The Practical Buyer’s Guide: Bullion Bars or Coins?
In the flurry of purchase orders we’ve taken here at Global Gold lately, I found a recurring question that kept coming up with clients before they purchased. Perhaps what was most interesting about the question is that we were getting it from not only new clients that were purchasing with us for the first time, but I found many of our existing clients looking for the same help.
The Question: should I buy bars or coins? There are countless articles you can find on the internet if you search the subject. But what I started to find missing from all of those articles, and what I clearly found many of our clients liked in my responses, was what would a “regular Joe Blow” think, and why?
“Joe Blow” is the hypothetical name for the average person – you don’t hear it much anymore, so maybe I’m dating myself a bit. But how better to advise someone than through your own experiences? I own metals stored with Global Gold as well, amongst other places. What would I do?
And thus, my “practical” guide on whether to buy bars or coins was born. This is basically a variation of emails I sent to clients earlier this year. Before I dive in, I’m going to focus on gold here, keeping in mind this could apply to silver as well. But I just don’t want to jump around too much, keeping to the key points. These are just some practical things to consider, and then I’ll conclude with my own personal recommendation, the “what would Scott do” part!
I’ve always been a value shopper in everything I do, so I want the most “bang for my buck”. The premiums above spot you pay on coins will always be higher on a per ounce basis than what it is on a bar. Why? There’s more detail and effort that goes into creating a coin than a bar. The 1oz gold American Eagle is beautiful in its detail for a reason.
But a 1oz gold American Eagle right now, if you are lucky, is running about 9% over spot at the moment. If you are doing the math, that’s around $160/oz. On the other hand, we currently can get a 100g gold bar for $30/bar over the spot price from one of our providers; that clocks out at over $9/oz over spot. Big difference! Why not a 1oz Valcambi bar: $25/oz over spot, so if we are looking at $1804/oz spot, we can get the 1oz bar for $1829.
Plans and Goals
Global Gold clients buy their metals knowing they will store them outside of their home country already, so what does it matter then if they buy bars or coins? Well, I always ask what the long-term goals are, if a person even knows what they are. If you want to buy and hold, with no intention to sell, then bars, and even larger bars, are the best. But if you think you could take delivery, coins are going to be easier to resell at your local metals shop. Or it will allow you to store in a few different locations. Maybe you want to keep some at home, then somewhere else to diversify.
Or, for those that really worry about the collapse of the fiat currency system, what would you rather buy a loaf of bread with: a bar or a coin? I think you get the drift.
Mobility and Liquidity
I had a client call me once asking me what he could do: he had a 500gr gold bar physically on his person, and no one would buy it from him. You won’t have this problem with coins, or even smaller bars, like a 1oz bar, or even the 100gr that looks like a matchbox.
Having smaller formats in any case is easier to handle than larger. I know more than one person that likes to travel with a coin or two on them at all times for an emergency. Or they like giving coins as gifts to family.
And, if your intention is to sell at some point, a 1kg bar will fetch you roughly $58,000 at the moment, whereas coins, even if selling in a tube of 10, will get you over $18,000. Always good to leave yourself some good liquidity options.
Those of you who know me well, know that I’ve more than once said how “pretty” a coin is. Look at the detail, how it shines in the light, how people recognize right away that you are holding something of value when you bring it out. I believe coins just carry a more sentimental value because of how they look.
I remember the first time I gifted my son a 1ozt American Eagle gold coin. He handled it with such care and amazement. Then, I showed him a 100g bar of gold, and you could tell amongst his basic instincts that the coin was just worth more to him. Naturally, that changed a bit once I told him the value of the bar vs. the coin, but I think the view is pretty clear through the eyes of a child.
It’s obvious that the more you buy in ounces of gold, silver, etc, the more space it’s going to take up. But if you consider a single, 1kg gold bar, about the size of your cell phone vs. 32, 1ozt gold coins (a 1kg gold bar is 32+ ounces), which do you think will take up more space?
I’m thinking mainly about the individual investor here that might want to store metals at home. If you are investing a large sum, or perhaps if you are an institution buying gold, then it makes more sense, space-wise, to have larger bars than coins. But even for the individual investor, it’s easier to store a 1kg gold bar in your safe at home, next to your passports, documents, etc, than more than 30 coins.
So, What Would You Do?
Here’s what I do: I own a mix. With coins, I look for whatever the lowest premiums are. I’m still a US person, and I’m a Swiss, but it doesn’t mean I buy only Eagles and Vreneli’s. The lowest premium coins we currently can get is a “who’s who” of the coins I own: Kangaroos, Maple Leafs, Philharmonics, Britannias and Queens Beasts. It’s the same for silver: Kangaroos, Philharmonics, and the Britannias.
For bars, I love the 1ozt and 100g for gold. With silver, I’ve purchased 250g and 500g bars in the past, but in storage, I like the 1kg bars. Otherwise, when it comes to silver, I’m mainly into the coins.
The statement “different strokes for different folks” applies of course. While you may agree with me some, or not at all, the point is that it's still important to have precious metals as part of your investment portfolio. I think we can all agree that is the most practical advice of all.