Investing in Gold? Which do you choose - gold bullion or gold coins?

When you first decide to invest in gold, what is the most desirable way to make your purchase? Let’s looks at the options – at least a few to begin with. There are two main ways to buy physical gold – either by gold bullion or coins, also known as numismatics.

First of all, when you buy gold bullion you are getting a direct correlation to the value of the metal – nothing else. If the price of gold goes up 2% then whatever physical gold you are holding goes up 2% as well in this form. However, gold coins are quite different, since their value is based more on their relative worth to a collector rather than the gold itself. So if the value of gold goes up 2%, your gold coins may not go up even a penny! On the other hand, if they suddenly are more in demand due to some perceived or real shortage, the coins may jump in value even as gold stays the same in price. Other factors include scarcity, condition, and popularity.

One of the downsides to collecting numismatic coins is the added cost of dealer markups and the grading of the coins. The difference between wholesale and retail prices could be as much as 30% depending on dealer markup. Gold bullion has a much lower markup at around 2% or so, unless you are buying gold bullion coins which have a slightly higher markup since they are smaller and require more cost to make than gold bars. Gold bars are the cheapest of course, although since their size can be from 1 gram on up to a kilo or more depending on which dealer you chose.

The difference in the timing of these investments is that if you buy numismatic coins you will want to hang on to them for a much longer time period to get the maximum amount of appreciation from them, since you are paying a premium just to buy them. In the case of gold bullion you only need to wait until the price of gold has risen sufficiently to warrant your taking the profits, if you so wish. Either way, plan ahead and make sure you do your homework first before investing!



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