Investing
Many Americans today are looking to protect their hard-earned savings with precious metals like gold. Rising economic uncertainty has helped drive increased gold demand in recent years, and it doesn’t show any signs of slowing down.
But one question many gold buyers have, especially if they’re new to precious metals, is whether they should buy gold coins or gold bars. While ultimately the decision on whether to buy gold coins or gold bars will be a personal decision that is dependent on your particular preferences, here are a few things to keep in mind.
Gold bars are, as the name suggests, a bar of gold. When you think of gold bars you probably think of Fort Knox or the Federal Reserve’s gold vault in New York, with gold bars stacked up on pallets and stored in large vault rooms. But those aren’t the only types of gold bars there are.
The standard for gold bars in international trade is the Good Delivery bar, which weighs around 400 troy ounces. These bars are held in professional bullion vaults and feature an unbroken chain of custody from the time they’re first refined to the time they change hands.
But most investors don’t have millions of dollars they can spend on gold bars, so they have to turn to smaller bars if they’re in the market for gold bars. Thankfully there are numerous options to choose from.
Gold bars are often produced by gold refiners, such as PAMP Suisse, Argos-Heraeus, or Valcambi. But more and more mints are also starting to capitalize on demand for gold bars.
Gold bars come in a variety of different sizes, although most are rectangular in shape. Some bars come in weights denominated in grams, with bars available from as small as 1 gram to as high as 1 kilogram (1,000 grams). Other bars are available in the more traditional troy ounce weights, with weights normally running from ½ ounce to 10 ounces, although there are bars as small as 1/100th of an ounce.
Gold coins are coins that are minted from gold. The overwhelming majority are round, and they’ll generally feature a governmental design on one side (such as a national symbol or a picture of a monarch) and a different design on the other side. Most gold coins minted today are intended for investment purposes, as gold coins haven’t circulated as currency in decades.
Many of these coins may have some legal tender value minted on them, although their metal value is far higher than that. And they’ll normally have a date and some indication of the amount of gold they contain, while many will also have a marking to indicate the fineness (gold content) of the coin.
Gold coins are normally minted with sizes of 1/10th of an ounce to a full ounce, although there are gold coins as small as 1/25th of an ounce and as large as 10 ounces.
There are also gold rounds which, while not coins, are the same shape and size as coins. Some may mimic the designs of coins, while others may have unique designs. Gold rounds, however, don’t necessarily have their gold content marked on them, and they may be marketed more to collectors than to investors.
If you’re wondering whether you should invest in gold coins or gold bars, you may want to look at the advantages of each of them. Here are some of the advantages of gold bars.
Aside from a few very large one-off gold coins, you’ll never find a gold coin that approaches the size of a standard 400-ounce Good Delivery Bar. In general, bars will be available in larger sizes than coins, so if you’re looking to get your hands on the largest pieces of gold you can, you’ll want to look at bars.
Gold bars often also command lower premiums than coins. Just like you’ll pay more per pound for filet mignon than you would for a whole beef tenderloin, the smaller the unit of gold you buy, the higher the premium will be, and the larger the unit of gold you buy, the lower the premiums will normally be.
Because gold bars are rectangular and often relatively flat, they stack and store easily. With no rounded edges, this means that you can store gold bars in a smaller footprint than an equivalent weight of gold coins.
Of course, gold bars have their disadvantages too. Here are two of the primary drawbacks.
The expense of gold bars is one of the major disadvantages of them. At current gold prices, a Good Delivery Bar will cost close to $800,000. But smaller bars are expensive too.
A 10-ounce gold bar will likely cost well over $20,000 once premiums are included. If you’re looking to buy $50,000 of gold, do you want to buy just a couple of bars, or would you rather have dozens of coins?
Aside from the expense of the large bars, there are also limited resale opportunities. If you’re looking to sell your gold, a gold coin that retails for $1,000 has a much larger potential customer base than a gold bar that costs $10,000-20,000 or more. Plus, if you only need to sell $5,000 of gold but you own only bars that are worth $20,000, you may sell more gold than you need to, which could increase your tax liability.
Added to that is the fact that some of the gold refiners, while well known and respected in the gold industry, aren’t necessarily that well known to the man on the street. For the average Ma & Pa investor, gold coins are going to be more familiar to them than gold bars produced by a gold refiner.
So what are the advantages of gold coins? Well, there are at least four of them.
In general, gold coins are going to be more recognizable than gold bars. Everyone who starts looking to buy gold will eventually learn about the South African Krugerrand, or IRA-eligible gold coins like the Gold American Eagle, the Canadian Maple Leaf, or the Austrian Philharmonic.
When you look at a gold coin, you can immediately see which country issued it, how much it weighs, etc., and you trust that the mint that produced it didn’t cut corners. Most people have everyday experience using coins in financial transactions, so they’re used to handling coins. But most people haven’t held or dealt with gold bars, which are less recognizable and less familiar to them.
Gold coins are incredibly popular and widely available. If you’re looking for gold to buy, there’s a good chance that you’ll have an easier time finding a particular gold coin than a particular gold bar.
While no one would recommend spending a 1-ounce Gold American Eagle for a $50 purchase, there is the added benefit that gold coins are legal tender. While there may not be a particular use case for that right now, their use as legal tender in the future can’t be completely ruled out.
Gold coins have the added benefit that they have the potential to become collectibles, or at least to gain monetary value above and beyond just their metal value. While you can’t use a gold IRA to purchase collectibles, a gold IRA can purchase gold bullion coins with limited mintages that could become sought after in the future.
With gold demand having increased significantly in recent years, mints are producing more and more different coin designs which, although they are IRA-eligible due to their metal content, could also see interest from collectors in the future due to their unique designs and low mintages.
Of course, gold coins have some disadvantages too. Here are two of them.
You’re normally going to end up paying higher premiums on gold coins than on gold bars, especially due to the smaller size of gold coins. But while you may end up paying more for 40 ¼-ounce gold coins than you would for a 10-ounce gold bar, it will be easier to liquidate those 40 coins when the time comes to sell because you can sell them off piecemeal, rather than having to sell a huge bar all at once.
Gold coins aren’t going to be as easy to store as gold bars, due to their round shape. You can buy large quantities of coins and store them in coin tubes, which can help, but if you want to own a variety of gold coins in different sizes and weights you may have to get creative with how you store them if you’re looking to keep them at home.
One fear that’s common to those looking to buy both gold coins and gold bars is the fear of buying counterfeit gold. It’s not an unreasonable fear, but the risk can be mitigated by working with trusted and experienced partners like Goldco.
Goldco works with mints around the world to bring you guaranteed authentic gold coins and gold bars that you can trust, whether you’re buying them for a gold IRA or looking to buy them with a direct cash purchase. With thousands of 5-star reviews and over $2 billion in precious metals placements, we work hard to bring the benefits of owning gold to our customers. Call Goldco today to learn more about the various gold coins and gold bars we offer, so that you too can benefit from owning gold.
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