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How Physical Gold & Silver Coins Differ from Stock Market Investments

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How Physical Gold & Silver Coins Differ from Stock Market Investments


There tend to be some misconceptions in the market between physical gold and silver coins and digital or stock market investments. This is especially the case if someone has historically traded gold and silver in the form of stocks, ETFs or mutual funds and they’re considering gold and silver coins for the first time. One of the most common questions we receive is why the buy sell spread on coins isn’t the same as on stock market investments.

In today’s article, we’re going to discuss some of the differences between physical gold and silver coins, highlight the pros and cons of each, which one may be a better investment than the other, and why the price for coins and bullion differs from stock market investments.


Physical Gold & Silver vs Stock Market Investments

The physical gold and silver market as well as the stock market offers a wide range of options for the investor. From a physical standpoint, you can invest in privately-issued bullion, government issued coins, investment coins, collectible coins and many different sizes of each. From a stock market perspective, there are mining stocks, individual gold stocks, ETFs, mutual funds and sectors that heavily rely on precious metals for their business.

2023 Best stock trading platforms
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These days, most trading platforms, such as E-Trade, Charles Schwab, Robinhood, etc. offer free trading, or close to it, therefore, the transaction fees are nominal. Furthermore, if buying a heavily traded stock, mutual fund or ETF, there’s likely a minimal buy sell spread. This means that the price to buy and sell the investment is nearly the same. Considering everything is done online with very little overhead and staffing expenses, these investments can be offered to the public at seemingly zero cost to the investor.

On the other hand, physical gold and silver coins and bullion requires much more overhead, equipment, staffing, time and expense to mine, refine, fabricate, mint and distribute. There are multiple layers of players involved in the process and everyone needs to operate at a profit to make their efforts worthwhile. While the cost to mine gold and silver is likely below the prevailing spot price, when factoring in the multiple channels, it shouldn’t be surprising that the cost to acquire physical gold is a few percent over spot and the cost to acquire physical silver is a few dollars over spot.

In many respects, this is no different than buying any commodity or hard asset. When we look at vehicles and houses, two of the most popular commodities, we understand that there’s a transaction cost with each. When buying a new vehicle from a dealer, there’s a markup above the dealer acquisition cost from the manufacturer. The dealer has operating expenses that they need to cover, including overhead expenses to maintain their place of business and to pay the service and sales staff. If you’ve ever bought or sold a home, you know that there are real estate commissions, closing costs, title fees and seemingly a host of other miscellaneous expenses in doing so.

If you’re merely looking for an exposure to the vehicle and housing sectors, you can purchase stocks, such as Toyota or D.R. Horton. However, if you’d like something tangible that you can use, hold or enjoy, then you’ll need to factor in the transaction costs or commissions in doing so. Buying physical gold and silver is similar to buying a vehicle or house, but there are benefits in doing so, which we’ll discuss in further detail.

Why Buy Physical Gold & Silver Coins

If the only difference between physical gold and silver holdings and digital or stock market investments is the expense, then almost without exception, everyone would invest in the stock market. However, when you scratch below the surface, there are other factors to take into consideration which may make investing in gold and silver coins a more attractive or at least safer investment over the long term. We’re going to discuss some distinctive advantages associated with holding and investing in physical gold and silver coins.

Gold & Silver Coins Held by You Have no Counterparty Risk

Physical gold and silver coins, when held by you, have zero counterparty risk. This means that you aren’t reliant on another party to fulfill their obligations. This can be incredibly important, especially in an environment where some companies (think Enron) or investment managers (think Madoff) have plunged to zero or stolen their clients’ money. While this is the exception rather than the rule, there have been instances of poorly run companies or those that have intentionally mislead their investors or clients.

Are the Physical Holdings Sufficient to Support the Shares Issued

Along the same lines as the above issues are the reported gold and silver holdings by the company. Are these companies being regularly audited? Are the funds fully or partially backed by physical gold and silver? In other words, are they leveraged or do they hold enough precious metals to support the number of shares they’ve issued? While we don’t have direct knowledge, we’ve heard from multiple sources in the past that some of the ETFs available in the marketplace are highly leveraged. The risk here is that if large holders of contracts request settlement in physical gold and silver and it’s not available in the vaults, this could cause the stock or ETF price to crater.

Can You Redeem Your Stock Holdings in Physical Gold & Silver

Many traditional stock investments sound appealing due to their low expense ratios and ease of investing, but the drawback in many of these cases is that you’ll receive fiat (i.e. dollars) when you liquidate your position as opposed to physical gold and silver. If the reason for investing in gold and silver is to diversify as a hedge against fiat currency, which can be printed at will, these investments may not be right for you. While you may benefit from the increase in gold and silver prices while you hold your investment, ultimately, you’ll need to find another place to invest your money if you choose to exit your position.

