Should You Buy Gold Coins
Coins typically have lower gold content than gold bars. A one-ounce American Eagle coin, for instance, is only 91.67% gold. In fact, the coin weighs 1.1 ounces, approximately one ounce of which is pure gold; the rest of the weight is silver and copper.
should you buy gold coins
Rather than investing in a single company tied to gold, you invest in a basket of gold-related securities through gold mutual funds or ETFs. Gold funds may track the price of gold, include the stocks of multiple gold mines and refineries or provide exposure to gold futures and options.
For investors willing to take on more risk, futures and options may be attractive. (If neither of those words means anything to you already, you should probably avoid these gold investments for now as they are highly speculative.)
With gold futures, you commit to buy or sell gold in the future at a specified price. Under a gold options contract, you have an agreement with the option to buy or sell gold if it reaches a certain price by a predetermined date.
When it comes to buying physical gold, for most of us that means snaffling away a few gold coins. They are small and convenient. And provided you can do so securely, you can keep them at home. Just remember, you may need to let your insurers know, or you can pay somebody else to look after them for you safely.
So, while collectable and bullion gold coins both have their merits in terms of investments, which you buy depends on what you are trying to achieve as a buyer. Are you looking for a safe, reliable store of value, the price of which may appreciate in these fevered times? If so, bullion is your bag. But if you are fascinated by beautiful, rare and exceptional pieces, then collectable coins are a worthy asset, but consider them more of a hobby than an investment.
Angels, ryals and guineas would pop up among others as variations of gold coins in England from the Middle Ages onwards, down to the 24-carat Britannias and 22-carat sovereigns that are still legal tender today (although no longer in circulation)
BullionVault (bullionvault.com), as its name suggests, sells bullion coins. Aside from the Britannia, other common one-troy-ounce gold bullion coins you will come across include the American Buffalo (USA), Krugerrand (South Africa), Maple Leaf (Canada), Gold Panda (China) and Gold Nugget (Australia). But only the Britannia is free of capital-gains tax in the UK. For a full list of where to buy physical gold, head to moneyweek.com/where-to-buy-gold-coins-and-bars.
The most common gold coins weigh one or two ounces, though half-ounce and quarter-ounce coins are also available. Collectible coins, such as South African Krugerrands, Canadian Maple Leafs and American Gold Eagles, are the most widely available type of gold coins. Some dealers even sell blanks and damaged or worn coins.
Investing in the stock of companies that mine, refine and trade gold is a much more straightforward proposition than buying physical gold. Since this means buying the stocks of gold mining companies, you can invest using your brokerage account.
The SPDR Gold Shares ETF (GLD), for example, holds physical gold and deposit receipts, and its price tracks the price of physical bullion. VanEck Vectors Gold Miners ETF (GDX), on the other hand, is a passively managed fund that tracks an underlying basket of stocks of gold mining and refining companies.
Of all the ways to invest in gold, the riskiest is trading futures or options contracts, a form of speculative investing. Futures and options are derivatives, meaning their value is based entirely on the price of an underlying asset.
People who choose to invest in gold via options or futures contracts need to actively monitor their holdings so they can sell, roll over or exercise their options before they expire worthless. In addition, each of these options includes a certain degree of leverage, or debt, by default, so investors who overuse them and experience market losses can see their losses mount quickly.
Depending on your own preference and aptitude for risk, you may choose to invest in physical gold, gold stocks, gold ETFs and mutual funds or speculative futures and options contracts. Regardless of the form of gold you choose, most advisors recommend you allocate no more than 10% of your portfolio to it.
Many of them began by looking at how they should buy gold coins, and then changed their mind and bought Good Delivery bullion instead. They chose BullionVault because it avoids so many of the costs and problems associated with gold coin investment.
BullionVault looks after more gold than any other online bullion provider - in fact the total currently stands at more than 11% of Britain's official gold reserves. Our solutions to the problems of buying gold are widely recognised as the best, and we offer the lowest prices - guaranteed.
