The most common question from new gold investors is “Should I buy gold bullion bars or gold coins?”
Gold bars are made of 24 carat (999.9 pure gold) and come with an assay certificate that guarantees their weight, purity, etc. The 100 gram bars and newly minted gold bars (100 gram and above) are usually sold in sealed packaging to protect the bar.
Most investors with a large budget buy gold bars because of their low premium. This allows them to buy gold at the lowest price. Gold bullion bars are regarded as the cheapest way to own gold.
Cheaper premium compared to spot
Gold bars are usually cheaper to produce than gold coins. Therefore, their premiums are lower compared to gold coins. The larger the gold bar, the lower its premium. A gold bar that weighs one kilo has a lower manufacturing cost than 10 times 100 gram gold bars.
Therefore, it’s cheaper for you to buy a kilo gold bar than 10 times 100 gram gold bars. You save about 1%, which makes your portfolio less flexible. You won’t be able to sell part of your investment because you can’t cut a kilo gold bar in two. Also, it’s less likely for a small local business to buy one large gold bar than several one-ounce gold bars.
Although larger gold bars can command lower premiums, they aren’t necessarily the best option. Smaller bars can be beneficial if you sell part of your investment in the future. Smaller gold bars such as the 50g and 20g bars also combine a convenient size with a relatively low premium.
Why buy gold coins?
Gold coins are also a great way to invest in physical gold. These days, most government mints issue gold coins for investment purposes. The most popular series include the British Britannia, the South African Krugerrand, the Canadian Maple Leaf, the American Eagle and the Vienna Philharmonic.
Gold coins can be made of 22 carat (916.7) or 24 carat gold (999.9). The most popular bullion coins contain 1 troy ounce (31.1035 grams) of gold, a standard weight for gold investments. They all have a unique design and their year of issue is stamped on the obverse. The purity and weight of the coin are usually engraved on the reverse.
Wide range of varieties available
Gold bullion coins are available in a range of sizes, from 1/10 ounce to 1 ounce. They’re ideal for trading and offer a good balance between value and flexibility.
Because you can’t cut a gold bar in half, gold coins offer more flexibility. You can split your investment into smaller pieces. With a large gold bar, you have to sell all your gold bars at once. Gold coins therefore offer less market risk as you don’t have to sell at a single gold price. Gold sovereigns are ideal for this purpose. They’re the cheapest gold coins on the market and are relatively easy to sell. Their small size (7.32 g) allows you to divide your investment into even smaller units.
If you’re worried about liquidity, gold coins are the best option for you. Since they’re widely accepted, gold coins are easy to resell. Since smaller gold units are easy to release, you can access cash quickly when you need it.
As a first-time investor, gold coins are a good starting point for investing in physical gold. However, it’s advisable to diversify your portfolio with a mix of bars and coins. There really is no perfect time to buy or sell gold. It comes down to personal preference.