How to Take a Big Picture Approach to Investing in Gold Coins & Bullion

Investing in gold coins and bullion is not as straight forward as it may appear on the surface. In fact, there are so many ways to invest in these physical assets that we’ve dedicated numerous articles in the past to the topic. As is the case with all goods, there are multiple price points available for investors of gold coins and bullion, including discounted, moderately priced, and high end.

Each of these options comes with pros and cons, which we plan on discussing in further detail in this piece. We’ll also provide definitions or guidelines to give our readers some perspective as to which items fall within the various categories. It’s our hope that this information will provide you with further insight into the subject and allow you to make an informed decision as to which option may be best for you, your needs, and your financial future. However, before we delve into the subject matter, it’s important that we begin with a definition of gold coins and bullion so that we’re all on the same page.

Gold Coins vs Gold Bullion

There are multiple ways to define gold coins and bullion, so we’ll keep this relatively simple and share common definitions recognized and used in the industry.

Gold coins are government-produced gold, typically in the form of a round or circle. Nearly all of these coins, with the exception of the South African gold krugerrand, includes a face value and is considered legal tender in the country of issuance. Furthermore, they are guaranteed to contain the exact specifications of the coin with respect to weight, diameter and purity. For example, the most popular gold coin in the U.S. is an American gold eagle. A  1oz American gold eagle is U.S. legal tender and has a face value of $50.

Gold bullion is more commonly associated with privately produced gold. Gold bullion can be circular in shape, like a coin, but is more commonly rectangular in shape, which is referred to as a “bar.” The number of private producers of gold bullion far surpasses the number of government mints. With so many producers, it may be difficult to know which ones to invest in. We’ll address this issue in further detail as we highlight some of the options below.

Discounted Gold Coins & Bullion

Now that we’ve provided a definition of gold coins and bullion, we can discuss some of the options available, including the pros and cons of each, beginning with discounted gold coins and bullion. There’s no hard and fast rule when it comes to defining discounted gold, but for our purposes, we’re going to refer to any options with a premium of under 4%. Premiums and availability may change in the future, especially if we see a surge in the demand and price of gold, but as of the beginning of 2023, this seems to be a good rule of thumb.

Multiple times a week we receive phone calls from individuals that are interested in acquiring the cheapest available gold coins and bullion. Many of these individuals are concerned with the collapse of the dollar, using gold for bartering purposes, and believe that under such a scenario, sellers are going to be more concerned with accepting any type of gold as opposed to being concerned with the stamp or mint that produced the gold.

There’s some logic to this approach, but if there’s a complete collapse of the currency and financial system, silver will more likely be the metal used for daily transactions and gold for larger purchases. Even if gold is widely used for daily transactions, individuals are going to be more receptive to accepting gold coins and bullion that they recognize and that aren’t known to be frequently counterfeited. Under a barter situation, there may be a large learning curve; especially for some of the more obscure coins.

This being said, there are opportunities for individuals to acquire well known and recognized coins and bullion at discounted rates if they aren’t too particular with the condition of the items. Most coins dealers, including us, pay discounted rates for gold coins and bars that are off-quality and are willing to sell these items at a discount. If you’re not too particular with respect to the condition of your items, this can be a great way to accumulate widely traded items at a discount. For example, Canadian gold maples, especially those produced in the 80’s and 90’s tend to have contact marks, scratches, scuffs, and on occasion red and brown spots. These coins are usually available at a $20 discount off retail-prices, which puts them firmly in the discounted category.

Depending on the market at the time, old world European coins can also be acquired at discounted-rate premiums. For example, we regularly sell Austrian 100 coronas, Belgium 20 francs, Denmark kroners, Italian 20 lires, Netherlands 10 guilders, South African 2 rands and Swiss/French 20 francs at rates that would fall within this category. We recommend that you consider these coins before coins from obscure mints or commemorative coins, which may have limited recognizability in the marketplace. Again, the idea when investing in discounted coins is to purchase those items that have as broad of a market as possible.

