Once you have made the decision to invest in physical gold, the next question often asked is whether you should buy gold coins, gold bars, or a combination of both. Although there is no simple right or wrong answer to this question, the type of gold you buy should be determined by your investment objectives, liquidity needs and risk tolerance.
Investors simply looking to acquire as many total ounces of gold as possible may prefer to stick to bullion bars. Gold bars can oftentimes carry the smallest over spot premiums and may, therefore, allow the buyer to acquire more total gold for the price. With newer fractional gold bars, investors no longer need to purchase one or more ounces at a time. These smaller bars are sized in fractions of an ounce and can, therefore, allow the investor to purchase a half ounce, quarter ounce or even smaller size switch as 1/10th ounce. As the price of gold again approaches the $2000 level, fractional gold bars may be a great choice for investors on a budget or with limited funds to invest.
Gold coins can also be a great investment. Coin values can vary wildly, however, based on several key factors. A highly liquid gold coin, such as the American Gold Eagle one ounce coin, may not carry a significant dealer premium. A rare gold coin, on the other hand, could carry a premium that exceeds the value of the metal it contains. Investors interested in buying and holding physical gold may want to avoid such coins, therefore, as more of their investment dollars would go towards collectibility value than to actual gold. Gold coins do also have a face value and may be good, legal tender. That face value, however, is not where the coin’s value comes from. The coin is still valued primarily on its gold content.
Whether you should buy gold bars or gold coins depends on your objectives. If your goal is to get as much physical gold as you can afford, then bars or coins with the smallest premiums are your best bet. If you are looking for products that also have collectibility value attached, then coins may be the better option. In our experience, however, coin collecting is best left to professional collectors. This is because gold coin collectibility values can fluctuate significantly, meaning you can lose a lot of money on them even if the price of gold rises.
Figuring out whether you should buy gold coins or gold bars is simple if you ask the right questions. These may include: What am I trying to accomplish by purchasing gold? Am I on
a limited budget-what can I afford to spend on gold? Do I know and understand collectable coins and how they are valued? Will I need to sell any of the gold in the near or intermediate term?
As with any other type of investment, spending some time upfront to consider your goals, risk tolerance, liquidity needs and other factors can go a long way towards helping you make the right decisions.