As explained above, owning wholesale bullion in a market-accredited vault is the safer, cheaper and easier way to own gold, silver, platinum and palladium. That said, we recognize that some people also like to keep a little bullion at home, and so we now enable UK users to buy gold coins.
When you buy gold coins and small bars they are priced according to the world market inter-bank gold price. On top, you will pay a hidden mark-up which, though it varies from dealer to dealer, is rarely less than 6% and often much more. When you sell back the discount is typically a further 2%. Buying and later selling gold coins will cost you about 8% of your capital.
Buying and later selling Good Delivery bullion will cost you a maximum of 1.2% of your capital. On larger sums that comes down to about 0.3%. This is much less than the 8% cost of buying and later selling gold coins.
Good Delivery bullion is standard-sized, large bar gold (or silver) of proven weight, purity, origin and history. These bars are the assumed settlement form for professional bullion market trades, where pricing is keenest.
You cannot settle a professional bullion market trade with gold coins. They will neither be delivered to you nor accepted from you. If you buy coins you will have to trade with coin dealers, where liquidity is not nearly so deep and prices are not nearly so competitive as on the professional bullion markets.
Consumers worldwide increasingly demand 99.99% gold coins - and they pay for the privilege. So called four nines gold requires electrolytic refining, and of course the cost is passed through to the ultimate buyer.
No intrinsic value is added with 99.99% refining. In fact if gold coins are later re-cast into large bars (as many are, to be sold at the Good Delivery bullion price) this loses both the cost of electrolytic refining and the 99.99% rating.
When calm returns, and savers are selling, the dealers rapidly become overstocked. The resulting gluts will force them to finance and hedge (which is punitive) or to re-cast their surplus gold coins and small bars as large bars, to sell where the liquidity is deepest.
You will need a concrete floor and a brick or stone wall behind, which should not be accessible from the rear. Your safe will probably be installed with 6 inch bolts set in resin, applied into holes drilled in the floor and wall. Installation is not complicated and will cost another 100 - 200. Once complete you can usually only remove the safe intact by drilling out the bolt heads from the inside the safe.
Although this sort of safe will deter most intruders it will also advertise where the valuables in your home are stored, and it would be unlikely to hold a determined thief at bay for long. An ordinary metal cutting wheel on a household drill, and an uninterrupted hour, would defeat your defences. So it is essential that you extend your home insurance to cover your gold coins.
For those who already have a safe, and who are storing only small numbers of gold coins, the minimum fee of $4 per month makes BullionVault slightly less competitive. Beyond this small quantity you are unlikely to find a cheaper or easier way than BullionVault to both store and insure your gold.
The mathematics of risk for gold storage are well understood, and insurance actuaries know that although there are certainly risks during transportation, an approved long term storage vault within the professional bullion market system is by far the safest place to keep gold.
For a small number of coins, of limited value, often the most convenient and confidential storage solution is at home, in an insurance rated safe. This definitely works best when you do not need to itemise your gold coins nor extend your household insurance.
If these conditions are met, and no other terms in your insurance contract are breached, then keeping a small number of gold coins at home is a reasonably safe and economic storage solution.
Once insured remember to monitor the values of your gold coins. If they rise too fast your insurance limit is likely to be exceeded and re-create the above problems for you. This inconvenience never happens on BullionVault because all insurance is adjusted automatically to current bullion values.
Whichever crisis a gold coin buyer is seeking to avoid it turns out that making an immediate and sensible choice of offshore storage location is the best guarantor of being able to access the value of the gold when it is required. Domestic governments find it impossible to act effectively against privately owned gold stored overseas.
Gold owners looking for an overseas storage location should try to avoid political instability, negative trade balances and budget deficits, and they should look for countries with a healthy interest in maintaining the trust of international investors.
Those that do sell will be exceptionally brave and skilful investors. They will judge that the fears of crisis are unjustifiable, and sell to take advantage of the high price available just as gold ownership looks to be the wisest thing they ever did. By definition they will be in the tiny minority. And of course they will live to bitterly regret their decision to sell if the feared crisis deepens. 041b061a72