As we alluded to above, when it comes to discounted bullion, try and stick with recognized producers or manufacturers. Many coin dealers will only purchase gold bars produced by LBMA-approved refiners, so to protect yourself, we recommend that you do the same. The price and premiums for gold bars varies, depending on the size, producer and how the bar is packaged, but in most cases, it’s possible to acquire a 1 oz gold bar outside of its packaging (frequently referred to as “raw”) at a discounted rate. There are plenty of reputable producers, but some of the most recognizable are Credit Suisse, Pamp Suisse, Royal Canadian Mint, Perth Mint, Valcambi, just to name a few. Keep in mind that coin dealers will offer you discounted rates for these bars outside of their packaging, but you’ll always have a market for them.

At the end of the day, a good way to look at discounted gold coins and bullion is that you’ll pay less when you acquire them, but you’ll also receive less when the time comes to sell them.

Of course, in a Mad Max scenario, all bets are off, so you may conceivably be able to trade an off-quality gold maple leaf at the same rate as a retail-quality coin.

Moderately Priced Gold Coins & Bullion

While plenty of our callers are interested in obtaining physical gold at the lowest price possible, most of the gold coins and bars that we frequently deal in fall under the moderately priced category. Again, there’s no hard and fast rule when it comes to premiums for moderately priced coins, but for the purposes of our article, we’re going to define moderately priced as a 4% – 6% premium over the spot price of gold. At today’s spot price of roughly $1,900, that would put premiums anywhere from $75 to $115 over spot.

In today’s market, which of course may be different by the time you read this article, this premium range will include the most recognized producers of gold bars sealed in an assay card all the way up to highly coveted 1 oz American gold eagles and buffaloes. It also includes the most recognized and traded 1 oz foreign gold coins in the industry, including South African gold krugerrands, Austrian gold philharmonics, Canadian gold maple leaf coins, Australian gold kangaroos, British gold britannias and Chinese gold pandas, just to name a few.

We believe moderately priced gold coins and bullion are the sweet spot in the industry. Not only are they reasonably priced and recognized, but they are the most frequently traded items in the industry. When it comes to a high value item, such as gold coins and bullion, it’s important to have as large of a customer base for these items as possible.

For one, not everyone has nearly $2,000 to invest. Secondly, those that do, may be particular.  If we happen to experience a tight market in the future, sellers may be selective as to the types of coins or bullion they’re willing to accept for their goods or services.

It’s also important not be penny wise and pound foolish.

For example, we recently received a phone call from a customer that was interested in purchasing a fairly large number of gold bars. We didn’t have enough gold bars to fill his order but had recently acquired a number of gold maples and krugerrands that we were willing to offer to him at $10 – $15 over the price of gold bars. For a 20 oz purchase, he was only looking at $200 – $300 price difference by going with the gold coins. We attempted to explain to him that the gold coins were more marketable than gold bars, regularly trade at higher rates, would be easier to trade, and would yield more than the premium price difference when the time came to sell the items.

However, he was so dead set on purchasing gold bars for slightly less that he discounted all of the benefits of going with coins over bars.

While we love gold bars just as much as the next person, in our opinion, when given the option between a well-recognized gold bar and a popular gold coin, especially when the price difference is negligible, you should always go with the coin.

As we noted above, gold coins have the added benefit of being legal tender, are more widely traded, and are guaranteed by the government of issuance to contain the exact weight and purity specifications. Furthermore, generally speaking, gold coins aren’t counterfeited as frequently as gold bars.

High End Gold Coins & Bullion

The market for high-end gold coins and bullion is smaller than the moderately priced and discounted rate markets but is no less appealing; especially to individuals that place a high emphasis on the design, mintage, and size of the item. While it’s not possible to highlight all of the options that fall within this category, we’ll do our best to identify those that we most frequently see so that you’ll have a good idea of what this market entails.

Generally speaking, the smaller the item, the higher the premium, so while the high-end category might consist of many of the items that fall within the moderately priced category, they are just smaller in size. Before we continue, we’ll define what we mean by high-end or higher premium coins and bullion. These are items that trade at a premium of anywhere from 7% – 20% over the spot price of gold.

Most of the gold coins that we highlighted above in the moderately-priced category in ¼ oz sizes or smaller fall within this premium range. Furthermore, some of the smallest gold bars, such as 1 gram and 5 gram, also trade as higher premium products.

