Major Considerations for What Precious Metals to Buy
- Sovereign bullion coins are most popular Precious Metals
- Bars and rounds are most cost-effective method of investing
- Modern numismatics are highly collectible and can increase in value
- Vintage numismatics are dependent on condition and rarity
When buying Precious Metals, an investor will incur a total cost that includes the spot, a premium and any applicable taxes and other fees. The spot price is the value of a Precious Metal at any given time, and a premium is the additional price paid over the spot price to help cover manufacturing and distribution costs.
Remember that both spot prices and premiums vary with time, market conditions, mintage and manufacturing. Though taxes and fees tend to stay constant, the spot price and premium will always fluctuate. Also, the smaller the weight bought, the larger the premium tends to be. Inversely, one will pay mostly smaller premiums when buying larger amounts of Precious Metals. A balanced portfolio should include an allocation of precious metals and we suggest that you diversify among the different precious metals to ensure that your portfolio is well represented and diversified.
Sovereign Bullion Coins
Sovereign coins are the most popular Precious Metals people buy for investment purposes. They are minted in quantities; they have face values like regular currency; and they historically maintain their values and premiums. Also, unlike bars and rounds, they are manufactured, backed by the full faith and credit of the underlying sovereign governments around the world, and they are quite transferable.
Another reason to buy sovereign coins is their ability to retain value over time. Unlike bars and rounds, which only have value due to their metal content, not only are the coins worth their face value, but they also have intrinsic value due to their metal content and collectability. Sovereign coins each usually have declared set mintages (supply), along with a strong market for their purchase and collection (demand). Due to the principle of supply and demand, putting these two factors together is a formula for longtime preservation of value.
The whole world recognizes the value of Precious Metals, while the U.S. dollar, the British pound and the Japanese yen, for example, are usually only recognized by the countries that created and distributed them. If an investor were to take a $1 American Silver Eagle into any bank in the U.S., the bank must give them one dollar in exchange. The difference, though, is that one of those dollars is a piece of paper (also known as fiat currency), while the other has a value in the actual silver content. Precious metals have a similar value anywhere in the civilized world. They are truly universal currencies.
Many investors obtain and hold onto these coins because of their recognizability and ease of liquidity – the ability to be converted to cash. But an additional reason to invest with the American Eagle is its transferability. Like all Precious Metals, it can be handed down easily to future generations or even left as part of an estate. But if an investor needs to sell American Eagles, there are thousands of coin dealers across the country looking to buy that exact item.
American Eagles are one of the few types of sovereign coins allowed by law to be used in individual retirement accounts, or IRAs, due to their backing by the U.S. Government. They serve as buffers against inflation and the volatility of the stock market and can be held in specialized plans called Precious Metals IRAs. These function the same as regular IRAs but only hold physical bullion coins or bars. Only selected products are eligible for those programs, since by law they must meet minimum content purity standards: Gold must be 99.5% (.995) pure, Silver must be 99.9% (.999) pure, and platinum and palladium both must be 99.95% (.9995) pure.
However, Precious Metals IRAs are unique and have different regulations and custodians, along with limits to the annual contributions allowed to be made to them. APMEX suggests speaking to our specially-trained IRA professionals to obtain information relating to your state. Other popular products for first-time sovereign coin buyers include Canadian Maple Leafs, South African Krugerrands, and Austrian Philharmonics.
Bars and Rounds
Bars and rounds are forms of bullion minted by private companies. They have the same general content and purity as sovereign coins minted by governments, but normally do not have the greater cost of production of coins. Thus, bars and rounds are a more cost-effective way to invest in Precious Metals. A major consideration when buying bars and rounds is paying premiums over spot. When purchasing bars and rounds, due to the lower production costs, the premiums will be lower. We offer our own branded bars and rounds, like 9Fine Mint and APMEX branded products.
Minted coins become highly collectible when certified as being in exceptional condition by third-party grading services, like PCGS or NGC, or when minted in limited quantities. Because of their limited mintage, beauty and condition, numismatic coins have value beyond the innate value of their Precious Metals content. The collectability of numismatic coins can affect their overall values; as time goes on, the more collectible (and valuable) the coins can become.
For aesthetic purposes, many numismatic coins are simply beautiful to look at. Just by examining such coins, a collector can tell the numerous hours spent by designers to make the coins unique. But handling the coins without gloves can wear down their characteristics, like words, numbers or designs, and can diminish their overall beauty (and value).
But numismatic coins do not just look beautiful, they can always potentially increase in value.
Some of APMEX’s popular modern numismatic coins include the 2021 Australia 5 oz Silver Swan Proof (High Relief), 2021 Australia 1 oz Gold Lunar Ox BU and the 2020 Great Britain 2 oz Gold Proof James Bond 007 coin.
Investors acquire historical or vintage coins as collectible pieces because of their condition, design and rarity. Such coins can become more valuable if grading companies certify their authenticity and condition. And collecting coins can be one of the most gratifying hobbies one can have. One major factor of a historical coin’s monetary value is its condition or state of preservation. Over time, the details of a historical coin may begin to wear down, especially if it is not handled with great care. This can cause the overall value of the coin to decrease.
A coin’s rarity is defined by two main qualities: its mintage and its population. Mintage refers to the number of a type of coin which were originally minted, while population stands for the actual number of those coins remaining in existence as determined by the surviving numbers of those coins in specific grades that were graded by PCGS and NGC.
Coins have stood the test of time, having been around for thousands of years. Yet collecting coins is not just some passing fad; it is informally known as the “hobby of kings.” One of the earliest coin collectors was Caesar Augustus, who used to give coins away as gifts. As the centuries have gone by, coin collectors have included clergy, an American Founding Father, U.S. Presidents, singers, athletes and even celebrities. To borrow a baseball metaphor, people collect “for the love of the coin.”
Another characteristic of a coin collection can be its historical significance. Ancient coins are prized for their ties back to antiquity when they were used as a means of making wealth more portable. Later on, currency – in the form of notes and bills – replaced most coins, due to the scarcity of gold in coin form. Because of this, currency took on many designs over the years (which, nowadays, increases their collectability).
Another feature to a collection is the ability to spend or barter with those coins. They are, after all, legal tender, and can be spent when a collector is in financial hardship. Compared with other collectible items, like baseball cards, stamps and comic books, coins have unparalleled liquidity.
But one does not need to be wealthy or affluent to be a coin collector, and a collection does not need to be full of expensive, rare coins to be meaningful. When they are able, they can grow their collection by buying or trading for coins. And the more they learn about rare coins, the more discerning they can be about what to add to their collection. Depending on the interest, there are coins for everyone.
The age of a coin might lend to its historical significance, but not necessarily increase its value. And though one historical coin might be older than another, if there are fewer of one type of coin in existence, that type can be more valuable.
Take as an example the 1913 Proof $2.50 Indian Gold Quarter Eagle; only 165 of these proof coins were ever minted. Yet due to a Presidential order in 1933, most gold coins and bullion were to be turned into the U.S. Government, melted down into Gold bullion bars, and stored at Fort Knox, Kentucky. But despite the order, some coins were kept in secret and still exist to this day. APMEX has one of these very coins. Despite the coin’s small amount of bullion content, its excellent condition and rarity make it worth more than $47,000.