Inaya Mclaughlin
Gold has been considered a safe-haven asset for thousands of years, and today’s investors are no exception. Gold is a tangible asset that is highly liquid, meaning it’s easy to quickly find a buyer if you need to sell. It's also considered a hedge against inflation and can be used to diversify your portfolio.
There are two main ways to invest in gold: (1) purchasing physical gold or (2) investing in gold-leveraged securities like gold stocks, mutual funds or ETFs.
If you choose to purchase physical gold, you can buy gold bullion bars, coins, or jewellery. Gold bullion bars are available in various weights and purities, with bars ranging from 1 gram to 400 ounces and are most commonly available as one- and 10-ounce bars. Gold bullion coins are produced by government mints and private mints, and they are a popular choice for investors due to their convenience and recognisability.
If you prefer to invest in gold-leveraged securities, you can consider gold stocks, mutual funds, ETFs, or gold futures contracts. Gold stocks allow you to invest in specific gold mining or refining companies, giving you complete control over which companies you support. Gold mutual funds and ETFs provide shares in multiple gold-related assets, offering more diversification and liquidity than physical gold. Gold futures contracts are agreements to buy or sell gold at a later date and can be traded on exchanges.
Before investing in gold, it's important to consider the pros and cons of each option and ensure that it aligns with your investment strategy, financial goals, and risk tolerance.
| Characteristics | Values |
|---|---|
| Reasons for investing in gold | Gold is a safe haven in times of economic and geopolitical uncertainty, and a hedge against inflation |
| Forms of gold investment | Physical gold (bars, coins, jewellery), gold stocks, gold funds, gold futures, gold mining companies |
| Advantages of physical gold | Provides stable value, doesn't need to be watched closely |
| Disadvantages of physical gold | Requires secure storage and insurance, can be illiquid, subject to dealer markups |
| Advantages of gold funds | More liquidity than physical gold, diversification, ease of ownership, no individual company research needed |
| Disadvantages of gold funds | Don't track gold's value very closely, management fees may apply |
| Advantages of gold futures | More liquidity than physical gold, no management fees |
| Disadvantages of gold futures | Very risky, not suitable for inexperienced investors |
What You'll Learn
Gold coins vs. gold bullion bars
Gold coins and gold bars are two of the main types of gold that people buy for investment. Each has its pros and cons, and the right choice depends on your specific needs and preferences.
Gold Coins
Gold coins are minted in a certain way and take a specific form, which adds a premium value to the gold itself. Many gold coins that are traded today were once in circulation as currency, and some are still legal tender. This adds to their value, as they are often sought after by coin collectors. Gold coins are also minted in continuing annual series, meaning that their value tends to increase over time as collectors seek to complete their collection. The value of gold coins is also influenced by their rarity, which tends to increase over time as older coins become harder to find.
The British gold Sovereign coin and gold Britannia coin are popular examples of gold coins with a strong collector's market.
Gold coins are typically more difficult to value against the live gold spot price, as their collector's value is less easily determined. They also tend to command higher premiums over the spot price than gold bars due to the extra minting costs and their commemorative nature.
Gold coins are a good option for those who appreciate the historical value of these coins and perhaps want to start a gold coin collection. They are also a good choice for those seeking a discreet investment, as they are available in smaller sizes.
Gold Bars
Gold bars, on the other hand, are usually valued based on their weight and purity, which is inscribed on the bar itself. This makes it easier to determine their value, as it is closely tied to the live gold spot price. Gold bars are typically valued strictly for their gold content, rather than their cultural or historical significance.
Gold bars are available in a wide range of sizes, allowing for flexible investment. They are also a good option for storing large amounts of wealth in a small space. For example, 1kg of gold can represent wealth of over £40,000.
Gold bars usually comprise 99.99% pure gold and are typically priced very close to the gold spot price, with a small additional margin from the mint and merchant. They are considered a reliable investment and are particularly attractive to investors who want to focus on the value of the gold rather than its cultural or historical significance.
Other Considerations
When deciding between gold coins and gold bars, it is also worth considering the following:
- Storage and Security: Gold coins are easier to store and can be kept in gift boxes or presentation boxes. Gold bars, especially larger ones, may require a safe or safety deposit box at a bank, which can incur additional costs.
- Liquidity: Gold bars may be more difficult to liquidate, especially if they are larger. Smaller gold coins may be easier to resell and are more widely accepted by dealers and coin shops.
- Taxes and Duties: In some countries, gold coins may have preferential tax treatment compared to gold bars. For example, in the UK, certain gold coins are VAT-free and CGT-free.
- Tradability: Gold coins from leading mints are widely recognised and accepted worldwide, making them easier to trade and use for exchange or barter in times of financial crisis.
In summary, gold coins offer historical and collector's value, flexibility in terms of sizing, and strong tradability. Gold bars, on the other hand, provide a more straightforward investment focused on the value of the gold itself, with sizing options that allow for flexible investment. Both options are considered reliable investments, although gold coins may be more difficult to value due to their collector's value.
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Where to buy gold coins
Gold coins are a popular way to invest in gold, and they can be purchased from a variety of sources. Here are some options for where to buy gold coins:
Dealers, Pawnshops and Individual Sellers
Gold coins can be purchased through dealers, pawnshops, and individual sellers. It is important to buy from trusted sources to ensure the authenticity and purity of the gold coins. Buying from a dealer listed in the U.S. Mint's database is recommended.
