What Is A Better Investment, Gold Coins or Gold Bars?

There’s no denying that investing in gold is a good idea. It’s a great way to diversify your portfolio, and it provides a comfortable safe haven against inflation and economic distress.

However, you may have noticed that there are a few different formats for buying gold online. So, this page is going to help you decide which format is best for you – gold coins or gold bars. 

Purity and Authenticity

Gold Coins

Gold coins usually come with one of two levels of purity – 22-karat and 24-karat. Some coins, like the American Gold Eagle and the South African Krugerrand, are in the former category. Each is minted with 91.67% gold, and both contains some copper.

Other coins, like the American Gold Buffalo and the Canadian Gold Eagle, are minted with as much pure gold as possible. These coins are minted to be 99.9% gold, with only trace amounts of other metals.

One of the biggest advantages of investing in coins is their certified authenticity. Gold coins are the products of sovereign mints within their country. In other words, they are official products of their country’s government, and they bear both the backing and the certification of said government to be minted precisely according to their legal specifications.

Gold Bars

Gold bars – and rounds, for that matter – are almost always minted in 24-karat gold. Because their value is entirely a function of their gold content, mints aim to pack their castings as closely to 100% pure gold as they can.

However, though gold bars can and often do come with certifications from their mints and independent agencies, the reality is that there is a larger window for shenanigans with these pieces than there is for coins. Fraudsters have enough to worry about without drawing the ire of a sovereign government’s enforcement arm.

So, there may be an added hurdle to buying gold bars, in that you may need to take steps to ensure that the bars you’ve purchased contain their gold as advertised. It’s rare, especially if you buy from reputable mints and dealers, but you cannot beat the preset authenticity of coins.

Storage and Security

Gold Coins

Storing your gold coins is both a blessing and a curse. On the one hand, their precise specifications mean that you can count on their standard sizes to store them easily and effectively.

However, gold coins have a significant portion of their value tied up in their condition. Their gold content is often secondary to their condition. So, they place a burden on you, the investor, not only to keep them but to keep them in such a manner that they aren’t damaged.

There’s probably little difference between the security concerns involved with securing gold coins and gold bars of the same size. However, a gold coin may come with an additional security concern due to their popularity advantage to bars. In other words, a gold coin may be a slightly bigger target for thieves than bars, since they are more recognizable for their value.

Gold Bars

Most gold bars are fairly easy to store, as they are not usually much more than a few square inches and a pound or two. A home safe, a safe deposit box, or a private vault are all available options for your bars – to a point.

The only problems that might arise would be if you bought multiple bars of different sizes over the course of your investment journey. The uneven sizing might create challenges for storage that coins never would.

You might also create issues if you decide to buy gold bars that are of significant size. The combination of storage challenges and the fact that you are locking up such a larger portion of your portfolio in a single object might create an untenable amount of anxiety for you.

The good news is that although you wouldn’t want to toss your bars around too often, their value isn’t hurt by small dings or blemishes. So, you may have a more diverse set of security options available to you than you would with coins.

Liquidity of Gold coins vs. bars

Gold Coins

Gold coins are clearly a more liquid investment than gold bars. Every gold coin is a certified government piece with a history and provenance, and their designs are often well-known.

Furthermore, the added value that coins draw from their condition and historic significance means that they are always going to be a more popular vehicle for investors. Even though you’ll likely have to pay a bit more on the front end, you can chalk it up to the cost for the facility of reselling your coins.

Gold Bars

Though gold bars are popular items for buyers and sellers, they simply don’t trade as easily because of the need to weigh them accurately and to confirm their authenticity. Furthermore, gold bars are more likely to be kept for extended periods of time, as their only use is for their gold content.

In other words, investors are probably going to hang onto them and sell them less frequently because they bought them to increase their stack size, not trade them numismatically like coins. You may also have a slightly more difficult time finding a buyer for your bars due to the fact that some investors avoid the storage and security hassles associated with bars.

Premiums on Gold coins vs. bars

Gold Coins

Despite the fact that gold coins are not necessarily as pure as gold bars, they usually command higher prices and premiums than their bulky counterparts. As mentioned, the sum total of a coin’s value goes beyond its mere metal content.

If anything, the value of the metal content – the melt value – is a baseline figure for their worth. The rarity, condition, and popularity of a coin’s design can add up to higher premiums in a way that bars simply cannot.

As mentioned, they are also more liquid, and easier to buy and sell than bars. So, many dealers take advantage of that fact and charge a bit extra for them.

Gold Bars

Gold bars have the same advantage for investors that generic drugs do for pharmacy customers. Because they have no worth beyond their metal value, they are more affordable than coins.

That’s not to say that you won’t find coin deals with lower premiums than a comparable bar. It’s just that bars are going to remain at a lower price more consistently because they are a reflection of the spot price for gold.

You should still shop around when you buy gold bars. If anything, it’s easier to detect the quality of the deal that you’re getting, since there isn’t any numismatic value to worry about.

Do gold bars and coins trend differently in the market?

Not usually. Though coins have additional considerations about their condition, the values of both types of gold move according to the ebbs and flows of the spot price for gold.

Do you pay taxes on gold coins or gold bars?

It depends on the state where you buy them. Many states have exemptions in their sales taxes for precious metals purchases, and states vary on whether they charge their own capital gains taxes when you sell. A few states, like California and Florida, have taxes that apply or don’t apply based upon the size of your transaction.

However, we haven’t detected many differences in taxation that specifically target coins or bars. Illinois temporarily did not allow South African Krugerrands to be exempt from sales tax – presumably as a rebuke to that country’s apartheid – but current Illinois sales tax law bears no such restrictions.

Which is better for diversification, coins or bars?

The primary difference lies in the varying liquidity of the two formats. If maintaining a certain amount of liquidity in your portfolio is critical and must involve your precious metals investment, then coins are the better way to go. However, if you aren’t particularly worried about the speed of resale, then there’s no real difference.

Conclusion

The notion of which type of gold – coins or bars – is the better investment boils down to your own goals and the spot price of gold. If you have an interest in making more frequent trades, or if you want to search for “diamonds in the rough,” so to speak, then coins are probably the way to go.

If you prefer to stack your gold as high as you can, then bars are probably better for you. They don’t require as much maintenance, and they are almost uniformly pure pieces of gold.

Either way, JM Bullion is here to help you achieve your investment goals. Contact us anytime (800-276-6508) if you want to ask more questions or get started with your first purchase.