Since its discovery over 5,000 years ago, gold has always been associated with wealth, beauty, and intrinsic value. In modern times, gold has become a seemingly simple way to invest money—an often cited ‘safe haven’ for investors. Gold is an internationally recognized asset held by all major governments, and for the personal investor it can act as a hedge against inflation and a way to diversify an investment portfolio.
At Diamond Estate Jewelry Buyers, we specialize in buying previously-owned gold bullion from the public. However, we also are often asked for advice regarding how to buy gold as an investment. Buying gold bullion coins and bars is not necessarily a complicated process, but there are differences between gold coins and bars, and collecting versus investing. In the following article, we’ll try to illustrate some of these differences for the first time buyer.
Buying Gold Bullion Bars as an Investment
Assuming you have already decided to buy gold as an investment, you need to evaluate your specific reasons to determine what kind of gold to buy. Are you interested in buying gold solely for its value as a precious metal? If so, you might think that buying gold bars or ingots would be the best option—after all, you’re not really interested in coin collecting. There are, however, some common misconceptions about gold bullion. Some believe that gold bars are the only form of gold bullion, and that gold coins are limited in supply and therefore much more expensive ‘collector’s items.’ The reality is a bit more complicated.
The truth is that gold bullion is simply a recognized weight and fineness of gold, no matter what form it takes, bars or coins. When most of us think of gold bars, we see stacks of giant bars from the movies. Those bars are typically the “London good delivery” gold bars of 400 troy ounce size. (There are 12 troy ounces to the troy pound versus the 16 ounces that make up an ordinary pound). These movie-sized behemoths might be suitable for major banks, but not so much for the smaller investor. Gold bars for the more modest buyer are sold in sizes of one troy ounce, 10, 100, or even larger sized gold bars. The smaller the bar, the larger the premium charged over the “spot price” of gold, or the current market value of the metal.
Large gold bars are the most cost efficient way to buy gold, but if you don’t actually make use of them, they can be costly to liquidate, and you may have to pay assay, refining, and handling fees. Liquidating a single chunk of gold worth $100,000 is much more difficult and costly than selling the same amount of bullion in smaller sizes.
Where to Buy Gold Bullion Bars
Gold bullion bars can be purchased from a number of sources, from local coin shops to online retailers and even on Craigslist and eBay. The bars themselves are made by many different mints and private refiners, such as Johnson Matthey, PAMP Suisse, and the Perth Mint, though there are many others. Each refiner produces a variety of gold bar weights to common standards regarding weight and purity.
When comparing two bars of equal weight and purity, you will find that there can be substantial differences in price. The difference in premiums results from differences in fabrication costs and brand preference. Though all gold is the same, there is some value to owning gold with a highly recognized hallmark, or mark of authenticity, as these hallmarks can affect the liquidity of your investment. The best advice is to buy your gold from a dealer whose reputation you can trust.
Buying Gold Bullion Coins
Gold bullion coins are not simply for the numismatists (coin collectors) among us—in fact, many gold bullion ‘coins’ aren’t even coins at all as they carry no monetary value and were never intended for circulation. Some gold coins are considered ‘coins’, but derive their value from their precious metal content and not their face value. Confused? The important point here is that gold is gold, and for the small investor looking for gold coins without numismatic value, gold bullion coins issued by internationally recognized national mints or reputable private entities can be a great way to invest in gold.
Gold bullion coins are produced in different forms by many countries, including United States Gold Eagles, South African Krugerrands, Canadian Gold Maple Leafs, and Chinese Pandas. Available in sizes ranging from 1/25 troy ounce to as large as five troy ounce sizes, these coins are available for purchase at three to fifteen percent over the spot price of gold, depending on the dealer and the size of the coin. A one-ounce American Eagle gold coin typically sells at four to five percent over the spot value.
Gold Bullion Collector Coins
Gold bullion coins with a value beyond their simple weight include both common U.S. gold coins and truly valuable collector’s items. Needless to say, knowing the difference is of utmost importance to the potential investor. Before 1933, the U.S. minted gold coins for circulation.
Though these coins were technically ‘recalled’ by President Roosevelt, many were not turned in and are available to investors today at a surprisingly small premium above their gold content—sometimes less than seven percent. For this small premium the investor has, in a way, the best of both worlds: a gold coin worth its weight in gold that actually has the possibility of its numismatic value increasing.
Other U.S. gold coins fall into the ‘truly collectible’ category, and should be avoided by the novice gold coin buyer. Coins that were minted in small numbers can have extremely high numismatic premiums, sometimes valued at more than ten times the intrinsic value of the gold.
Where to Buy Gold Bullion Coins
Finding a place to buy gold coins is as easy a typing a query into your internet search window. What you’ll find are many online sellers, including eBay and Craigslist, some with deals that sound too good to be true. Be sure to do your homework. Research the coins you are interested in and get information from someone other than the person selling the coins. The Professional Numismatics Guild is composed of top rare coin and bullion coin dealers, and they adhere to a strict set of ethical guidelines regarding the sale of numismatic and bullion merchandise. Make sure your dealer is a member in good standing.
If you already own gold bullion coins or bars and are considering selling them to cash in on your investment, please contact Diamond Estate Jewelry Buyers today for a free cash quote.