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Bullion Coins versus Numismatics

Many people who are new to buying gold, silver and other precious metals fail to grasp the differences between bullion coins and numismatic coins. These two coin types are in fact very different, and may be used for different purposes. Here we will outline both bullion coins and numismatics, and discuss the differences between the two. Having a thorough understanding of these differences may help you buy the coins that are most suitable for your needs.

Bullion Coins

The term bullion coin refers to coins that are struck from precious metal bullion. While gold and silver bullion coins are the most common, some bullion coins are also struck from platinum and even palladium. Bullion coins are good legal tender, although they are not used in day to day commerce. The majority of a bullion coin’s value lies in its bullion content. For example, a one ounce American gold eagle coin carries a face value of $50. The coin is worth far more than that, however, as it contains one troy ounce of .9167 percent pure gold. Another example would be a Canadian silver maple leaf coin. This coin has a face value of $5 (CAD) and contains one troy ounce of .999 percent fine silver. Is the coin worth more than $5? You bet. The majority of value lies within the coin’s silver content. Bullion coins are purchased to reflect the value of the precious metal content. If gold prices go up, so does bullion coin values. If gold prices fall, so does bullion coin values. Some examples of bullion coins include:

• American gold or silver eagles
• Canadian gold or silver maple leafs
• South African krugerrands
• 90 percent junk silver coins
• Chinese gold or silver pandas
• Austrian Philharmonics

Bullion Coin Sizes

Some bullion coins are available in a single size while others are available in multiple sizes. For example, the American silver eagle bullion coin is only struck in the one ounce size. An American gold eagle, on the other hand, is struck in several sizes including:

• 1/10 ounce
• ¼ ounce
• ½ ounce
• One ounce

Smaller weights, otherwise referred to as fractional coins, make it easier for those on a limited budget to buy bullion coins. With a gold price of $1200 per ounce, for example, a 1/10 gold American eagle may cost only $130-$150 while a one ounce American gold eagle coin may cost from $1260-$1320.

It should be noted, however, that fractional coins will have differing face values as well. The 1/10 ounce American gold eagle has a face value of $5 while the one ounce gold eagle has a face value of $50.

Bullion Coin Premiums

Bullion coins will almost always carry significantly smaller premiums than numismatic coins. Premiums on bullion coins can range by coin type and metal content, and can be anywhere from a few dollars to $60 or more above the spot metal price. Bullion coins give precious metals investors a way to invest in physical precious metals that will closely track the prices of the precious metals. Unlike numismatic coins, these coins are not typically bought for collectability purposes.

Numismatic Coins

Numismatic coins are a completely different story. A numismatic coin may contain gold, silver or other precious metals which certainly add value. These coins, however, are usually bought for their scarcity or collectability. A buyer of numismatic coins may be far more interested in the collectability of a coin than its bullion content. In fact, buying of numismatic coins is usually best left to those who are familiar with numismatics and the nuances of coin collecting. Some examples of numismatic coins include:

• Swiss 20 Francs
• Peace silver dollars
• British sovereigns
• Pre-1933 $10 and $20 eagles

Numismatic coins are no longer produced, while bullion coins are produced every year.

Numismatic Coin Sizes

Like bullion coins, numismatic coins may come in varying sizes from one ounce to fractional. Like bullion coins, numismatic coins can also have a range of face values.

Numismatic Coin Premiums

Numismatic coins typically carry significantly higher premiums than bullion coins. In fact, the difference can be quite staggering. While a one ounce Canadian gold maple leaf bullion coin may have a premium of $50-$80 over the spot gold price, a one ounce gold numismatic coin could carry a premium of several hundred or even several thousand dollars over the spot gold price. Not only are these premiums much higher, but they can fluctuate wildly making the purchase of numismatic coins a riskier proposition for many. As an example, a $3 1887 gold piece PCGS graded MS63 is retailing for about $7431-far more than the coin’s gold bullion content. The extra premium is all in the relative scarcity and collectability of the coin.

The Bottom Line

There is one key difference that will help one separate the difference between bullion coins and numismatics. Bullion coins are an investment in the precious metal they are struck from, whole numismatics are an investment in the coin itself. For those looking to add physical precious metals to their portfolio, bullion coins are an excellent vehicle with their lower premiums, liquidity and ease of acquisition. Numismatics, on the other hand, are for those interested in collecting coins. Their goal may be to see coin premiums rise due to scarcity and difficulty of acquisition.

While anyone can purchase bullion coins, numismatic purchases are usually best left to coin experts who have a thorough understanding of the numismatic coin market.