silver bars, as well as platinum and palladium bullion.
What kinds of gold coins and gold bars are IRA-eligible?: IRAs are only allowed to acquire gold coins or gold bars with a minimum fineness of .995 (99.5% pure gold). Using IRA assets to purchase coins with a lower gold content that are not IRA-eligible would be considered a distribution of assets and could subject you to taxes and penalties.
Can I take physical possession of the gold in my gold IRA?: The gold in your gold IRA must be stored in a bullion depository, but you may take possession of that gold when you decide to take a distribution through an in-kind distribution.
Some companies claim that there is such a thing as a home storage IRA, which purportedly allows you to purchase gold and silver using IRA assets and store those precious metals at home. These types of arrangements have been explicitly banned by tax courts, and anyone attempting to start a home storage IRA could face significant taxes and penalties.
How can I fund a gold IRA?: One of the most popular ways to fund a gold IRA is through a gold IRA rollover. You can roll over assets tax-free from an existing retirement account such as a 401(k), 403(b), TSP, or IRA account into a gold IRA.
Goldco’s precious metals specialists have helped many customers navigate this rollover process. Contact our specialists to learn more about how the gold IRA rollover process works.
I already own gold coins or gold bars. Can I move those into a gold IRA?: IRAs are prohibited from engaging in certain transactions, including IRA owners selling their property to an IRA.
This is why it can be helpful to consult with your financial advisor or tax advisor to go through the IRA rules and regulations in order to make sure that you don’t inadvertently end up making a mistake that could subject you to taxes and penalties.
As with any other asset purchase, whether you choose to buy gold coins or gold bars is a decision that you’ll make after assessing your unique individual goals. Each person’s financial situation, time horizon, and financial ability can play a role in whether they buy gold coins or gold bars.
Some people look to gold as an inflation hedge against inflation that remains stubborn. Others may fear a potential financial crisis, and look to gold as a safe haven asset, hoping it will perform in the next few years just as well as it did from 2008 to 2011.
And other people may just want to diversify their portfolios a little bit, just in case.
If you’re looking to buy gold, no matter the reason, it can be important to work with trusted partners who can provide you with the products and support you need.
Goldco has worked hard to make ourselves one of the top gold and silver companies in the country, and our more than 8,000 5-star reviews are a testament to the lengths we go to provide premium gold and silver products and exemplary customer service.
Our specialists have helped thousands of customers benefit from adding gold to their portfolios. Will you be next?
Call Goldco today to learn more about how gold bars and gold coins can help you safeguard your financial future.
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