Pros and Cons of Buying Gold Coins as an Investment

buying gold coins for investment

Have you ever seen or touched a gold coin? 👛

Gold coins are beautiful to both see and touch – they’ve been an inherent part of our culture since the Roman times!

If you’re looking to add gold to your portfolio, it’s likely you’ve been reading about gold coins as well as gold bars. Although both are made of gold, gold coins are a different type of investment to bars: premiums (the add on fees) are usually higher, and coins are stored and insured in a different way. For this reason, it’s worth understanding the difference between gold bars and coins before going off and buying a handful of shiny gold coins.

 

What are gold coins?

Gold coins are minted and produced in several corners around the world. In South Africa they’ve got the Krugerrand coins, in the US and Canada they’ve got Maple Leaf coins and Eagles, and in the UK we have the gold sovereign, half sovereign and gold Britannia.

All gold coins are similar and usually only differ in the quality of the gold, ranging from 22 to 24-carat gold. It’s also important to note that gold coins are usually separated into rare collectables and bullion coins. Rare coins (the technical term is numismatic) are valued on their rarity, location of issue and year they were minted in. This means they can sometimes be sold for hundreds of times more than their market value; rare coins are more like art collectables or an old car than gold. Bullion gold coins are sold at market price – the price of gold that day – with a premium added on by the gold dealer.

If you’re buying gold as an investment, you’ll be interested in bullion gold coins rather than rare collectables – you would need to be a numismatist in order to know your way around the best rare gold coins to buy for investment purposes. Having said that, bullion gold coins are quite different from bullion gold bars. Below we’ll be looking at the main pros and cons of investing in gold coins. 👇

Pros

Flexibility: Gold bars are usually sold in units of 10: 10 grams, 100 grams, 1kg and so on (at Minted we sell 10 grams!). Gold coins are sold in much smaller units, with the smallest being 1 ounce. This means that you can hold smaller amounts of gold, which could be helpful when trying to sell or if you want to store gold in several different places.

No capital gains tax: British gold coins fall under the category of a “British legal currency”, which means investors can make unlimited profits from all gold coins. This is not the case for non-British coins (such as the Krugerrands) nor for gold bullion bars. This is highly beneficial to investors who are looking to buy large quantities of gold.

 

Cons

High premiums: the main disadvantage of buying gold coins as an investment in the UK is that the premiums are much higher. This is because gold coins take more resources and time to manufacture than gold bars. It’s much more cost-effective to buy 1 gold bar of 100 grams than 10 bars of 10 grams – the same happens when buying gold coins. Although the difference may not seem like much, it really adds up if you’re saving hundreds of pounds in gold. 💰

More complex: believe it or not, it is actually more complicated to insure and store gold coins. This is because fewer gold dealers offer the option to store and insure gold coins. If you plan on storing your gold coins at home, your home insurance is likely to have a limit that may not reimburse you in case of burglary. Firms that do insure and store gold coins are likely to command a much higher fee than gold bars.

Liquidity: unfortunately, you cannot use gold coins to buy your milk at your local grocery store (although that’s what the Romans did!). Gold coins need to be sold to a gold dealer in order to get your cash. You’ll probably need to sell your gold to the dealer who sold it to you, and it’s likely you’ll get it a lower price because of the high premium you paid. This makes gold coins a little more complex to handle than gold bars, which have much lower premiums.

 

Buying gold bars vs gold coins

Investors who are looking to buy gold to hedge inflation and diversify their assets are likely to get a better deal when buying gold bars rather than gold coins. This is simply because gold bars are cheaper to produce, convenient to store and easier to insure and sell.

The main advantage of gold coins is that investors can start with smaller amounts. However, with gold dealers like Minted, investors can buy gold online with as little as £30 and still have access to gold bars at a fair price.

At Minted, we buy gold bars of 10 grams each. With our monthly savings plan, users can purchase gold with as little as £30. Once you hold 10 grams of gold, you can ask to get your gold bars delivered home and only pay the shipping fee – or we can happily store and insure them for you (the first year is free!). This is different from many other gold dealers that buy gold bars in kilos, and will therefore charge you “fabrication costs” before delivering your gold.

With Minted, the gold you buy is the gold you own. 🎉

Araminta Robertson

Araminta Robertson

Araminta is a financial writer and self-professed Fintech nerd. She likes writing about investing, the future of payments and of course, gold.
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Disclaimer: Gold prices can fluctuate over time and may increase and decrease. The Minted App Ltd does not accept any responsibility for any loss caused by information provided on the website. Minted is not an investment advisor and recommends doing research before making a purchase.