Coin Guides: Tips on Buying Precious Metals and Bullion Coins

By Gainesville Coins –

The Advantage of Physical Assets

Precious metals have long been treasured both for their beauty and rarity. As a result, these metals have been used by many civilizations as a store of wealth, and in some cases, a foundation for currency.

Historically speaking, these stores of wealth have not experienced the kind of boom and bust cycles present in other forms of investment. This observed stability exists for several reasons. First, precious metals such as modern bullion have intrinsic value. The fact that precious metals consist of something that actually has value makes them more stable than fiat currency which is made of near-worthless paper.

In addition, these metals in many cases have practical applications. Modern industrial processes make use of metals such as gold and platinum for their unparalleled conductivity and use in manufacturing electronics. Moreover, in the case of economic turbulence, when investors do seek investments other than those vulnerable to market fluctuations, they wisely turn to the stability of precious metals. This increased demand has the effect of increasing their values, making them an even better investment.

Finally, when precious metals are minted as collectable coins such as the popular Gold Eagle or Gold Buffalo, they are sought after not only for their intrinsic value, but for their rarity as a collectable item. Again, because there is a fixed supply of any one coin, increased demand for such an asset increases its value. It is for these reasons that for hundreds of years, gold and silver coins have enjoyed a remarkable history of defining purchasing power and backing international finance. For more on this subject, see our article addressing the superiority of precious metals.

Technology and Precious Metals

The influence of the Internet on the trade of precious metals has been vast. It is no longer necessary for collectors to buy and sell coins only locally. The Internet has several venues through which to vend or purchase these assets to buyers or sellers around the world.

It is easier now than it has ever been to learn how to trade precious metals. There are numerous resources available on the web for anyone needing to keep on top of the market, or simply wanting to learn more about the practice.

Grading services authenticate coins and rate them based upon how closely they resemble a freshly minted coin, making it easier to certify that the coins being traded are in fact investment grade. The presence of these services online gives buyers easier access to information, allowing them to make better-informed decisions.

Electronic registry services which permit investors to register their collections online and compete against others in building the highest graded, most valuable sets have also recently appeared on the Internet.

There are many ways to accumulate precious metals. When considering the acquisition of physical precious metals however, one is able to choose from the purchase of either modern bullion or numismatic coins. The single most important step in purchasing precious metals is learning first what the relative advantages and disadvantages to each type are. Besides that, your purchase should suit your preferences and interests. Accumulating coins should be interesting and fun. Coins are, after all, works of art expressed in precious metal!

Modern Bullion

The larger of the two markets for physical precious metals is that of modern bullion. The market has flourished since December 31, 1974, when under the Gold Statement of Policy, Americans were once again permitted to buy and sell bullion. Non-circulating modern bullion coins have been produced each year since 1986, and the US Mint has recently been very active in promoting these coins through television and radio advertisements.

If considering bullion bars such as the PAMP Suisse 1 oz. Gold Bar or the Made in the USA 10 Troy oz. Fine Silver Bar, there are a few things to keep in mind. Generally speaking, the price of a modern bullion bar is dictated primarily by the spot price of its respective metal, and not a numismatic value. In addition, the bar, if issued by a minting authority, is likely to be guaranteed as to its quality and composition. These two facts greatly simplify the evaluation process whether you’re looking to buy or sell the asset. For this reason, modern bullion bars enjoy great liquidity on the market. If your eventual goal is to sell your precious metal purchase, and you’re not concerned with the asset earning collectible status, it may be prove wisest to go with a bullion bar.

If modern coins better suit your tastes however, slightly different conditions apply. While most modern coins minted by a government authority are certified as to their quality and composition, and are therefore relatively easy for which to establish some base price, there is the added potential benefit of numismatic value. Each minting of a particular coin is done in some fixed supply. This supply can never be expanded, which means that in the event of an increased demand for a particular issue, the numismatic value of the coin will increase, in some cases over and above the intrinsic value of the coin. The flip side to this is that some precious metals investors will be particular as to which coin they would like to buy. This can decrease marginally the liquidity of your investment. Some of the more popular modern issues include the Gold Buffalo, Gold Eagle, Silver Eagle and the new Presidential Dollar.

