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Eight Things to Consider as a First Time Buyer of Gold or Silver Coins

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Eight Things to Consider as a First Time Buyer of Gold or Silver Coins

The idea of embarking on something new can be overwhelming. This is especially the case when you have thousands of dollars at stake. Considering the state of the economy, stubbornly high inflation, geopolitical issues and uncertainty in the financial and banking sectors, we are seeing many new first-time buyers of gold and silver coins.

The amount of information online can be overwhelming and cause paralysis through analysis. You may have noticed that there’s a lot of conflicting information and that everyone seemingly has a different opinion and agenda. While we’re all in business to make money, ultimately, coin dealers should first and foremost operate in the best interests of their customers.

In today’s article, we’re going to discuss eight things that you should consider before making an investment in gold or silver coins, or for that matter, gold and silver bullion. Once you’ve established a game plan, you’ll be well on your way to successfully navigating the coin and bullion industry.

 

Are you a coin investor or coin collector

One of the major issues we regularly see with first-time coin buyers is a lack of focus on one particular sector of the market. Simply put, there are collectible coins and investment coins. Collectible coins sell for a premium above and beyond the underlying precious metal value (in some cases, the underlying metal has no impact on the value), and are valued based on the rarity, condition, and demand for the coin in the marketplace.

An example of a collectible coin is a Carson City Morgan silver dollar. In most years, the Carson City Mint produced fewer coins than the Philadelphia, San Francisco and New Orleans mints and trade at premiums over common date Morgan silver dollars. Carson City silver dollars produced from 1882 – 1884 are more prevalent than coins from other years and tend to trade at lower values than their counterparts.

On the other hand, most Morgan silver dollars produced by other mints and in other years fall into the investment bucket. While these coins trade at higher premiums than privately-produced bullion and modern government-issued coins, the premiums are typically reasonable. As with Carson City silver dollars, the condition of the coin matters, but most of these coins are in standard condition and trade at a flat rate.

There’s nothing wrong with being a collector and investor, and in fact, many of our customers are both. However, you should decide which approach best fits your needs and place a greater emphasis on that part of the market. It’s also important to know that prices can vary widely (especially with collectible coins), so we recommend spending additional time to learn about the market to avoid overpaying for an item.

Narrow your focus on whichever sector best fits your needs

It’s important to acknowledge that we can’t be an expert in all areas of investing and collecting, so we suggest that you focus your time and energy on the sector that best fits your needs. As mentioned above, this is especially important with collectible coins, considering the vast number of options and wide range of values.

With respect to collectible coins, we suggest subscribing2025 Blue and Red Coin Books to resources such as Greysheet, Coin World or Numismedia to get an idea of the market for particular coins. You may also want to consider purchasing the Blue Book and Red Book to get a better idea of the market and retail value of coins.

Lastly, consider searching for recent auction sales to get a feel for the current market value. The value and demand for collectible coins can change in short order, so auction results from a year or so ago may not reflect the current market for these coins.

If your interest is primarily in bullion or bullion coins, values and the market for these items are easier to keep tabs on. While premiums, demand and supply vary for these coins, the price tends to be more reflective of the underlying spot price of gold and silver as opposed to the factors that affect the collectible market, such as the state of the economy and discretionary income.

In the next section, we’ll delve a bit further into the difference between bullion and bullion coins and the factors that affect prices in this sector.

The Difference Between Bullion and Bullion Coins

If you’re new to investing in gold and silver, you’ve probably come to realize that there are many terms used in the industry that you may be unfamiliar with. To begin with, it’s important to understand the difference between bullion

Close up of several silver rounds
Privately Issued Silver Buffalo Rounds

and bullion coins. Bullion is a term used to describe privately-issued gold and silver. This is typically in the form of rounds or bars, but we’ve seen some pretty interesting designs for privately-issued bullion over the years.

Coins, on the other hand, are government-issued. Coins are issued by the official government mint of that country and with few exceptions, include a face value or denomination. Coins are legal tender, but you wouldn’t want to use them for their face value, as the underlying precious metals value is substantially more. For example, an American silver eagle has a face value of $1 and the Canadian silver maple leaf has a face value of $5. These are just arbitrary values assigned by these governments and have no bearing on the price at which these coins are traded.

Rather, buy rates and sell rates are driven by the underlying

silver eagle and silver maple king charles

 spot price of gold and silver in the market and the demand and supply of these coins. As you would expect, in most cases, but certainly not all, higher gold and silver prices attract more sellers than buyers and vice versa. However, catalysts, such as war, pandemics, high inflation and bank failures, tend to attract more buyers than sellers regardless of the price.

