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Should I Buy Gold Or Silver Coins, Bars Or Other Bullion And What Is Better?
After remaining dormant for many years, investing in precious metals has regained interest from the investing community. Precious metals to invest in are most commonly gold and silver and to a lesser extent platinum and palladium.
There are many different ways to keep precious metals in an investment portfolio, but one popular way is by buying precious metals bullion. However, bullion has many choices available to the investor. Bullion can come in several different forms, including:
Each has their own advantages and disadvantages that people interested in precious metals investing need to be aware of when selecting which one best fits your needs.
What is bullion?
Bullion are precious metals in bulk, which are traded worldwide on international bullion markets. Most popular are those made of gold and silver and to a lesser extent, platinum and palladium. Recently, bullion may also include industrial metals such as copper.
Bullion has to meet certain requirements or specifications, depending on the market it trades in. A commonly used specification is the good delivery from the London Bullion Market Association (LMBA). Good delivery gold bars are the standard used by central banks around the world and contain between 350 and 430 troy ounces of between 99.5 percent and 99.99 percent pure gold.
The price of gold and silver quoted on the bullion markets is referred to as the spot price. The difference between the spot price and the actual retail price is called premium. The spread refers to the difference in price when a certain type of bullion is bought and sold. A popular unit of measurement in bullion is troy ounce, which roughly equals 31.1034768 grams.
Bullion usually list their weight, purity and the manufacturer's name or logo. They can also come with a serial number or come with an assay card, which guarantees the bullion meets its claimed specifications. Some types of bullion can become collectable after some time and thus gain a numismatic premium in their value.
Why choose gold or silver bars?
Gold and silver bars are most often rectangle and either flat or in the shape of a brick. Bars can be either cast or minted. Cast bars or ingots are made by pouring molten metal into molds. Minted bars are made from metal blanks. Examples of bullion bars are those from Pamp Suisse and Credit Suisse.
Bars are the easiest and cheapest form to manufacture and therefore have the lowest premium. The larger the bar, the lower the premium. The largest bars are the least expensive way of investing in gold and silver bullion.
Advantages of gold and silver bars.
- Have the lowest premium available.
- Are the only option in large sizes such as 100 troy ounces.
- Come in a wide variety of different shapes, sizes and purity to satisfy all investor needs.
Disadvantages of gold and silver bars.
- Bars, especially in larger sizes, are the easiest to counterfeit.
- Cast bars have a rough texture and finish, giving it an unappealing look to some people.
- Are highly unlikely to gain numismatic value.
Why pick gold and silver rounds?
Gold and silver rounds are thin and circular metal discs, which are stamped using metal blanks. Unlike coins, they lack any denomination. Examples are Apmex or Kitco rounds.
Advantages of gold and silver rounds.
- Carry low premium, which is only slightly more than bars.
- Generally better looking than bars, especially cast ones.
- Harder to counterfeit than bars.
Disadvantages of gold and silver bars.
- Choice of size available is restricted to less than or equal to 5 troy ounces.
- Restricted to circular shapes, unlike the more varied bars.
- Highly unlikely to gain any numismatic premium.
Why get gold and silver coins?
Gold and silver coins are similar to rounds with the difference being that coins have the important status of legal tender. They carry a denomination and can be used as currency. Coins can only be issued by a government and not by private companies. Examples are American Gold and Silver Eagles and Chinese Gold and Silver Pandas.
Legal tender status can have important tax and other legal implications. For example, in some European countries coins with the status of legal tender are exempt from value added tax (VAT), which can be up to 20 percent. Depending on the country, this can make silver coins a cheaper way to invest than silver bars.
Many coins have gained numismatic value after their initial release. These coins are usually popular with investors, but minted in limited numbers. Over time, the laws of supply and demand have significantly increased their value. Such coins could eventually offer the best returns on initial investment.
Advantages of gold and silver coins.
- Hardest to counterfeit.
- Usually the most attractive in design and finish compared to other forms of bullion.
- Carry the status of legal tender and backed by governments.
- May gain numismatic value over time.
Disadvantages of gold and silver coins.
- Carry the highest premium.
- Are restricted in available shapes and sizes.
What are junk silver coins?
A substitute to regular bullion coins are Junk Silver coins. Junk Silver coins are a throwback to a time when coins in circulation contained a certain amount of a precious metal. The precious metal used is most often silver. These coins do not list how much precious metal they contain or their purity. The Franklin Half Dollar is a commonly used type of Junk Silver coin in the United States.
The advantage of Junk Silver coins is that it is possible to buy the precious metal at below spot price. The downside is that their resell value may also be below spot price. Junk Silver coins are often worn and may have lost some of their precious metal. The amount of precious metal they contain can range from 35 to 90 percent, which can make determining their value somewhat complicated.
Where to buy gold?
There are many choices available to the investor interested in buying gold and silver. Bars, rounds and coins can be bought everywhere. For example:
- at local coin shops,
- at online retailers,
- directly from government mints etc.
Each varies in price difference, quality of service provided, speed of delivery and so on. Which one to choose is for the individual to decide. Shop around to find the best value available.