Should I invest in gold bars or gold coins?
One of the most common questions we get asked is "should I buy gold bars or gold coins"? Whether you’re new to bullion investment or not, deciding which to invest in - bullion bars or bullion coins - should be given some consideration. Before making this decision, it would be advisable that you conduct your research as there is no definitive right or wrong answer, it will vary depending on the needs and circumstances of the individual investor.
Trends can also change over time depending on market conditions. There are a several factors to consider including the value of your investment and the product premiums, how long you plan on keeping it, where to store it, capital gains tax (CGT) and how you plan on realising the value of your investment.
Gold Bars vs Coins Premiums
The premium is the additional cost charged above the gold spot price attributed to manufacturing
costs, handling, packaging, insurance and delivery. Reputable bullion dealers charge investors
very small percentage premiums in a bid to be competitive, however they are unavoidable as even
bullion dealers have to buy gold above the spot price.
The most effective way to keep premiums at an absolute minimum is to buy
if you are looking to invest in silver bullion. Gold bars attract a smaller premium as opposed to bullion
coins due to their larger unit size resulting in lower manufacturing costs. For example, it is more cost
effective to buy a 1 kilo gold bar than to buy ten 100g gold bars for the very same reason. Despite them
both containing exactly the same amount of gold, you would expect to make a saving of around 1%
which can be a substantial saving at large values. If you plan on keeping your gold for a long time
and have no intention of wanting or needing to sell part of your investment, then larger gold bars are
ideal for you. However, be mindful that this relatively small saving would result in a lack of flexibility.
The premium is one of the biggest factors to consider when choosing between gold bars or coins. At smaller size investments however, particularly 1oz and under, premiums largely equal out, and can even be cheaper on coins as they are produced in far higher numbers than similar sized bars. For larger sized bars however, 100 grams and larger, premiums will usually be lower per gram than any coin.
Gold Bars vs Gold Coins Tax
The second key factor in the decision of whether to buy gold bars or coins is the tax status. All investment gold is VAT-free in the UK, so you can rest assured that any gold purchase will be VAT-free at the time of sale, making your money go further.
When selling however,
Capital Gains Tax
is an important consideration. UK coins - those produced by The Royal Mint - will have a face value and be classed officially as legal tender in the UK. This means they enjoy the unique benefit of being exempt from CGT. Buying multiple gold coins may prove slightly more expensive per gram than a larger bar, but could result in greater returns upon sale given the lack of CGT to pay. Buying CGT-free gold coins is therefore the more popular choice for many investors.
Most investors buy gold bullion with the intention of preserving wealth and making a return on
their investment. Where the larger unit size gold bars or silver bars offer the best value when
buying, they do not necessarily represent the best value when it comes to selling your gold or
silver at a later date. Smaller unit gold bars such as the 1oz, 50g and 100g bars, and in particular
gold coins and silver coins offer greater flexibility at resale. There are many reasons where this
flexibility would come in use, releasing part of your investment for quick access to cash, or perhaps
part-selling which is often an effective way of getting a maximum return on investment.
Over time, individuals often want to change the balance of their portfolios, for example an investor may
have 20% of their liquid wealth held in a 1 kilo gold bar, but want to release half of this to reinvest in
stocks. At this point, the investor would either have to sell their entire gold bar or leave it and miss out
on the other potentially lucrative investment opportunities. However, if they had originally invested in
ten 100g gold bars, they could have easily sold half the bars to gain instant access to half of the money.
Better still, bullion coins represent even greater flexibility and are a very popular option for new and
experienced investors alike who are mindful of this and anticipate selling part of their bullion in the near
or distance future. Gold coins are available in a variety of sizes such as 1oz, 1/2oz, 1/4oz and 1/10oz
making them highly versatile, easy to store and ideal for trading if the banking system did ever collapse.
Popular gold coins include the famous South African
coins which tend to attract the lowest
premiums making them perfect for smaller and first time investors. Alternatively, British bullion coins like
the gold Sovereign, Half Sovereign and gold Britannia are perfect for coin investors who hold a large
amount of money in gold bullion due to their CGT-free status.