Access to Gold & Silver May be Limited or Restricted

Does anyone remember the pandemic? In 2020 some banks and depositories prevented their clients from accessing their physical gold and silver. Natural disasters could also affect your ability to access precious metals. An EMP attack or the downing of an electrical grid could delay the process for months, if not longer.

Does the country in which you’re holdingjavier milei argentina your precious metals promote alternative investments such as gold and silver and cryptocurrencies? Are they in the process of reducing the size of government and extending more freedoms to their citizens? If so, then this may be a safe country in which to store your precious metals.

Unfortunately, that’s not the case in most countries (at least in the West), so this is also an important factor to take into consideration.

Geopolitical Risk Isn’t a Factor with Physical Gold & Silver

To piggyback off our last comment, there’s also zero geopolitical risk when holding physical gold and silver coins. That’s not the case otherwise. For example, some mining companies operate in politically unstable environments and run the risk of being nationalized by the government. Venezuela and South Africa are resource-rich countries that have been known to nationalize companies or specific industries.

We’ve also seen instances of some countries levying exorbitant fees or taxes against companies in certain industries that they find less appealing. Australia is an example of this. This can make operating in these jurisdictions no longer viable, and in some cases, can have a dramatic impact on the stock price.

Gold & Silver Allow You to Hold Investments Outside of the System

We’re all heavily reliant on technology these days for our banking and investments. In fact, very few people have little to no cash holdings, which we believe is a mistake. This is just sound risk management. You may be familiar with bank holidays, capital controls, and the suspension of stock market access/trading. These are all risks that we’ve experienced here in the U.S. or have seen in other countries.

Furthermore, it is of the opinion of David Webb, author of The Great Taking, that you don’t actually own the stocks that you’ve invested in. Rather, they’re technically owned by the brokerage house that you’re using. One high profile voice in the expat space is convinced of this and believes that it’s not worth the risk to hold stocks. Subsequently, he liquidated all of his stock holdings and invested the proceeds in assets that he believes are safer, such as cryptocurrencies, gold, and real estate.

If you’re solely invested in digital investments, then you’re heavily reliant on whichever brokerage firm you’re using to be well capitalized and to be the direct custodian of the stocks. In some cases, there are multiple entities involved, which can complicate the unwinding of assets following the failure of a brokerage firm. This reminds us of some of the recent changes to the banking industry introduced under the Dodd Frank Act. While we have not thoroughly reviewed the bill, it’s our understanding that you’re technically no longer the owner of the deposits you’ve made in the bank. If a bank is at risk of defaulting, they may be able to convert your holdings to bank stock. This is called a bail-in and may saddle you with worthless bank stock as opposed to having access to your money. This is what happened in Cyprus in 2013.

Physical Gold & Silver can be Used for Trading or Bartering

While we’re not necessarily predicting this, if in the future you’re not able to access the funds in your bank account, credit or debit cards aren’t working, if there are capitalsilver coin barter table controls limiting the daily withdraws from your account, or if for some reason your currency is no longer accepted or desired, you’ll want to have something tangible that people recognize as having value and that has been used as money for thousands of years. Gold and silver, more than any other commodity, fits the bill. If you look at countries that have gone through hyperinflation or that are currently experiencing hyperinflation, gold and silver may be the only way to obtain access to those items that you need for you and your family. If we happen to experience government rations, such as during the Great Depression, we can almost guarantee you that you’ll still be able to obtain what you need in the unregulated or black market if you have a form of money that is desirable.


We began our discussion with how stock market investments differ from physical gold and silver coins and shared with you many examples of how and why physical precious metals are superior to digital investments.

The big takeaway is that physical gold and silver don’t have counterparty risk, which means that you’re not reliant on someone else to fulfill their responsibilities. Having gold and silver coins outside of the system provides opportunities that you may not have otherwise, and in a worst-case scenario, may be the preferred or only form of money that is accepted.

10 year Price of Gold vs S&P 500
10 year

While the intent is not to frighten you with a multitude of potential risks involved with traditional stock market investments, they should be considered as part of your investment strategy. You’ve probably heard the adage that you don’t want to keep all your eggs in one basket. We believe that holding physical gold and silver can provide needed diversification, thus lowering your risk.

If you’re convinced that an investment in gold and silver coins is right for you, reach out to the experts at Atlanta Gold & Coin. We have years of experience and have worked with thousands of clients over the years. We can help guide you and provide recommendations on which options may be best to fit your particular needs and circumstances. We look forward to hearing from you and earning your business!


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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