Investing in gold: Bullion coins versus collectible gold coins

by , 25 November 2015

If you want to invest in gold, the most straightforward way of doing it is to buy gold coins.

But there are different types of gold coins. There are bullion coins and there are collectible gold coins.

So which should you invest in?

Read on to find out…

Owning gold coins

The first thing you need to understand about owning physical gold is that it won’t pay you interest like bonds or a savings account, nor will it pay you dividends.
In fact, owning gold costs you. You should pay for insurance to cover your coins in the event of theft and you may choose to buy a safe to keep them in.
The only way you can profit from gold coins is if the value of gold rises over the time you own them.
But gold hedges you against financial uncertainty and this is why many investors opt to hold a portion of their portfolio in gold.

Deciding between bullion coins and collectible gold coins

If you’re buying gold coins for the exposure to gold, you should stick to bullion coins. This is because collectible coins can trade at a large premium to their gold content. 
When you buy bullion coins, you should only pay a small premium above the gold price. With collectible coins, this premium will be a lot more.
When you buy coins, it’s easy to tell how much more you’re paying by checking the gold price and working out what a coin should be trading at based on this.
If you’re buying Kruger rands for example, it’s worth looking around to find the dealer selling them with the smallest premium. 
You need to bear in mind that when you sell your gold coins, you’ll receive less than the current price of gold. The spread, the difference between the buy and sell price of coins, is where dealers make their money.
If you’re looking for pure gold exposure, stick to bullion coins. If you want to put a portion of your gold coin money into collectible coins, do your research and understand that you will pay a lot more for these kind of coins.
If you opt to invest in collectible coins, look for the rarest examples you can afford that are in the best condition.
So there you have it. Investing in bullion coins versus investing in collectible gold coins.
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Investing in gold: Bullion coins versus collectible gold coins
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