Updated on 02/07/17
Investing in gold can secure your future.
When the next financial crisis hits, stock market investors will see earnings disappear in an instant. But gold owners don’t face that risk. A hard asset doesn’t evaporate in times of turmoil.
Diversifying your portfolio with physical gold—not gold ETFs—is the best way to protect your wealth in any financial climate. Because unlike gold ETFs, bullion doesn’t require another party to make good on a contract. When you own gold bullion, you own it outright.
Gold coins offer investors transparency, liquidity, and the real potential for long-term returns. But to truly benefit from your investment, you must buy gold at the best price and be able to sell it easily if you need to.
This guide explains everything you need to know about buying gold coins as an investment.
(If you've ever felt confused when trying to buy precious metals or wasted hours searching for the lowest commissions, you need to read Investing in Precious Metals 101. Download it now—free!)
While any type of precious metal bullion is a better investment than paper currency, gold coins do offer a few advantages over gold bars.
Coins have the status of legal tender, are mass produced (which allows for competitive pricing), and are universally recognized. They are minted by sovereign governments, who guarantee their weight and purity. In worst-case scenarios, you can use gold coins as money to buy goods.
The main appeal of gold bars is their pure value. While most 1 oz gold coins contain 91.67% gold, most 1 oz gold bars are 99.99% pure. You pay less per ounce and receive more gold. If you plan to make a very large investment, spending it on one item instead of piles of coins can be preferable.
The biggest drawback of gold bars is they’re mostly struck by private mints, so they have no legal tender face value and often require authentication to sell. If you take delivery, they can be cumbersome to move and store.
|Content and purity are guaranteed by the governments that mint them; no need to authenticate for resale.||Governments charge wholesalers larger fees than private mints, so you’ll pay higher prices over spot for coins than bars.|
|More liquid than bars; a more convenient and tradable size. Easier to cash in only a portion of your holdings.||Bars are a more cost-efficient way of buying a large quantity of physical gold.|
|Coins are legal tender that can be used to buy goods if the value of paper currency collapses.||Bars are typically 99.99% pure, so you get more gold for your money than from most coins whose purity is 91.67%.|
|Coins are easier to split among your inheritors.||Bars require less space than coins to store the same number of gold ounces.|
Gold’s spot price is the current price per ounce traded in global commodity markets. It comprises approximately 95%–98% of gold bullion’s overall price.
But the US Mint doesn't sell gold coins directly to investors. They sell them to wholesalers, who then sell them to dealers, who sell them to you. And everyone has to make a buck.
Because of this, you shouldn’t expect to pay the spot gold price for gold coins. The ask price will include the costs of fabrication, minting, distribution, and a sales fee (the dealer’s profit). This is called a premium.
The purchase price of a 1 oz gold coin or a 1 oz gold bar is anywhere from 2.3%–4.5% over spot. For 1 oz gold coins, however, dealers will charge a 5% to 8% premium. Fractional coins can have an even higher markup. The larger fees are associated with government mints versus private mints that strike gold bars.
There’s no real right answer as to which size coins you should buy. One-ounce gold coins will typically give you the best bang for your buck, but there are reasons to consider purchasing fractional sizes.
Gold bullion coins are most widely available in one-ounce, half-ounce, quarter-ounce, and tenth-ounce sizes. Other weights available include:
The main advantage of the smaller fractional weights is more accessible price points. They can also be easier to liquidate and barter, which is great for trading.
Their biggest drawback is their high premium. Minting costs are usually fixed regardless of the size of the coin, which is why 1 oz gold coins are a better long term investment.
Larger coins are mainly bought as novelty items.
Depending on the type of gold coins you buy, they will either be 22-karat or 24-karat gold. The 24-karat coins are preferred by some investors because of their purity (99.99%) versus 22-karat coins (91.67%).
However, it’s worth considering that there’s actually a benefit to the copper content in 22-karat coins. They’re tougher and less likely to be damaged than 24-karat coins.
If you’re concerned at all with ease of selling, it’s best to stick to North American coins. They are more liquid in the US than coins like the Australian Kangaroo and Turkish Republic.
But bear in mind that gold coins aren't really meant for trading. To reap the most benefit from your investment, you’ll want to hold on to them for at least a few years.
When buying gold coins, we believe the following to be the best options. In addition to being solid long term investments, these coins are instantly recognizable and in wide circulation, making them easy to value, trade, and sell at any time.
Gold American Eagle
First released in 1986, the American Eagle coin is 22-karat gold. Its gold content and purity (91.67%) are guaranteed by the US Mint and they’re competitively priced in the US and most major international markets. They are also approved for Individual Retirement Accounts (IRAs).
First offered for sale in 2006, the 24-karat American Buffalo is not as well-known as the Gold American Eagle, but it is the purest coin ever offered by the US Mint (99.99%). It is also called the Gold Buffalo. Fractional sizes of 1/10 oz, 1/4 oz, and 1/2 oz became available in 2008.
Canadian Maple Leaf
Produced and guaranteed by the Royal Canadian Mint, the Canadian Maple leaf is a 24-karat gold bullion coin first introduced in 1979. It is among the purest official bullion coins worldwide. In addition to the 1 oz gold coins, there are also 1⁄25 oz, 1⁄20 oz, 1⁄10 oz, 1⁄4 oz, and 1⁄2 oz versions.
First minted in 1989, the Austrian Philharmonic is considered among the most beautiful coins in the world, and it is the most popular gold coin in Europe. They are 24-karat gold and available in four sizes: 1 oz, 1/2 oz, 1/4 oz, and 1/10 oz. The 1 oz Austrian Philharmonic is the most popular size.
South African Krugerrand
The most common modern gold coin in circulation, the Krugerrand constitutes about a fifth of all coins produced since 1970. Widely recognized for the springbuck on the back of each coin, the 22-karat Krugerrand comes in four sizes: 1 oz, 1/2 oz, 1/4 oz, and 1/10 oz. The fractional coins represent 20% of the Krugerrands in existence today.
Gold coins are a highly liquid asset. There’s a strong market for them and unlike gold bars, they require no supporting documents for authentication.
If you're buying gold coins to add the risk-protection of hard assets to your portfolio, but still want the option to resell them, bullion-based gold coins are the only way to go. Dealers generally look to buy well-known coins that have a strong secondary demand, like the American Eagle or Canadian Maple Leaf—coins they know they can resell.
Few dealers will accept numismatic coins because they’re harder to value and appeal only to the much smaller “collectors” market. If you do find a dealer to buy them, you can bet they won’t pay nearly the price you paid.
Don’t fall for buying proofs, antique coins, and collector or commemorative coins. Only gold bullion coins deliver the security and long-term gains that smart investors seek.
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