In a world of economic uncertainties and volatile markets, investors seek stability and security in their portfolios. Precious metals like gold and silver have stood the test of time as reliable assets that hedge against inflation and economic downturns. Whether you’re a seasoned investor or just starting on your investment journey, deciding to invest in gold or silver comes after careful consideration. This guide will navigate you through the landscape of gold and silver bars, coins, and rounds, helping you make informed choices that align with your investment goals.
There are thousands of options in the marketplace today, and it can be confusing trying to understand their differences. By the end of this guide, you should have a grasp of the criteria used to categorize the different types of gold, silver, and platinum products in the market. Selecting the right product for your goals will be simplified when you understand what kinds of products best align with your preferred strategy.
Bars, Coins, and Rounds: What’s the Difference?
When investing in precious metals, there are three primary forms: bars, coins, and rounds. Each has its own unique advantages and considerations.
Sovereign mints and private refiners typically produce gold and silver bars. They offer simplicity and purity, making them a popular choice for serious investors. Bars come in various sizes, from small increments to larger denominations, catering to various budgets and investment strategies. Bars are best for those who want to store a large amount of wealth in a dense format. One of the most popular sizes for silver are ten-ounce bars.
Coins hold historical significance and can be both a collectible and a bullion investment. Sovereign-minted coins, like the American Gold Eagle and Canadian Maple Leaf, are backed by governments and carry legal tender status. These coins often command higher premiums due to their recognized quality and origin. Coins are best for those who want to keep their investing strategy simple and reliable.
Rounds are like coins but lack legal tender status. They are often produced by private mints and offer a more cost-effective way to invest in precious metals without the associated premium of sovereign coins. However, in recent years, the premiums on rounds have increased to the point where many sovereign coins have price parity with rounds. With careful purchasing, however, investors can get lower premiums on rounds, making this an ideal choice for investors seeking a price advantage.
Sovereign vs Private Mints: A Matter of Trust
In general, it’s easier to resell coins and bars from sovereign mints. Enhanced liquidity is a key trait that drives popular bullion demand from government mints. On the other hand, there are also private mints that have earned trust and are renowned in the marketplace.
Coins minted by sovereign governments provide assurance of quality, authenticity, and purity. They are backed by the issuing government and are recognized internationally, which can facilitate ease of resale. Sovereign mints also imprint security features into their coins, such as a missing reed on American Eagles, or micro engravings on the Royal Canadian Maple Leaf.
Private mints offer a wider variety of designs and sizes, catering to diverse investor preferences. However, due diligence is essential to ensure the credibility of the mint and the quality of the product. Some popular private mints known for their gold bars include Valcambi, PAMP Suisse, APMEX and Credit Suisse – although Credit Suisse mint’s fate is unclear after the bank failed in 2023. Engelhard silver has become sought after since they stopped production in the 1980s. Johnson Matthey is also an historically significant private mint, known for silver bars no longer in production.
One of the most popular bullion rounds in the world, the silver buffalo, is produced by a variety of private mints. Investors often seek out the lowest premiums they can find on silver and gold, and buffalos can sometimes be found with extremely low premiums.
Collectibles Vs Bullion: Balancing Art and Investment
Some coins transcend their intrinsic value and become collectibles due to their historical significance, rarity, or unique design. While collectible coins can appreciate significantly, they also come with a higher level of risk due to their speculative nature. Investors should carefully evaluate their risk tolerance and reasons for purchasing precious metals before investing in numismatics.
It’s important to note many people are invested in rare coins as a hobby. Numismatics (or coin collecting) sits at the intersection of art, history, and currency. The goals of a new gold or silver investor may not align with the goals of someone who purchases vintage gold coins. The vintage buyer may be building a collection to honor their heritage, celebrate history, or for dozens of other reasons. It is possible to achieve a generous return on investment for rare coin collectors, but it is not always the primary goal.