Lastly, there are purely numismatic coins such as those minted before 1933. While these assets usually contain a high level of precious metals, they are valued primarily for their numismatic value. It is for this reason that when purchasing such a coin, one will pay far above the intrinsic value of the coin, and when selling it, can expect to collect much more than the intrinsic value of the coin. As should be expected, the market for such investments is smaller than that of the precious metals market on the whole. Depending on market conditions, it may be difficult to find either a buyer for such a coin; if you do however, you can expect to make great returns on your initial investment.

A Word About Quality

Regardless of which form of modern bullion you decided to purchase, quality ought to be of concern. Coins, even those of the same grade, often show significant variation in eye appeal. This is true because some characteristics of a coin, such as light copper spots or reduced luster, do not necessarily affect a coin’s grade. For example, if a selection of Double Eagles having the same grade were placed on a table for your examination, you would certainly notice many for their exceptional color, luster, and condition. You might also notice that while some share the same grade they appear slightly duller to your eye or have small black spots in their prime focal areas. You might conclude, quite correctly, that the exceptional coins are on the “strong side of the grade” and those less attractive to you are “below average for grade.” Determining the quality of a potential purchase is an imperative step in deciding how much to purchase. Not only will this affect the purchase price of your investment, but it will almost certainly affect its re-sale value as well.

Gainesville Coins Inc. is a large online coin dealer. We are well-known throughout the coin industry for employing exceptional talent, offering world-class service, providing customers with a widest selection of high quality precious metals.

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2 Comments on "Coin Guides: Tips on Buying Precious Metals and Bullion Coins"

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  1. Dave Thompson says:

    I’ve been thinking about buying some gold coins. My dad told me to invest in something that will last the test of time. I’m pretty sure that gold is something that will always be worth money. However I am not sure how to get started on my investment in gold coins. any recommendations on how I might go about that?

    • CoinWeek says:

      First thing you want to do, look at the different coins available and decide which you prefer. Because you are buying gold for investment, you want to pay as little premium over spot as possible, so you might want to pass on proof gold or collectible modern commemorative coins. They look great but have larger premiums so you get less gold.

      1 Oz gold bullion coins are the standard size for investment, like the US Gold Eagle, Canadian Maple, Austrian Philharmonic or South African Krugerrand. Many countries also offer fractional gold coins in 1/10, 1/4 and 1/2 oz but the premium you pay over spot goes up as the coins size goes down , so stay with 1 oz.

      Many dealers will suggest you purchase numismatic items ( in the US Gold $20 Saint Gaudens, or other common date “generic gold”) as an alternative to bullion coins. The reasoning is that these 90% gold coins increase in value as the spot price of gold increases, but they also have a numismatic component so they have the ability to appreciate as collectibles as well. Right now premiums on US generic gold is at the lowest levels in years.

      You also need to consider the tax consequences when you eventually sell as well. Bullion products and numismatic items are not always treated the same and you might be well advised to investigate this aspect of gold ownership.

      You might also want to consider creating a precious metals IRA account, or roll over an existing IRA as the vehicle to hold your gold for retirement. There is alot of information available on this and most Bullion dealers can provide you information. CoinWeek also has published several articles about gold IRAs as well.

      Another option to consider is Foreign Gold Coins that we actually used in circulation but now trade at super low premiums to spot and also are smaller in size that the standard 1 oz gold bullion coins. Coins such as the Swiss Helvetia, French Rooster are examples of these .1864 oz gold content gold coins, so they are affordable and generally traded world wide.

      So as you can see there are many things to consider, but perhaps the most important is to find yourself a good dealer to buy from. Look for companies with solid long term reputations that offer to both buy and sell product. Check out the companies reputation online, ask questions and make sure they have the product in stock and can make immediate delivery.

      Finally, when you buy precious metals, take delivery of your items at the time of sale……or have your coins stored in a certified independent and insured depository.

      I know this a lot to chew on but be informed, protect yourself, and enjoy your purchase

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