One common question many new precious metals investors ask is: “Should I buy bars or coins?”
In this article, we will review the pros and cons of each.
Why buy precious metals?
Most investors will put a percentage of their assets into physical precious metals. Holding precious metals help to protect a person’s wealth during times of economic adversity, because during economic recessions and periods economic and political instability, precious metals prices normally go up. Holding precious metals helps to hedge an investor’s overall portfolio.
Investing in gold and silver coins
One of the most significant factors that distinguishes a coin from a bar or round is that all coins are government minted, and maintain a legal tender value.
What this means is, or example, a British Britannia gold coin will have a legal tender face value of £100, and be backed by the government of Great Britain.
One major benefit to owning coins is that, depending on where an investor is living, there can be major tax benefits. For example, in the United Kingdom, if an investors has purchased Sovereign or Britannia coins, then they do not need to pay capital gains tax on their profits when the coins are sold if they are a UK resident. In some cases, there are also benefits to purchasing coins as the VAT may be payable at a reduced rate, depending on where the investor resides.
However, gold and silver coins generally trade at a higher premium to bars or coins. This means that they are more expensive to purchase initially. If an investors is purchasing gold or silver purely for speculation in the short term, than bars or rounds carrying a lower premium may be a better option.
Investing in gold and silver bars
Unlike coins, bars are not backed by government mints, and do not carry a legal tender value. That being said, there are many government mints, such as the Royal Canadian Mint and the Rand Refinery, which also produce gold and silver bars in addition to their line of coins.
Major refineries worldwide produce most precious metals bars. The most recognised brands include PAMP, Argor Heraeus and Valcambi.
Gold and silver bars generally come in a much larger range of sizes. Gold bars are available from 1 gram to 400-ounce sizes, and silver bars from 10 grams to 1000-ounce.
Bars also tend to trade at a much lower premium to coins, especially in the larger sizes, as the manufacturing and refining costs are lower.
Gold or silver bars or coins can both be good investments, especially when included in a larger, well-diversified portfolio. However, whether an individual should purchase bars or coins depends on the purchasing requirements and preferences of the buyer.
For buyers who are unsure of which way to proceed, SwissBullion.ch recommends buying some of each.