Buying Bullion Bars or Coins: Which is the Better Investment?

Many investors have decided that it is safer to have precious metal in hand than it is to invest in precious metals Exchange Traded Funds (ETFs). Granted, the cheapest and most convenient way to invest in and trade with gold and silver is ETFs, but they also come with more long-term risks. Risks such as, but not limited to, counter party risk, which means that the precious metal is not actually held by the ETF provider. It’s typically held by a large bank and if the bank goes bust, your investment could disappear as well.

Besides, how do you know they’re actually holding the precious metals that they claim to be holding? Along with this are the U.S. Commodity Futures Trading Commission and the Gold Anti-Trust Action Committee that reported that the actual physical gold that exists globally above ground is only 1% of the ‘paper gold’ that is being traded.

The Shiny Stuff

Buying physical gold and silver is undoubtedly more expensive than purchasing ETFs. First you have the dealer’s premium that you will incur when you buy it. You will also have to factor in delivery, storage and even insurance costs. Then when you sell, there is typically a dealer fee as well. Of course, buying and selling gold and silver is also not without risks either.  Gold and silver prices could drop through the floor resulting in a loss on an asset that may not be easy to sell. However, when you look at current market conditions and global economic trends, investing in physical precious metals definitely warrants close consideration. So what form of precious metal do you buy? Bullion and coins each have their own merits and drawbacks and both should be assessed as to how they fit your unique needs and investment strategy.

Coins

Coins can be quite elaborate and attractive and easy to purchase in small amounts. Since they are something with which most of us are familiar, they can also be a little less intimidating than bullion, at least at first. Some coins are rare and collectible which can add even more complexity to the investment. It should be noted that the added value of being a collectible is often in the eye of the beholder. Collectible and antique coins are very specialised markets and should probably be avoided unless you really know what you are doing. Collecting coins can be fun and rewarding but for true investors, most would agree that bullion is a wiser choice.

Bullion

Precious metal investors focus purely on the metal value rather than getting caught up in collectible values. Bullion is easy to sell, hard to fake, and is typically more pure than coinage and the premium is generally lower as well. For the serious investor, gold bars are the simplest and most efficient way to invest in precious metals. Larger bars are generally available for the lowest premiums over their intrinsic metal value. The trade-off is that they are not quite as flexible as smaller bullion portions when it comes time to sell.

Even though most investors would agree that bullion bars make the most sense, like most things, investment strategy is an individual pursuit and only you can determine what’s best for you.

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