The reason being is that gold and silver are seen as safe haven investments. Investors typically don’t like uncertainty, and when this occurs domestically or internationally, you’ll tend to see investors seek quality, safe, and sound investments, such as gold and silver.

Generally speaking, coins trade at higher premiums than coins, as government mints charge dealers a higher premium than private mints. However, with everything else, there are exceptions to the rule. Novelty bullion, vintage bullion, art bars and limited-edition bullion can trade at higher values than some coins.

 

Why there is a difference between the spot price and physical coins and bullion

We touched on this briefly above, but when purchasing bullion or coins, you can expect to pay a premium above the spot price. There are a couple of reasons for this. There are mining, fabricating, minting and distribution expenses associated with producing and distributing coins and bullion.

All mints charge coin dealers a different premium. Historically, private mints charge the lowest premiums, followed by foreign mints and the U.S. Mint. Dealers charge a premium above and beyond their cost to cover overhead expenses and to realize a profit. All dealers charge slightly different premiums, which is why it’s a good idea to do your research to make sure that you’re not paying above market prices.

An important factor to take into consideration is that premiums aren’t fixed, so what you previously bought or sold bullion or coins for may be different than the current market. A good rule of thumb is that when there’s unprecedented demand for physical gold and silver, you’ll pay higher rates. Alternatively, when there are more sellers than buyers, you can expect to receive a lower rate for your items. Like nearly every other market, pricing is based on supply and demand, so it’s important to know the current environment before you proceed with buying or selling coins and bullion.

 

Should you buy gold, silver or both

Another common question we receive from first-time buyers is if they should invest in gold, silver or both. This is a personal decision for most folks, but we’ll share with you some factors you should take into consideration to determine which is best for you.

 

Gold Coin & Bullion Options

Gold is viewed by the market as a safe and stable investment. Historically, it has served as an excellent hedge against inflation and has allowed individuals to maintain their purchasing power over time. Until 1971, the U.S. was on a gold standard, and even to this day, most central banks keep a decent portion of their country’s reserves in gold. This is especially the case in the East, where central banks have been acquiring gold at nearly a record pace.

When viewed from the standpoint of the turtle and the hare, gold is without a doubt the turtle. Slow and steady wins the race. Since going off the gold standard in 1971, gold has outpaced inflation by a few percent. While there’s no guarantee that this will continue to be the case, chances are that we’ll continue to see gold outperformGold Bars inflation over the long term.

From a retail investor standpoint, the most common ways to invest in gold are in the form of gold bars and gold coins. While not an exhaustive list, gold bars produced by Credit Suisse, Pamp Suisse, Royal Canadian Mint, Perth Mint, Valcambi and Heraeus tend to be the most popular.

From a government coin perspective, American gold eagles and buffaloes are the most popular followed closely by Canadian gold maple leaf coins. Other popular foreign gold coins include South African gold krugerrands, British gold britannias, Chinese gold pandas, Australian gold kangaroos, Austrian gold philharmonics, and Mexican gold libertads, just to name a few. Additionally, 1 oz gold coins and bullion are the most popular sizes and are widely traded in the market.

 

Silver Coin & Bullion Options

Silver serves many of the same purposes as gold and is primarily used as an investment metal and for jewelry, but it is also used extensively as an industrialsilver stacking precious metals metal. Some of the most common uses are in solar panels, medical equipment, electronics and for vehicle components. It’s estimated that silver is currently mined at ten times the rate of gold and that we’ll likely experience shortages in the future due to the extensive use as an industrial metal.

In theory, silver has more upside potential than gold, but is a more volatile metal. It’s not uncommon to see a 5% change in the price of silver in a day, whereas that’s rarely the case with the price of gold.  While the price of silver will most likely differ by the time you read this article, at present it’s about 35% below its all-time high, which in theory means that it has a decent bit of upside potential from current levels. There are no guarantees, only probabilities.

The most common ways to invest in silver are in the form of silver bars, rounds and 1 oz coins. Unlike gold, the producer of private-issued silver bullion isn’t as much of a factor. Rather, the size and shape of the bullion is the driving factor. That being said, 1 oz silver bars and rounds tend to be the most popular sizes, followed by 10 oz silver bars and 5 oz silver bars. Other common sizes are kilo and 100 oz. The demand for these sizes is slightly less and they tend to trade at lower premiums than the previously mentioned sizes.foreign Silver Bullion Coins

From a silver coin perspective, the American silver eagle is the most popular government-issued coin followed by the Canadian silver maple leaf coin. Other popular foreign-issued silver coins include the South African silver Krugerrand, the Austrian silver philharmonic, the British silver Britannia, the Australian silver kangaroo, and the Chinese silver panda, just to name a few.

