Three Important Factors to Consider Before Buying Coins & Bullion
The coin and bullion markets are as broad and deep of a market as any other industry you might find. There’s literally an item for everyone regardless of your budget and interests. Furthermore, the size of coins, bars and rounds run the gamut from less than a gram to over a thousand ounces and everywhere in between.
In today’s article, we’re going to discuss some of the various options that are available to investors and collectors, including the marketability of each.
Large Size Coins & Bullion
As you would expect, the price of items differs based on the marketability and affordability of the product. This point was driven home recently when we met with one of our regular customers, who is one of our personal favorites and a faithful reader of our newsletter. This individual reached out to us to sell a 5 oz platinum bar. While we’re always in the market for platinum bars, regardless of the size, there aren’t quite as many buyers for a 5 oz coin or bar as there are for smaller items. Therefore, our buy rate is slightly less on a per ounce basis considering the extra time and effort needed to sell these items. When we do sell them, we typically do so at a bit of a discount to incentivize a buyer to make a larger size purchase.
After sharing this information with our customer, she remarked that had she known a 5 oz bar wasn’t quite as marketable as a 1 oz bar, she probably would have made a different decision when she purchased the bar years ago. We shared with her that 1 oz sizes, whether gold, silver, platinum or palladium in the form of coins, bars and rounds are typically a good option. The reason being is that the spot price of precious metals is quoted in ounces. Furthermore, you’ll have a broader market for your item when the time comes to sell, as more investors can afford a 1 oz bar than they can a 5 oz bar.
However, this does not by any means imply that you should stay away from these items. In fact, purchasing a larger item may be the best option when you take into consideration your purchase price and the likely resale value of the item. For example, if you’re able to purchase a 100 oz silver bar for a couple of dollars less per ounce than a 1 oz bar, then you’re likely getting a great deal. This is especially the case if you expect silver prices to increase substantially from current levels, which is very likely to happen. If you have any doubts regarding the resale or buyback price of the item you’re considering, ask the coin dealer you’re working with before you make your purchase.
Fractional Coins & Bullion
Thus far we’ve been talking about coins and bars that are larger than an ounce, but there are plenty of options that are smaller than an ounce. As we mentioned in our introduction, there are coins and bars that are as small as a gram, if not less. The marketability of these items is typically just as good (if not better) than 1 oz coins, bars and rounds, but they come at a bit of a cost.
Fractional coins or bars, which are typically defined as those less than an ounce usually trade at a higher price per ounce. The reason is that there is more time, effort and resources needed to produce multiple smaller coins than there is to produce a larger size coin. Furthermore, the coin dies or presses that are used to mint coins need to be changed out more often from the additional usage and wear and tear.
The additional time, effort, resources and equipment used in producing smaller size coins and bullion is reflected in the price that a
government mint or private mint charges coin dealers. When placing an order with a mint, it’s more expensive for a coin dealer to acquire (200) 1/10 oz gold coins than it is to purchase (20) 1 oz gold coins.
While the acquisition price may be higher, it’s also important to take into consideration the market for the item when the time comes to sell.
Commemorative or Limited-Edition Coins
Commemorative or limited edition coins also have their place in the market. As an example, the Canadian Mint does a fabulous job of producing coins and bars that cater to a broad audience. They also frequently produce limited edition modern commemorative gold and silver coins.
Because the production number of the coins is limited, these items typically sell at a higher price point when they are released.
However, when the time comes to sell these coins, you may be disappointed, as the secondary market for modern commemorative foreign coins isn’t as strong as the primary market. After all, more people are familiar and comfortable with traditional Canadian gold and silver maple leaf coins than they are with limited edition wildlife series coins.
Again, this is not an attempt to dissuade you from purchasing these coins, as they can make great additions to a collection. You just need to realize that the resale value may not be as strong as you might think regardless of what a coin broker or sales person might lead you to believe. Another example of a coin with a higher original mint price but that doesn’t trade as well in the secondary market is British silver britannias with privy marks. Privy marks are small marks imprinted on a coin to signify who produced or designed the coin, or to commemorate a certain place, person, event or landmark. For example, some britannias are lunar year coins with a privy mark on the edge of the
coin of an animal, such as a horse, snake or pig.
Another one of our long-time customers purchased a large quantity of “limited edition” silver britannias with privy marks with promises that the coins would sell for substantially more in the future due to the rarity of the items. However, when the time came for him to sell a few years later, he was only able to realize what he would have for a standard silver Britannia coin.
A good rule of thumb is to stay away from most modern foreign commemorative coins unless you can purchase them at close to a standard coin price.
Summary
In summary, there are many great options from which to choose in the coin and bullion industry, and if you’re buying strictly for the love or appeal of the coins without the intent of ever selling the item, we recommend that you purchase what you like and what is going to bring you joy.
However, if you’re purchasing or investing with the prospect of one day selling the item in the future at a profit or to fund your living or retirement expenses, then the resale value or marketability of the item should be taken into consideration.
As a reminder, in general, the larger the item, the less marketable it is, so you should expect to pay less on a per ounce basis than its smaller counterparts. This doesn’t not mean larger size items are bad investments. In fact, they may be the best investment you can make when presented with multiple options at different price points. Just make sure you know what you’re getting into before you pull the trigger.
On the other hand, fractional or smaller size coins and bullion are just as marketable, if not more so, than 1 oz coins and bars, but they typically come at a price. Realize that in most cases you’re going to pay more for these items on a per ounce basis so consider if it makes sense to have more flexibility with smaller size items when factoring in the cost. For example, if you plan on using gold coins for bartering, it probably makes sense to purchase smaller size items and pay the higher premium.
Lastly, while many modern commemorative foreign coins are lower mintage coins, and aesthetically, are oftentimes stunning, you may find that the resale value of these coins isn’t quite the same as standard-issue coins. This is in large part because the general public is more familiar with standard-issue coins, such as Canadian gold and silver maple leaf coins, than limited edition commemorative coins.
Factor in the resale of these coins before taking the plunge and make sure that you’re not going to find yourself underwater if and/or when the time comes to sell.
We hope that you found today’s article to be helpful and welcome you to contact Atlanta Gold & Coin Buyers for all your coin and bullion needs. We’re happy to answer any questions that you might have, including the marketability of the coins and/or bullion that you’re considering. See for yourself why we’re Atlanta’s premier coin dealer.
