Posted on October 30, 2015
The views and opinions expressed in this article are those of the authors and do not necessarily reflect the policy or position of JM Bullion, Inc.
Should you buy Bullion Bars, Rounds, or Coins?
Let me begin by defining the three choices:
Bullion bars – (n) physical precious metal in a bar form; value derived almost entirely from melt value alone; mostly struck by private mints, although some sovereign mints strike bullion bars (like the Royal Canadian Mint)
Bullion rounds – (n) physical precious metal in a flat, round shape; value derived almost entirely from melt value alone; by definition, a bullion round is struck by private mint
Bullion coins – (n) physical precious metal in coin shape; though value derived almost entirely from melt value alone, coins usually have an enforceable legal tender face value (the South African Krugerrand being one exception); by definition, a bullion coin is struck by a sovereign government mint
So, of the three types of bullion product forms, which is best choice and why?
Most buyers eventually stack a mix of all three forms of bullion. However, the question remains: Which portion of your stack should be constituted of each form?
Some important factors you may want to consider when choosing between bullion coins, rounds, and bars:
Smallest Premiums over Spot
The lowest priced bullion products will typically be the largest privately minted bullion bars (100 oz silver and 1 kilo gold bars).
Government-issued bullion coins will typically carry the highest prices over spot, generally due to the large seigniorage fees governments charge bullion dealers for their products.
In general, the public also trusts a government stamping on a coin over a private mint stamping on a bar or round, hence nearly every sovereign mint gets away with charging a higher premium for their products.
Privacy When Buying & Selling
In the USA, bullion dealers are required to fill out an IRS 1099 form when customers sell certain types of bullion products to them.
The most private forms of bullion to sell are the sovereign silver bullion coins, as well as some of the sovereign gold bullion coins. Transactions in which certain gold bullion coins (Canadian Maple Leaf, South African Krugerrand, and Mexican Libertad) are sold in allotments of 25 or more are not private.
Transactions in which silver bullion bars and rounds are sold to dealers in 1000 ounce or more allotments will not remain private. Transactions in which $1,000 face value bags of pre-1964 USA 90% Silver coins are sold are also not private.
Transactions in which gold bullion bars are sold in kilo (32.15 troy oz) allotments to dealers will not remain private.
For additional rules on IRS 1099 silver and gold product privacy, click here.
Highest Brand Recognition
When you choose your bullion brands or hallmarks, take into account the amount of active market makers for that specific product.
For instance, there are 10’s of 1000’s of coin dealers who buy and sell Gold Eagles and Silver Eagles, whereas, there may not be a lot of active buyers and sellers of unknown, niche, or privately minted bars or rounds.
For instance, if Bob’s Coin Shop designs and produces their own private silver zombie apocalypse round, you might be locking-in a lower melt-only discount bid price offer in your future.
I suggest you stick with the most popular and most well-recognized bullion products.
Trustworthy private bullion hallmarks with large two-way markets include some of the following private mint brands:
Johnson Matthey, Credit Suisse, Valcambi, Ohio Precious Metals (OPM), SilverTowne, Heraeus, NTR, Engelhard, Sunshine Mint, Geiger Mint, A-Mark, PAMP Suisse, Asahi, RMC
Cheapest Customs Duties / Easier International Transport
Generally, the easiest bullion gold products to transport internationally are government-issued 24k gold coins. So if you are thinking about moving your gold bullion abroad, I suggest steering clear of 22k Gold Eagle and Gold Krugerrand Coins.
If you are going to use 24k gold bars, I suggest buying government-issued bars. Even though they do not have legal tender face values, if the border guard sese a government stamping on your gold, he is less likely to give you trouble.
For the lowest taxes when shipping silver internationally, you’ll do best with .999 fine coins, which have legal tender face values.
Lowest Susceptibility to Counterfeit
In the counterfeit markets, there are basically two types of fakes. Bronze-, silver-, and gold-plated counterfeits are most commonplace, while hollowed-out bars have been sold as recent as 2012 in New York’s famous diamond district.
Protecting buyers from purchasing fake products is a growing trend in the bullion industry, as evidenced by the new counterfeit-proof features being designed and featured on many popular bullion products, such as the Mint Mark SI feature by Sunshine Minting or the Geiger Bar UV light-stampings.
The Maple Leaf Coins, produced by the Royal Canadian Mint, also have some great anti-counterfeit features.
Final note on fakes: be wary of silver and gold bullion deals too good to be true (if they are selling below spot, there is surely a scam behind it).
Though it may be a bit more expensive, it may also be smart to use a protective third-party payment systems like PayPal or a credit card when purchasing your precious metals. We also suggest only buying your bullion from trusted dealers who source their metals directly from the mints.
Of course, when taking price per square inch into account, gold stacks in smaller square footage to silver stacks.
Know where you will safely hide your bullion before you buy it.
Bullion bars stack easiest; mint cases of coins may be a close second, dependent upon the type.
Important Factors to Consider
Smallest Premiums over Spot = Bars
Privacy When Buying & Selling = Coins
Highest Brand Recognition = Coins
Cheapest Custom Fees for International Transport = Coins
Lowest Susceptibility of Counterfeit = Dependent on Bullion Brand
Stack-ability = Bars
For myself, I have allocated about 70% of my bullion stack to sovereign coins, about 20% to bullion bars, and the remaining 10% to bullion rounds.
There is no one-size-fits-all solution. Each investor will have to take into account the factors he/she deems most important and take action accordingly.
Good luck and keep stacking.
Research provided by James Anderson on behalf of JMBullion.com