 

What is the Ideal Percentage of Gold & Silver Holdings

Once you’ve decided that gold and silver are right for you, your next question may be what percentage of your precious metal holdings should be in gold and silver. While not a hard and fast rule, most experts in the field recommend a 70/30 to 80/20 gold to silver split, but there’s no right or wrong answer.gold silver stack ratio

For folks that are in pursuit of higher returns and are comfortable with volatility, they may want to allocate a larger percentage of their holdings toward silver. While others may be risk averse and choose to invest solely in gold. That’s not to say that you won’t experience some volatility with gold – it’s just that gold is less volatile than silver.

A ratio that many investors look at is the gold to silver ratio. In recent decades, the gold to silver ratio has averaged approximately 60 to 1. This means that the value of gold is roughly sixty times the price of silver. An easy way to calculate this ratio is to divide the current gold spot price by the current silver spot price. At the time of this writing, the spot price of gold and silver are $2,342 & $30.44, respectively. When dividing the gold price by the silver price, we arrive at 77.

If you’re using the gold to silver ratio to determine which metal may be undervalued, this

would lead you to believe that silver is undervalued, as the ratio is above 60. If the price of silver spikes relative to the price of gold and brings the ratio to under 60, then in theory, gold is a better buy than silver. While there’s some merit to considering this ratio,

gold to silver ratio 6.28.2024
gold to silver ratio 6.28.2024

we don’t believe this should be the only factor to consider when determining which percentage of each metal to hold.

 

What Percentage of Your Portfolio Should be Comprised of Gold & Silver

While we’re not financial planners, and don’t claim to be, many recommend that precious metals should comprise 5% – 10% of your portfolio. Those who are hard money advocates and are familiar with Federal Reserve monetary policies and government fiscal policies, typically recommend a higher percentage.

The idea of holding gold and silver is that it has a low correlation to most other asset classes. This means that gold and silver prices don’t tend to move with stock or bond prices. Adding asset classes with a low or negative correlation to the rest of your portfolio can reduce overall volatility and increase returns.

Keep in mind that it’s in the best interest of financial planners/wealth managers to maximize assets under management, as they are typically compensated as a percentage of these holdings. This means that they may recommend you invest in a gold mutual or ETF as opposed to physical gold and silver. However, for the reasons we’ve highlighted in a previous article, we believe that it’s important to keep the majority of your holdings in physical gold and silver.

Not only does this allow you to have some assets outside of the financial system, but it also ensures that you’ll be able to access the metals when and/or if they’re needed. For example, you may want to have quick and easy access to physicalRepublic Bank,Bank Run March 11, 2023 gold and silver in the event of a currency collapse, a banking sector collapse, an EMP attack, a natural disaster, currency controls and for bartering purposes.

 

Summary

In conclusion, we’ve covered a lot of ground today, so let’s recap. To begin with, once you’ve decided that gold and silver should be part of your personal holdings, determine if you’re an investor or collector. You may decide that you’re both, which is perfectly fine, but once you’ve made this determination, we recommend that you narrow your focus so that you can better understand the market and pricing.

We then went on to describe the difference between coins and bullion, why you can expect to pay a premium when buying physical gold and silver and highlighted the most common or popular gold and silver coin and bullion options available in the marketplace.

Lastly, we wrapped up our discussion with recommendations on the percentage of gold to silver holdings, how much of your portfolio financial experts recommend you hold in precious metals, how to determine if gold or silver appears to be a better buy, and the importance of having physical gold and silver on hand versus investing in digital assets. We strongly believe in the mantra, “if you don’t hold it, you don’t own it”.

We realize that you may have some additional questions, but we tried to address the most common questions that we receive from first-time buyers. If we can be of any further assistance, or if you’d like to schedule an appointment to make your first purchase, contact us at 404-236-9744 or via email at sales@atlantagoldandcoin.com. We look forward to hearing from you and earning your business.atlanta gold and coin hq

Picture of Tony Davis
Tony Davis
Tony Davis is the owner of Atlanta Gold & Coin Buyers, a full service Atlanta based coin and bullion dealer specializing in buying, selling and appraising coins and coin collections of all types and sizes. Tony frequently writes on various economic and numismatic related topics affecting the coin and bullion markets and has been published on some of the industry’s leading websites, including Coin Week, the American Numismatic Association, Coin Collector, Coinflation, and Coin Auctions Help, just to name a few. Visit Atlanta Gold & Coin’s website at atlantagoldandcoin.com to obtain additional information on the products, services and educational resources offered by his company. Tony can be reached at sales@atlantagoldandcoin.com or at 404-236-9744

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