When investing in gold, should you buy bullion or collectable coins?

2개월 전

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Should you buy gold coins?

The first thing to say when looking to invest in gold coins is that it's important to decide whether you are collecting or investing...

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If you're still sat on the fence, and unsure if precious metals are for you, allow me to give you 3 quick reasons why EVERYONE should consider owning some.

1 Diversification:

Every portfolio should attempt to diversify exposure among asset classes that are not “correlated” (meaning, they move to different rhythms and should offer some protection of a price decline across your entire portfolio at the same time).

2 Currency & Inflation Hedge:

If you believe the US Dollar, or any other currency, is headed for decline, precious metals offer one means of “hedging” this risk. As a currency weakens, precious metals should increase.

3 Economic Collapse Hedge:

The media has had fun highlighting “Preppers”, or those that believe “TEOTWAWKI” (The End Of The World As We Know It) is at hand. Many believe that an economic crash could lead to precious metals used for barter in the end times.

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So you're still undecided, OK, one last attempt to convince you....

With central banks now spraying unprecedented amounts of printed money at the global economic system, it’s little wonder that the gold price has soared by 18% in the six weeks following the stockmarket meltdown. All the extra money sloshing around means the chances that consumer price inflation will take off and erode the value of your cash has risen sharply. While central banks can create as much paper "money" as they like, gold can’t be produced at the touch of a button.

As a result, gold is trusted as a store of value and people flock to it as a safe haven in uncertain times. These qualities mean it typically flourishes when the news is bad and risky assets such as stocks slump. That’s why I would alwsys advocate holding at least 10% of your portfolio in gold as a form of insurance. I personally hold a lot more, with silver being a major part of my retirement fund.

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When it comes to buying physical gold, for most of us, that means snaffling away a few gold coins. They are small and convenient, and provided you can do so securely, you can keep them at home.

So when it comes to gold coins there are two different kinds of coins, both have merits and both can help preserve future wealth - Collectable gold coins and bullion gold coins are two very different types of investment.

Collectable gold coins

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Collecting coins can indeed be lucrative, calculations show that the value of collectable coins in general (not just gold ones) increased by an estimated 175% in the decade to the fourth quarter of 2019. Where as between 2010 and 2019, the FTSE All-share index rose by 52%.

This is because collectable coins have “numismatic” value to them, and collectors will pay well above the precious metal content value to get their hands on desirable coins.

The materials they are made of are very important, but so are their rarity and beauty. Sometimes key elements in the “stories” behind the coins are what collectors love. A coin may, for example, have been struck in error, such as the 20p coins from 2008, which emerged without the year on them.

Or it might point to a milestone in history, such as the “Flowing Hair” dollar – the first to be minted by the newly independent US in 1794, one of which sold for $10m in 2013. A $20 “Double Eagle” from 1933 became the world’s most expensive gold coin to be sold at auction – and the second-most overall after the “Flowing Hair” dollar – in 2002, when it fetched $7.6m. Some coin collectors will also tell you that rare coins are also a safe haven from stockmarket falls.

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flowing hair dollar

Bullion gold coins

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When the stock markets enter a bear market, investers tends to be bullish for gold. The fact that gold bullion comes in the shape of a small, circular discs with pretty designs impressed upon them is incidental to bullion investors. To them It doesn’t really matter, they are only interested in the weight and the purity of the gold coins they can buy. When it comes to purity, investors want their gold coins to be at least 99.90% pure (that is 990 parts gold per 1,000), as that is the minimum that it takes to be classified as “investment gold” by the taxman, making it free of VAT, here in the UK (The purity value of gold bars needs to be higher, at 99.95% or 995 parts per 1,000.).

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The popular Britannia bullion coins, from the Royal Mint, are 99.99% pure gold and as pure as gold comes on to the market. For “investment gold”, coins also need to have been minted after 1800 or otherwise included on a list of acceptable foreign gold coins, available at gov.uk .

There is one big advantage to buying British gold "bullion" coins over collectable and bars, for UK-based gold investors. This is because the 1oz Britannia, with a face value of £100, is legal tender in Britain, it is also exempt from capital-gains tax.

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generic bullion bars

The big disadvantage of coins compared with bars is that you will pay a much higher premium over the “spot” gold price. This is to cover all of the associated costs that go into making and distributing them. For a 1oz coin,you can typically pay on average 4% above the spot price. But when buying fractional gold coins, (Coins weighing less than one troy ounce) you have a higher premium again. Simply because their manufacturing costs are higher, relative to the value of the gold in the coin.

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So, while collectable and bullion gold coins both have their merits in terms of investments, which you buy depends on what you are trying to achieve as a buyer. Are you looking for a safe, reliable store of value, the price of which may appreciate in these fevered times? If so, bullion is your bag. But if you are fascinated by beautiful, rare and exceptional pieces, then collectable coins are a worthy asset, but consider them more of a hobby than an investment.

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Another well written article!
Small mistakes: 'When it comes to purity, investors want their gold coins to be at least 99.90% pure (that is 999 parts gold per 1,000)" and "The purity value of gold bars needs to be higher, at 99.95% or 999.5 parts per 1,000."
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i like a bit of both, because as you say.. diversify !

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Won't get any arguments from me on that. Always best not to put all your eggs in one basket.

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Truly gold will always be a haven of value, like silver, they are a good investment par excellence; In relation to gold coins, it is this physical form that has the greatest advantage at the moment for small and medium investors, since many of the hard products in this area have associated logistics problems that undoubtedly affect their mobility. Not surprisingly, the purchase of coins has soared 30%, surprising the minting of regular and circulating coins that represent more profitability to the coin manufacturing houses.

For silver, the scenario that is seen is very interesting, even when its price is highly undervalued, with a ratio of 112: 1 to gold. However, for the good investor, the information about this metal will provide a profit that will be seen for years to come.

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Gold and silver have the advantage that you can use for industrial purpose even if there is a situation you need to under sell it. Also, collectable coins have a premium because or its scarcity but you have be cautious to what you buy, because you have a big risk to be victim of scam.

If we see stokes v Crypto, I prefer to invest in crypto, as blockchain is a revolution for the era. We need platform like Koinpro which are doing work with crypto and stokes at the one place.

Gold is old school investment, Bitcoin is the lastest and good return investment.

Well written about yellow money. I think its a safe investing to have money in gold.

he issue of investments in actaulides is quite complicated. Apart from gold or cryptocurrencies there are other alternatives. What I do not like, and in fact does not contribute to the strengthening of any economy, is the excessive speculation that these markets are generating.

Greetings and have a good weekend.


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I don’t know how the trend and market it’s. But I love to keep these gold items! How do you think about swiss gold bar, with the PAMP written there... worth to keep? How to differentiate it’s genuine?

Nice article. Our Community @banking-finance doesn’t have any precious metal posters. I will cross-post this article there. It will hopefully give you new rewards for this post and stimulate interest in the previous metal investors to share their posts in our Community.
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