Why would someone be interested in spending more money per ounce on high-end gold coins and bullion when there are plenty of great moderately-priced options? This primarily has to do with flexibility. For example, someone may have a short-term financial need that requires them to dip into their gold coin or bullion holdings.

Let’s say that you have a $400 auto repair bill. Rather than cashing out a 1 oz gold coin and having over a $1,000 in excess cash, which is losing money by the day due to high rates of inflation, you may be able to cash in two 1/10 oz American gold eagles to pay for the repairs.

Another common reason why investors may choose to invest in small denomination gold coins or gold bars is with the intent of using them for barter at some point in the future. It’s much easier to receive change for a 1 gram gold bar if you’re purchasing a dozen eggs than it is to use a 1 oz gold coin for such a small transaction. While we believe that the best precious metal to use for bartering purposes is silver, we certainly see the appeal of gold, and don’t necessarily want to dissuade anyone from purchasing these items. We just recommend that you do so at a reasonable premium because it may be difficult to recoup your premium if and/or when the time comes to sell in the future.

Small size gold bars can be appealing for small, unexpected cash needs. Let’s say that you have a $50 co-pay for an unexpected doctor’s visit. Technically, there’s not a need to cash in a 1/10 oz gold coin if you’re trying to raise just enough funds to cover the expense. The sale of a 1 gram gold bar will allow you to pay your bill with a small amount of cash remaining, thereby, allowing you to keep most of your holdings in physical gold. One option that has become very popular in recent years is Valcambi CombiBars. While a number of different options exist, the most commonly traded Combibars are 50 x 1 gram and 100 x 1 gram. The bars are scored so that you can snap off one bar at a time as the need arises. This isn’t too different from how gold is currently being used in Venezuela. Many business owners are accepting fractions of a gram of gold for various goods and services, as we highlighted in a previous article.

While high-premium gold coins aren’t ideal for everyone, they do provide the flexibility that some of the moderately and discounted priced options don’t. Having a portion of your holdings in this category isn’t a bad idea, but it’s important to weigh the costs with the benefits and only purchase as much as you think you might need to cover smaller unexpected expenses or for bartering, in a worst-case scenario.

Summary

There’s more to gold coin and bullion investing than meets the eye. As we discussed, before investing in gold coins or bullion, it’s important to first identify what we mean by the different types of investments. In a nutshell, gold coins are government-issued gold that trade as legal tender, while gold bullion is privately produced gold, typically in the form of gold bars.

We began our discussion with discounted gold, which for our purposes, is gold that trades at a nominal premium over the underlying gold price; typically, no more than 4%. Some of the most popular gold coins can be acquired at discounted rates, if in off-quality condition. Furthermore, gold bars outside of their original packaging and many old world European coins trade at these rates. We recommend that you avoid gold coins from obscure mints or commemorative gold coins that might have a limited market.

Moderately priced gold coins and bullion is by far the broadest category and includes the most widely traded gold coins and bullion. Coins in this category make up approximately 80% of our transactions. We mentioned that it’s important to take a big picture approach when investing and consider the resale of your coins. If you’re able to purchase a widely traded gold coin over a gold bar at a modest price difference, we recommend that you opt for the coin, as this will provide you with more options to sell in the future.

High-end or high-premium gold coins and bars also have their place in a diversified gold coin and bullion portfolio. Investing in smaller-size items provides you with more latitude, especially if the need arises to cover small, unexpected expenses or if we find ourselves in a barter situation at some point in the future. However, it’s important to be cognizant of the price that you’re paying and to only purchase enough for the intended purpose. Most of your holdings should be in moderately priced 1 oz gold coins and bullion.

We hope that you found this article to be helpful and that it has shed light on which gold coin and bullion options to pursue. As a full-service coin and bullion dealer, we offer many of the highlighted products, including others. Whether you’re a discounted buyer, a moderately priced investor, or are interested in obtaining higher-premium products, we have you covered.

Contact the gold coin and bullion experts today at Atlanta Gold & Coin Buyers. We offer industry leading rates and unparalleled customer service.

We look forward to hearing from you and earning your business!