For the ultimate flexibility, perhaps consider silver coins which are substantially lower in value than gold coins and come in a 1oz size. Popular silver coins include silver Maples, the silver Philharmonic coin, and the silver Britannia coin, which tends to be the very cheapest coin to buy. For ultimate flexibility, buying silver coins for investment is recommended, despite the slightly higher premium.
Small investors and first-time investors
It is advised that small and first time investors look into both coins and bars, despite coins being the
obvious choice for lower value investments. Depending on market conditions and stock, a dealer may be
offering a bar at a reduced premium. Some bar manufacturers such as PAMP, also offer their impressive
designs that can appeal to some collectors. We would generally recommend finding the items with the
lowest premiums within your budget, to help maximise your returns when you sell.
For silver investment, there are a whole host of 1oz silver coins available which are an ideal starter point.
It is advisable to look for the coin with the very lowest unit cost which tends to be the silver Britannia coins.
We advise this as when selling your bullion, you only get the intrinsic value of the metal, so the cheaper you
bought them for originally, the higher return on investment you make.
With individuals looking to invest large amounts of money in gold investment bullion, the decision is
less complicated as it’s important to get the very best value for your money to maximise return on
investment. It would be best to buy the largest unit sizes you can so 500g gold bars, 1 kilo gold
bars and 5 kilo silver bars will represent the best value. Also, buying gold in volume can also
offer further savings as the unit price is reduced when you buy more than one due to the lower
costs incurred by the bullion dealer.
It is also advised wealthy investors hold a selection of gold coins in addition to bars, with particular
reference to British coins. Gold Britannia coins and in particular Sovereigns do not attract any Capital
Gains Tax (CGT) due to their status as British Legal Tender.
Buying Sovereigns will demand a slightly higher premium than buying larger gold bars, however for wealthy individuals looking to realise large profits from their investment, Sovereigns represent the best value. For the very best value Sovereigns, it is advised investors buy our cheaper
mixed year gold Sovereigns
as opposed to specific year Sovereigns which command a slight premium.
Bullion coins, with particular reference to gold bullion coins, have in the past demanded additional premiums depending on market factors at the time. A fine example of this was in the 1960’s there was a premium of up to 40% associated with buying and selling gold Sovereigns. This is another factor worth taking into consideration when buying gold, where coins could potentially provide you with greater return on investment, bullion bars will only ever be worth the intrinsic value of the metal content.
Storing bullion bars and coins
Whether you are investing in one 1 kilo gold bar or approximately thirty 1oz gold coins, the gold size and mass would be near identical, however one would be easier and more convenient to store than the other. The 1 kilo gold bar is a single unit therefore you would be confined to storing it in a single location or deposit box or part of your home. However, with the thirty 1oz coins you have the ability to split your investment, for example ten in a deposit box within your bank, ten in a family members safe and ten hidden around your home, therefore physically having them to hand.
If you have a small investment, then you may not have access to a deposit box, therefore simply storing your bullion creatively within your home may be the best option. However, it is worth noting silver bullion is much more difficult to store than gold, due to its lower density and lower value meaning you would need much more precious metal for the same equivalent amount of gold.
Read more about storing gold bullion.
At BullionByPost we encourage our customers to opt for the bullion products which offer the very best value for money as your investment, therefore obtaining the highest intrinsic value of gold and silver for your budget. The best way to buy gold ultimately depends on your individual situation. This is all about personal preference and circumstances, taking into account all factors mentioned above with particular reference to premiums, flexibility and - for individuals investing large amounts of money - accounting for Capital Gains Tax.
Related Links: If you have any questions about gold bullion investment, please feel free to contact our knowledgeable and friendly team on 0121 634 8060 who will be happy to talk your through any queries you may have. Alternatively, you can email us at firstname.lastname@example.org and we will get back to you as soon as possible.
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