Coins, bars, and rounds valued primarily for their medal content are considered bullion. Most investors prefer to buy bullion over collectibles as they have a lower spread and are easier to liquidate when it is time to sell.
Semi-Numismatic Coins & Premium Appreciation
Semi-numismatic coins straddle the line between collectibles and bullion. These coins often carry a higher premium due to limited mintage, unique designs, or historical importance. At the same time, they’re not quite considered numismatic coins. Modern bullion coins like the Perth Mint’s Swan series might be regarded as semi-numismatic.
While semi-numismatics can appreciate, investors should know that their market can be more volatile than traditional bullion. Semi-numismatic coins can be a smart investment for savvy investors willing to put in more work when it comes time to sell.
Premium appreciation is a reference to the way the premium increases over time. On all products, the final price is a combination of the metal’s spot (base) price and its premium. The premium is the fee that covers the cost of the mint to produce the product, the retailer to sell it, and the miscellaneous costs in between, such as shipping. When demand increases for a specific product, and the supply of that product is limited, the premium may increase or appreciate.
Coins like Perth Mint Kookaburras or Swans, Libertads, or American Silver Eagles, can sometimes see their premiums increase over the years as the prior releases become scarce. This may lead to extravagant premiums over spot when selling in the secondary market at the right time.
Size Matters: Troy Ounces vs Grams
Troy ounces and grams are the two primary units of measurement for precious metals. One troy ounce is the equivalent of 31.1034768 grams.
Troy Ounces: Widely used for gold and silver, troy ounces are the standard measurement in the precious metals industry. Understanding troy ounces will help you accurately assess the value of your investments. When you check the spot price of precious metals, it always shows the value of a troy ounce. Most popular mints produce their coins and bars in troy ounces, which is the global standard.
Grams: Some investors prefer to work with grams, which are often used for smaller denominations. When comparing prices, it’s essential to convert accurately between troy ounces and grams. Most sovereign coins are produced in troy ounces, but the Chinese Pandas switched to grams in 2016.
However, newer investors without a firm strategy should stick with troy ounces as a standard unit of measurement. It’s easier to keep track of the value of your holdings. Believers in fractional investments may find better bargains on premiums by shopping in grams.
Best for Beginners: Building a Strong Foundation
For newcomers to the world of precious metals, simplicity and liquidity are key. Sovereign-minted coins or well-known private mint products are generally recommended for beginners due to their recognizable quality and ease of resale. Well-regarded sovereign mints include:
- The US Mint
- The Royal Canadian Mint
- The Royal Mint
- The Mexican Mint
- The Austrian Mint
- The Perth Mint
- The South African Mint
Beginners may be tempted to invest in collectible gold or silver from a sovereign mint due to their beautiful designs, emotional connections to commemorative events, or personal preference. For example, the Perth Mint produces amazing commemoratives, such as the stunning 2023 1 oz Gold Koala in High Relief.
However, this coin has an 85% premium. This premium could go even higher if the coin is popular, especially with a limited mintage of only 200 coins produced worldwide. This would be considered a semi-numismatic coin. The downside risk for a coin like this is that its popularity declines, and the premium declines in secondary market sales. If an investor were only able to sell this near spot in the future, it would be a big loss – and this risk is not one we would expect beginning investors to take. Comparatively, the Perth Mint Kangaroos can often be found with a premium of about 5% over spot – sometimes less. You’re still getting the same amount of gold, but you’re investing in the bullion coin by the Perth Mint and not the collectible. This reduces your spread, making it easier to recoup investment in the future. This type of investing is ideal for beginners.
Your Path to Precious Metal Prosperity
Investing in gold and silver bars, coins, and rounds can be rewarding, providing stability and diversity to your investment portfolio. By understanding the distinctions between sovereign and private mints, the balance between collectibles and bullion, and the significance of size measurements, you can make informed decisions that align with your financial goals. Remember, the world of precious metals investment is multifaceted, so conducting thorough research and seeking advice from trusted sources will guide you on your journey to prosperity.