Gold Coins vs. Bullion: Advantage of Each Investment's Worth
A lot of people are thinking that just because many mints are issuing gold bullion and gold coins, that they are basically similar to each other – they aren't.
When you invest in coins, you are primarily looking at the collector's value. Sure, there's gold versus silver and other precious metals involved. But the main driver of the value of gold coins and other coins mixed with precious metals is the collector interest. Not the amount of precious metal in these coins.
Don't get me wrong. The fact that these coins have precious metals tend to price them at a certain level; it starts the price at a certain premium. However, the extra value that these coins command fluctuates due to investor interest. Bullion, however, it's more of a play on metal content.
It's basically more about the play on underlying metal. Keep the following discussion in mind if you're trying to decide whether to invest in coins versus bullion. There are key differences between investing in coins versus bullion that might impact your strategy and might impact your timeline.
Value: Rarity in Coins vs. Bullion's Metal Content
The big play in gold coins and precious metal coins is that you are investing in rarity – why rarity? If your coin is rare, there are more collectors looking to buy that coin.
They bid against each other and the price of the coin goes up. It's no surprise that the most precious gold coins are actually sold and valued at auctions. People hold auctions and the prices arrive and it's a very, very high price, why? Because of collector value.
There's no controlling collector value. You're betting on the rarity; you're not betting on the metal content, why? If you are going to just sell your double eagle gold coin on the value of gold plus a collector's premium, you are not going to get much. At least compared to if you sell your double eagle gold coin on the collector's market.
With bullion, it's pretty much a metal content plate. It has value because of its metal content. Its exact valuation fluctuates depending on the fluctuation of the price of the precious metal that it has.
Reasons For Buying Gold Coins or Gold Bars
Now that you know the valuation factors in coins versus bullion, you can then identify your reasons are very personal, there's no one right reason. It's like trying to figure out what is the best. You only know what the best is based on your own personal perspective and your own personal situation – nobody could tell you what the “best” is.
For the most part, it is subjective. With that said, you have to really know and be honest about your reasons for buying and investing in these competitions. Otherwise, you might get gold coins or get gold bullion for the wrong reasons and come to regret it later on.
Identify Your Goals in Bullion Coin or Numismatic Coin Purchases
You have to be very clear as to your motivation. If you're investing in gold coins, it's probably a good idea to do so if you are motivated primarily in terms of collections. Or if you’re looking for collectibles, and you're looking to pay a premium for collectibles, getting into gold coins make a lot of sense.
If you view gold coins primarily as collectibles instead of gaining value because they contain gold, then you are in the wrong place. If you are looking to invest in gold and looking to invest in fluctuations of these metal prices, then it's probably a good idea to invest in bullion.
The reason for this is a pure-play, there is not distracting valuation element coming from the collector side of your investment option. It's all about the precious metal content of your investment. This may be a good thing or maybe a bad thing. If you're looking for an investment option that has many sources of up pressure, it might be a good idea to invest in gold coins instead.
Investments in Historical Coinage or Diverisfying For a Long-Term Investment
Look at it whether you want to invest in a part of history or you just want to hedge your portfolio. Neither of these is correct, neither of these is incorrect. Coin collectors should factor in uncirculated coins or proof coins when collecting as well.
History buff or you want to have a legacy that you want to pass on to future generations in your family, you might invest in gold coins. Gold coins do have that historical edge. Silver coins also have a lot of history if they're in good enough condition.
On the other hand, if you just want to diversify your portfolio so that it doesn't crash in value if the stock market heads out. It's probably a good idea to go with precious metal bullion instead. This is once again a more straightforward play; there are no distractions regarding valuation.
Consider the Difference in Fees and Standards
It's pretty much a straight play on how well or how badly the precious metal the bullion is made of is doing. However, keep in mind that you still have to pay certain small fees; there are small costs involved. If you have huge enough holdings in bullion of precious metals, this cost might be quite large.
However, in terms of percentage, they are quite small. If you are dollars and cents kind of person, the final figures might still scare you because they can add up. What are these additional costs I'm talking about? I'm talking about assay costs, storage costs and other ministerial and administrative costs involved in storing, buying and selling your precious metal bullion.