Investing in gold, no matter the type, carries several benefits. Gold often acts as a hedge against inflation, diversifies your investment portfolio, and is highly liquid. However, the type of gold makes a difference in your investment experience and ability to meet your goals.
What is the best type of gold to buy: coins or bars? Both are types of “gold bullion,” which is the general term for physical gold. Gold bullion is popular for investors because it is relatively easy to access and equates to a direct monetary value, as opposed to gold jewelry and other assets with less clear-cut valuations.
Explore the pros and cons of each type, a few other gold investments to consider, and all the details you need to make an informed decision below.
Gold Coins vs. Gold Bars: Exploring the Differences
When purchasing physical gold as an investment, your main option is gold bullion in the form of bars and coins. These products pose several different benefits for your portfolio.
You can purchase gold bars in standard sizes, such as one troy ounce, or weights ranging from one gram to one kilogram. Purchasing bullion in this way lets you easily calculate the value of your gold based on the current market rate.
Meanwhile, gold coins are small, round gold pieces that typically weigh between one-quarter ounce and one ounce. The main difference between gold coins and bars is that gold coins also have a collectible value that adds to their desirability for investors. A rare gold coin is often worth more than its weight in gold.
The type of gold bullion you purchase affects the ease with which you can buy, sell, and store your gold products. Understanding the differences can help you make the right decision for your investment goals.
Pros and Cons of Gold Bars
It is important to weigh the pros and cons of gold bars and coins when deciding which type to buy for your portfolio.
These are the pros of gold bars:
- High liquidity: Gold bars come in standard sizes, making them easy to sell.
- Lower premiums per ounce: Gold bars are often sold at a lower premium over the spot price than gold coins.
- Ease of stacking: Gold bars are easy to store and stack neatly, thanks to their uniform design.
Meanwhile, gold bars also come with a few cons:
- Lower demand for collectors: Unlike gold coins, bars don’t have any collectible or numismatic value.
- Plain, uniform designs: Gold bars also lack the unique designs of gold coins and are less interesting to look at.
Pros and Cons of Gold Coins
Investing in gold coins over gold bars offers several advantages:
- Unique designs: Gold coins have unique, collectible designs that make acquiring and admiring them more enjoyable.
- Collectibility: Many collectors prefer the thrill of landing on a rare gold coin to simply purchasing a gold bar.
- Lower gold weight options: If you only want to purchase a small amount of gold, a coin will weigh less and, therefore, cost less than a bar.
Consider these disadvantages of gold coins as well:
- Risk of counterfeits: Unfortunately, counterfeits of gold coins look very similar to real ones. These products are more likely to be counterfeit than gold bars, making it vital to do your research.
- Higher premiums: Gold coins often cost more than their weight in gold because of their collectible nature.
- More challenging to value: The numismatic value of gold coins makes them more challenging to appraise than gold bars.
Avoiding Pitfalls When Buying Gold Bullion
Aside from understanding the best type of gold to buy, you need to know the best way to buy gold bullion. Follow these tips to avoid pitfalls when purchasing gold bullion:
- Avoid high premiums: Compare the cost of a gold bullion product to the market price of gold, and avoid products with high markups. Gold bars typically have lower premiums.
- Look for reliable sellers: Buying gold bars or coins at a pawn shop or corner store isn’t nearly as reliable as purchasing them through a reputable online distributor.
- Ensure the authenticity of your gold products: If you do purchase gold from an unreliable source, verify its authenticity by checking the hallmark, using the magnet test, or having an expert evaluate it.
Buying Gold Bullion Using Your IRA
If you want to gain the benefits of investing in gold for your retirement savings, consider a gold-backed IRA. You can use Aa A self-directed IRA can also be used to purchase gold bullion and other precious metals — but you’ll need to follow a few requirements:
- Work with an IRS-approved custodian to manage your account
- Choose gold products that are at least 99.5% pure
- Store the gold in an IRS-approved depository
Gold IRAs offer tax benefits and the ability to diversify your retirement portfolio. Just be sure to choose an approved custodian and adhere to IRS regulations to ensure the validity of your account.
Other Gold Investments To Consider
Gold ETFs (exchange-traded funds) offer an alternative method of investing in gold that doesn’t require any storage and insurance costs. These ETFs operate like other stocks on the stock exchange. They track the price of gold, rising and falling in value with the fluctuation of gold prices.
You can also consider sovereign gold bonds, which are government-backed securities that are linked to the price of gold. These bonds are issued by the Reserve Bank of India and follow the value of gold in India.
Digital gold is another alternative you can consider; it’s a type of digital currency based on mass units of gold.
You may find investing in these alternatives easier than purchasing physical gold, as you don’t need to worry about verifying the purity and authenticity of gold or tracking the liquidity and resale value. However, they take some of the fun out of owning and collecting physical gold products.
Which Is Better for You: Gold Coins or Bars?
If you’re still wondering about the best type of gold to buy, both gold coins and bars are excellent options for owning physical gold. The right choice for you depends on your:
- Investment goals: If you want to minimize the premium and maximize the resale value, bars may be better.
- Budget: If you don’t want to pay for an entire bar of gold, a few coins can introduce you to gold investing at a fraction of the price.
- Personal preferences: Which type of gold bullion sounds more appealing to you? There’s nothing wrong with letting your personal preferences impact your decision.
Still can’t decide? Consider investing in coins and bars to enjoy the best of both worlds.
Investing in Gold Bullion: In Summary
If you’re looking to dive into the world of investing in physical gold, understanding the difference between gold bars and coins can help you pinpoint the best type of gold to buy for your needs. These two types of gold bullion offer many overlapping benefits — yet coins have numismatic value while bars are slightly more liquid.
Consider your financial goals and budget before making a decision, and consult a trusted advisor if needed. When you’re ready, Preserve Gold has a range of physical gold products to choose from.
