Should I Invest in Gold Bars or Gold Coins?
Whether you’re new to bullion investment or not, deciding whether to invest in bullion bars or bullion coins should take 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. However, as when making any other investment 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.
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 gold bars , or silver bars 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 is a fairly substantial saving of approximately £350. 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 savings would result in a lack of flexibility.
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, for example 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 Krugerrand 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 Britannia coin and the silver Philharmonic coin which tends to be the very cheapest coin to buy. For ultimate flexibility, buying gold 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. A 100g gold bar costing around £2,600 or a 1 ounce gold bar costing around £800 are popular starting points for some investors. Popular gold coins include the famous South African Krugerrand coins costing around £800, which tend to attract the very lowest premiums making them perfect for smaller and first time investors. Gold British coins, in particular gold sovereigns and half sovereigns, offer a much cheaper way to buy gold in smaller units costing around £200 and £100 respectively.
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 Maples and the Philharmonic 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 bullion, the decision is less complicated as it’s important to get the very best value for your money to maximum 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 the 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, due to its value being substantially lower than that of gold, is much more difficult to store than gold.
Read more about storing gold bullion
Here at BullionByPost, we encourage our customers to opt for the bullion products which offer the very best value for money for 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, Capital Gains Tax.
Read more about paying CGT on gold
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 e-mail us on:
and we will get back to you as soon as possible.
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