Should you buy Gold Coins or Gold Bars?

Should you buy Gold Coins or Gold Bars?

Buyers are often unsure whether to buy gold coins or gold bars when it comes to investing in gold. Firstly people need to be aware that they are investing in gold not the coin or bar, coins or bars are simply different forms of the same product. That is not to say they are exactly the same value, there are advantages and disadvantages to both, but for the average investor who is unaware of these it is worth pointing them out.

If we start with coins, the main advantage of coins is the ability of a dealer to distinguish its authenticity.  Gold has a unique density as a metal, it is one of the most dense metals on the periodic table. This is highly significant because, a well-known coin has its dimensions set by the mint it originates from. A quick internet search will reveal these dimensions to you. Using this information you simply need to measure your coin’s dimensions and if they match you then need to check the weight. If both are correct you have a legitimate coin. You can perform these checks in seconds using a  ‘Fisch’ device. This is an advantage over bars or bullion as I’ll explain later.

Coins can also have a numismatic element to them. The advantage of this is you may come across a coin that is worth more than its bullion content. However this is rare as coin collectors don’t often let collectible coins slip through the net undetected. The disadvantage of numismatics are paying too much over the bullion content and getting an emotional attachment to the coin. If your purpose is investing in gold, try not to get distracted by buying numismatics, leave that to the collectors.

Most of the best known coins in the gold market are backed by government rather than private refiners, i.e. sovereign, maple etc. Again this can lead to a slight premium in price but it more than pays for itself when it comes to selling. Also certain coins such as the gold sovereign have an affinity with the Irish and British markets, the same can be said of the gold maple in Canada. Again this is an advantage when it comes to re-sale.

The main advantage of gold bars is a low premium but it is important to get the product from a reputable source and the bar should be fabricated by a well-known refiner. The dimensions of bars are non-standardised, meaning you can get several different types cast, machined, assay stamped, assay unstamped. Therefore, counterfeiters are not bound by a mint’s pre-set dimensions. This simply means that they can create their own dimensions on a copy and then have the correct weight.

Other advantages of bars are the lack of emotional attachment that can come with coins particularly numismatics. Gold bar premiums do decrease with the larger bars but this is offset when it comes time to sell, it becomes harder to sell the product above 100g size.

In conclusion, of course there is an element of personal preference in the type of product the investor chooses, and indeed different investors will have different requirements. However, my advice would be to go for coins that are low premium, well known and easily tradable. In Ireland it is hard to look beyond the gold sovereign, it scores very highly in all three categories.

Great Reasons To Buy Gold

Great Reasons To Buy Gold

1. Ireland’s economy.

Soaring unemployment, unsustainable debt and a government unwilling to take the action needed to help Ireland recover.

2. Anglo Irish Bank.

Need we say more – whether its €32 billion or €64 billion needed to bail out this toxic bank we’re being dragged into a black hole by this mess.

3. Diversification.

Everybody should have some Gold in their possession as a way to diversify their investment porfolio away from poor performance sectors like stocks and housing.

4. Quantitative Easing.

In other words – printing money! All the world’s central banks are tyring to outdo each other on this, trying to get their economies going again. Any cash you hold, whether in Euro’s or dollars is virtually certain to go down in value over the next decade, just as they have in the last decade.

5. Gold’s track record as an asset class.

In 1970, one gold ounce was worth $35 dollars. By 2000 one gold ounce was worth $270 dollars. In 2010 gold is worth over $1200 an ounce. Thats long term outperformance by any measure.

6. China.

The Chinese are the driving force of the world economy right now. They are swiftly gaining on the US to become the world’s largest economy. This is inevitable, when Britain was the centre of the world, it was also the world’s workshop, and the same was true of the US. China is the world’s workshop today. And the Chinese love gold as an asset class. They will be big buyers of gold in the coming years.

7. The Dollar.

The dollar and gold are vying for the same role in the global financial system. That is, the dollar currently claims the role as the basic measure of value in the global financial system. But since 1971, when the dollar gave up its fixed gold value and left the Bretton Woods system behind, the dollar has lost 97% of its value versus gold. What sort of value measure does that make paper currency? The free market is passing judgement year by year.

8. World Gold Supply.

South Africa used to be the biggest gold producer in the world. It has now been surpassed by China as production falls. But China consumes all the gold it produces and is a net importer of gold. This at the same time that global gold demand is rising relentlessly.

9. Gold is still cheap.

At the start of the 1980’s gold reached over $800 an ounce.When you adjust prices for inflation gold would have to reach over $2000 an ounce today just to equal that high in real terms.

10. Barack Obama.

Obama looks good and sounds good. But when it comes to economics he is not so good. The dollar needs a president who understands that if you print too much you destroy underlying value and currency confidence. America needs a president who understands that low taxes always lead to higher growth and higher tax revenues. Obama wants to raise taxes for the wealthy. Sounds good, but a terrible idea if ecomomic history teaches us anything. And to allow business to thrive Ireland and America need to allow bankrupt and insolvent businesses to go out of business.

Instead economic zombies are being created which will suck the economic life out of western economies for years to come and draw resources away from new start ups and entrepreneurs who can build real wealth. In the face of these economic policies it’s inevitable that gold will be the benficiary for years to come.