Online Dealers
Online dealers such as JMBullion, the American Precious Metals Exchange (APMEX), or SD Bullion offer gold coins for sale. These dealers provide a convenient way to purchase gold coins, but it is essential to consider any delivery and insurance fees that may be incurred.
Mints
Gold coins can be purchased directly from mints, such as the U.S. Mint, the Royal Canadian Mint, the Mexican Mint, or the South African Mint. These mints produce a variety of gold coins, including the popular American Gold Eagle, American Gold Buffalo, and South African Gold Krugerrand. Buying directly from a mint ensures the authenticity and quality of the gold coins.
Jewellers
Jewellers, especially those who are members of reputable organisations like the Jewelers of America, can be a good source for gold coins. They often deal in gold jewellery and may also offer gold coins. However, it is important to be cautious as you may pay a premium for the gold content.
Bullion Dealers
Bullion dealers are another option for purchasing gold coins. They offer gold bullion coins, which are a convenient and cost-effective way to invest in gold. The pricing for bullion coins is typically based on the market price of gold. The U.S. Mint provides a Bullion Dealer Locator on its website to help find reputable bullion dealers.
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Where to buy gold bars
Gold bars are a good investment option if you are looking to diversify your portfolio. Gold bars are rectangular slabs of .999 pure gold and are produced in sizes ranging from 1 oz. to 1 kilo. The average gold buyer is likely to purchase a 1 oz. gold bar or a 10 oz. bar. Gold bars are also available in weights such as 1 gram, 2.5 grams, and 5 grams.
Gold bars can be purchased from online dealers such as APMEX, JM Bullion, and JM Bullion™. You can also buy them from local dealers, collectors, or pawn shops. When buying gold bars, it is important to note the spot price of gold, which is the price per ounce in the market, to ensure you are getting a fair deal.
Some popular options for gold bars include:
- Perth Mint Gold Bar
- PAMP Suisse Gold Bar
- Credit Suisse Gold Bar
- Royal Canadian Mint Gold Bar
- Sunshine Minting Gold Bar
It is important to buy gold bars from reputable dealers and to be aware of any additional fees or premiums that may be charged on top of the spot price of gold. Gold bars can also be purchased over the phone or online through websites such as U.S. Money Reserve, which carries gold bars from established government mints and trusted private mints.
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Gold coin purity and weight
Gold coins with a purity of 90% are considered the standard and are highly sought after by investors and collectors. Examples include the $20 Liberty Head gold coin and the $20 St. Gaudens double eagle, which are recognised for their rich history and sell at a premium. From a global perspective, many other recognisable gold coins are also 90% pure, including British gold sovereigns, Swiss gold francs, and French gold francs.
Coins that are 91.6% pure are referred to as 22k gold coins. Examples include the South African Krugerrand and American Gold Eagle. These coins are durable due to the inclusion of other alloys, such as copper and silver, in their production. It's important to note that a one-ounce 22k gold coin contains the same amount of pure gold as a 24k gold coin.
The purest gold coins available are 99.9% pure, often referred to as 24k gold coins. Examples include the American Gold Buffalo and Canadian Maple Leaf gold coins. These coins are more prone to damage and require careful preservation and storage.
While coin purity might be expected to directly influence its value, this doesn't seem to be the case. Instead, a coin's price is driven more by its familiarity and demand in the marketplace. Therefore, when investing in gold coins, it's advisable to choose coins that are highly recognisable and liquid, ensuring you can sell them easily if needed.
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Gold bullion bar weight and purity
Gold bullion bars are a popular way to invest in gold, but they come in a variety of sizes and weights to cater to different investors' needs and budgets. The standard gold bar, often seen in movies and TV, is the 'Good Delivery' bar, weighing approximately 400 troy ounces (about 12.4 kg or 27.5 pounds). This bar is typically traded by central banks and bullion dealers and is not usually sold to the general public. However, gold bars come in smaller sizes, such as 1 gram, 5 grams, 10 grams, and 100 grams, making gold investment accessible to a wider range of investors.
The weight of gold bullion bars can vary from a few grams to 400 ounces, but the most common sizes include 1-ounce, 10-ounce, and 1-kilogram bars. The London Bullion Market Association (LBMA) sets the standards for gold bar purity and weight. According to the LBMA, a "standard" gold bar should have a minimum fineness of 995 parts per thousand, or 99.5% purity. This ensures that the gold content is almost entirely pure, with only minimal traces of other metals or impurities.
When investing in gold bullion bars, it is essential to consider factors such as storage, insurance, and resale value. Gold is a dense and valuable metal, so finding secure storage, such as a safe or safety deposit box, is crucial. Additionally, gold dealers typically charge a premium over the spot price of gold, which includes manufacturing, distribution, and dealer fees. This premium can vary depending on the private mint that manufactured the bar.
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Frequently asked questions
Gold coins are minted by government bodies and private companies. They are made from pure gold and come in various sizes, with the most common being one or two ounces. Examples include the South African Krugerrand, the U.S. American Eagle, and the Canadian Maple Leaf.
You can buy gold coins from online dealers, local dealers, collectors, pawn shops, and even some jewelry stores.
Gold coins are a good investment option as they are easily recognisable, simple to divide between investors, and widely available. They are also a more convenient way to invest in gold than gold bars due to their smaller size.
One of the biggest risks of buying gold coins is the potential for theft. Additionally, it can be difficult to receive the full market value for your gold coins, especially if you need to sell them quickly.
When buying gold coins, it is important to note that their price may not align with their gold content. In-demand collectible coins often trade at a premium. It is also crucial to buy from a reputable and licensed dealer to ensure the authenticity of your gold coins.
