Gold Coins

If you’re thinking about investing in physical gold, specifically bullion, you’ll need to know the difference between gold bullion bars and gold bullion coins. While neither is a bad investment, each is valued differently, and retains or loses value in different ways. Knowing the specific characteristics and features of different types of physical gold will allow you to make more informed investment decisions that are suited to your investment objectives.

Premiums on Gold Coins

In the business of buying and selling physical gold, the ‘spot price’ is the price the market will pay for a certain amount of gold at a particular point in time. Gold spot prices are set twice a day, based on supply and demand. Since gold coins in general have higher ‘over spot’ prices, an investor who buys a 1 oz gold coin pays more for that coin than they would for a 1 oz gold bar or round, despite each piece having the same gold content.

Demand for Specific Specimens

One reason you might pay more for coins than pure gold bullion, in the form of a bar or rounds, is that some coins take on value based on when and where they were made. The value also reflects the condition of the coin, including any defects, or lack thereof. If you buy a coin that only has 1,000 specimens, it will be worth more than its weight in gold because it is rarer.

Some people buy gold coins that are rarer because they want to invest in the collectability of the coin, rather than the value of the gold itself. These are known as numismatic coins. While appreciation in the gold market may rake in a tidy profit, the collectability of the coin is what increases the investment appeal. The Royal Canadian Mint, for example, makes limited runs of valuable, ornately-designed, precious coins every year.

Numismatic and Bullion Coins

As presented in the previous section, gold coins can be either bullion coins or numismatic coins. The value of bullion coins are more closely tied to the value of the underlying gold, whereas the value of a numismatic coin is associated with the collectability of the coin, that is, how much a rational collector is willing to pay for that particular coin.

For gold investments, bullion coins are a better option because they sell at smaller premiums than do numismatic coins. Whatever the reason for purchase, gold coins are an attractive option to many investors. Apart from elegant designs, easy storage, an active market and high resale value, bullion coins are also IRA-approved, giving individuals the option to diversify their financial portfolio.

Types of Bullion Coins

The emergence of physical gold as an investment vehicle during the 1970s and 1980s saw soaring demand for bullion coins. However, it wasn’t until the introduction of the South African Krugerrands that the bullion coins market really took off. Today, the best-selling investment-grade bullion coins in the world are the American Gold Eagles.

The American Gold Eagle is the industry-standard in gold coins. Its iconic design and widespread popularity makes it a coin with both collectability and investment appeals. The 1oz gold coin is the most sought-after, although other weights are available. Single pieces are packaged in sturdy plastic cases; multiples of 20 coins come in mint tubes, and multiples of 500 are packaged in monster boxes. The coins are minted in West Point, NY.

Not far behind in terms of popularity is the Krugerrand. Featuring a majestic depiction of South Africa’s first and only president Paul Kruger on the obverse, and the Springbok antelope on the reverse, these coins are a sight to behold.

The Krugerrand was introduced in 1967, and contains one ounce of high-purity gold. The South African Krugerrands are rarely imported for the investment market nowadays, although it still enjoys immense popularity amongst investors. Between the Krugerrand and the American Gold Eagle, the latter sells at a higher premium over spot.

The Canadian Maple Leafs are also one of the most widely traded coins. Once considered on par with the American Gold Eagle, this coin has experienced a somewhat weaker resale market of late. Nevertheless, it is a viable option for an investor looking to enter the market, as are American Gold Buffalos (24k purity) and Austrian Gold Philharmonics,

Another coin steady gaining in popularity is the Perth Mint 1oz Kangaroo. Struck from 99.99% pure gold, each coin is packaged in a protective casing which retains its beauty and value. Both Canadian Maple Leafs and Perth Mint 1oz Kangaroos sell at lower premiums, compared to Gold Eagles.

Lesser known coins include the Mexican 50 Pesos and the Austrian 100 Coronas. These coins carry lower premiums over spot, compared to the Kruggerand and the Gold Eagle. Other lesser-known bullion coins with low premiums include the Austrian Philharmonics and the Hungarain 100 Koronas.

One of the reasons Kruggerands and Gold Eagles warrant higher premiums is that both coins contain exactly one ounce of gold. In contrast, the 50 Peso and the 100 Corona contain fractional ounces, which many investors are not comfortable with. Another reason is that Gold Eagles and Krugerrands have the gold content stamped onto the coin in English, thus making them more desired in more affluent, English-speaking countries.