The Art of Buying Gold Coins

Why do you want to buy gold coins?

Before buying gold coins, you should consider the reasons for doing so. This really means realising whether you are an investor or a collector. If your desire to own gold coins is born from the love of the design, history, images, or even the feel of them, then you should consider yourself a collector rather than an investor. This doesn’t mean you don’t view your coins as a source of profit, but profit is the lesser of your concerns when buying.

If your primary aim is to make money from your gold coin purchases, then you are in the investor category. It might be better to consider buying gold bullion in the form of bars, but there is something special about owning gold coins that cannot be replicated by owning a stamped gold bar.

However, owning a gold coin is a riskier business than owning a gold bar. For the collector that owns a rare Spanish Real, for example, the value could be in the thousands. Perhaps there is only a handful known in existence: its rarity will form the largest part of its value. What if a collection of hundreds of the same coin are then discovered on a shipwreck off the coast of South America? The value of the coin owned by the collector will likely fall, even though the condition and weight of gold hasn’t.

Here we look at how to make the best gold coin purchases for investment purchases rather than as collectibles.

What you should invest in

Investment grade gold coins are minted either by governments (national mints) or by private firms. For example, The Franklin Mint is a private mint that regularly produces collectible coins. The problem with buying such coins is that they are not viewed as collectible by coin collectors. They are not backed by governments, and have no monetary value. Often, through time, such coins lose value rather than gain. Many of these ‘collector’ coins are made from metal with little to no gold content, or a gold lining.

National mints include the UK’s Royal Mint, the US Mint, and Australia’s Royal Mint. Coins struck by such mints are considered legal tender, and will have a monetary value at all times. However, most often gold coins struck by national mints are done so for the investment/ collector’s market. They will be minted in finite numbers, and possibly as part of a larger series under one design. As such, they are likely to increase in value over time, particularly if kept in perfect condition.

What to look for

Bullion coins offered by national mints are struck with a minimum purity level (usually 99.9%).

Collectible investor coins will come in two formats: regular and proof. The proof versions of coins are struck to a higher quality and in more limited numbers.

Often these proof coins will be minted as part of a series. Royal Canadian Mint’s Maple Leafs and Pandas, and the US Mint’s American Eagles are examples of these.

Most mints produce especially themed coins. For example, in 2011 the Royal Australian Mint produced a $10 Gold Proof ‘Year of the Rabbit’ coin as part of its Lunar Series, which sold at $240. A year later, the same coin is for sale on eBay at $299.

Some of these collector series are very rare, and sold in limited numbers to individuals (for example, the US Mint regularly puts a limit per household on its coin sales). Sometimes coins are offered only to residents of the country in which they are minted. Such varying conditions add value to the coin purchased.

Investment coins that are kept in ‘mint’ condition are likely to become rarer over time, and this will enhance value further.

Where to Buy

Investment coins can be bought direct from the mints that produce them, or from private firms (for example the US Mint uses ‘accredited’ dealers to distribute its collector coins as well as sell direct).

When buying direct from the mint, you will normally receive a guarantee of gold content, weight, and purity.

If you are buying from a private firm, then select one that has a good reputation. Companies like Kitco, APMEX, and Monex have records dating back 30 years and more.

Of course, coins can also be purchased from specialist dealers found online or on the high street. Again, care should be taken with establishing the reputation and pricing policy of such firms. A price guarantee and an independent valuation of items purchased this way will help protect you from unnecessary loss.

Online auction houses such as eBay can be a good source for investors in gold coins. But again, the caveat is that reputation of the seller should be checked and established before entering into any agreement.

Coin Valuation

Pure bullion coins will sell for a price around the value of their gold content. They are bought for the value of gold rather than the design and rarity. When you are buying, expect to pay a small premium over the gold price, and when selling you should expect to receive a small discount – the difference in price will be the profit made by the dealer.

Collectible coins will be valued for rarity, quality, and condition. The premium on these will be higher than for the gold content alone, though investors will expect this premium to increase over time. This type of coin – sometimes called numismatic coins – offer the highest potential profit, but require the highest level of research and knowledge to invest wisely. Many gold coin investors begin by buying and selling bullion coins, then progress to newly minted collectibles, before building a collection of numismatic coins.

Other considerations

When investing in gold coins, you should also think about other factors that will affect your eventual profit.

Coins need to be stored properly, and this could involve special treatment. They will certainly need to be stored securely, and this may involve the cost of a safety deposit box at a bank and necessary insurance.

If dealing in coins through an online dealer, or national mint, then you should consider the costs of postage and delivery. Even dealing with a high street dealer will incur the cost of travel and parking, and the risk of loss of your coin whilst in transit.

Finally, you should always check the tax implication of any investment before buying and selling.

In conclusion

Investing in gold coins can be both profitable and enjoyable. Understanding the costs of doing so, and the tax implications of buying and selling, will help to make such an investment as profitable as possible. But perhaps the most important thing to establish before setting out on the path of coin investing is to fully understand your reasons for doing so. This will enable you to better focus your research and make wiser buying and selling decisions.

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