One of the first questions that many bullion dealers ask themselves is,
The truth is that there is no easy answer. There are benefits to investing in both bars and coins, and which one you choose will depend entirely on your preference, as well as what you want your investment to do. To make things a little clearer, let’s take a look at the pros and the cons of investing in bars and coins.
Investing in Bullion Coins
Bullion coins are produced to a high standard and are not intended for circulation. They include specific quantities of precious metals, and may or may not be legal tender (legal tender coins come with certain benefits, including tax savings and government backing). Bullion general refers to something that derives its value entirely from its precious metal content, but it’s not always easy to find bullion coins at — or slightly above — spot price. There are many reasons for this, and we can use 1 ounce silver coins as an example. These are the most popular form of bullion, with coins like the Silver Maple Leaf and the Silver Eagle selling tens of millions a year. These coins contain 1 ounce of pure silver, which is around $15 worth. And each individual coin needs to be struck, polished and then checked. This is a lot of work, and there would be very little profit for dealers or minters if these coins were then sold at spot price, so a small premium is added. This gets smaller as you buy in quantity, with rolls of 10 or 20 coins offering a slight discount and a “Monster Box” (500 coins) coming with a bigger discount.
In this instance, “premium” refers to coins that carry a value that is significantly higher than their intrinsic value. This value can be justified by the quality or the rareness of the coin, and in most cases it is a mixture of the two. “Proof” coins fall into this bracket. They are created to a much higher standard than normal bullion coins and are minted in very low numbers. Historically, a proof coin was a sample, the first coin struck using a particular die in order to check the strike and the quality. Over time, it came to mean a coin that was struck as a limited edition, using dies that were created for that purpose.
As you can see from this Royal Mint article, a lot of time, money and effort goes into making these coins, and they are usually included in presentation slabs or cases to increase their value further. These coins are favored by collectors who want something with a value that is independent of the precious metal value, something that could rise or fall in price much like a limited edition comic book or a first edition novel.
If you are interested only in the intrinsic value of precious metals, then these coins are best avoided, but if you have a passion for precious metals, it’s not easy saying no to some of these beautiful creations.
Investing in Bullion Bars
Before a coin is minted, the metal needs to be liquefied, poured and then formed into a uniform sheet. It is then rolled, pressed and shaped, before rounds are punched and the minting process begins. A similar method is used for minted bars, many of which carry a premium (discussed below), but in most cases, the liquid metal is simply poured into predefined molds, and it is then stamped before it has cooled. A similar technique has been used to create precious metal bars for thousands of years. It helps to keep costs down, with the refinery focusing on the precious metal itself, as well as the purifying processes, and not on any meticulous designs or minting processes.
As with coins, there are also premium bars, ones that carry a higher price tag. These work in a different way though. These bars are still valued for their beauty, but they are rarely produced in limited numbers, and the additional premiums often stem from the fact that the bars are given a higher quality finish, are minted to exacting specifications, are included in protective slabs and come with assay certificates that verify the purity of the metal.
Bars that fit into this category include the Lady Fortuna gold bars that are produced by PAMP. And because they were created to such a high standard, and by such a well-known refinery, these bars are usually very easy to sell on when the time comes.
So, what’s best for investors: bars or coins?
As we mentioned at the outset, whether you buy bars or coins will depend on what you want to get out of your investment. If you want something that has the potential to increase in value regardless of the intrinsic value, then premium coins and certain bullion coins are ideal. If you enjoy stacking and collecting precious metals, and get a kick out of them, then you should look to buy bullion coins or minted bars in bulk. However, if you’re only interested in the metal, have no desire to collect and simply want to invest, then focus your attention on poured/cast bars.