Investing in Gold Coins

Investment in Gold Bullion Coins

Gold Coins: Investment Basics – What, How and Where

Why Invest in Gold Bullion Coins or Rounds?

If you’ve made the decision to invest in gold, why would you choose gold bullion coins or rounds over bullion bars? After all, bars will typically have a slightly lower premium than coins on a weight for weight basis.

Their popularity is most likely down to the fact that we’re accustomed to coins – we use non-bullion coins in every day life so it’s a concept we’re all simply used to. Plus there’s the collector in us. Who hasn’t or doesn’t know at least one person who’s collected coins, whether unusual, old or foreign – it’s a common hobby here in America.

And unusually America still has coins containing precious metals in daily circulation – quarters, dimes, half dollars, and dollars made in and before 1964 are 90% pure silver silver and half dollars dated from 1965-69 are 40% silver. While they’re becoming increasingly rare due to the hobby of “coin roll hunting” we’ve all handled them.

What’s a Bullion Coin – What’s a Round?

Gold bullion coins and rounds are a precious metals coin made specifically for investment – and because they are often tax-advantaged or tax exempt, they are legally required to be sold near to gold’s market (or spot) price.

To count as bullion their value should be based on the weight of gold they contain and not on any other factor such as age, beauty or rarity. These types of coins are collectables – or numismatics – and don’t carry any tax advantages.

Bullion coins are truly universal and can be bought and sold at close to spot anywhere in the world. They are compact, easy to carry and store, easy to hide if required and in many cases are even legal tender with additional tax benefits in some jurisdictions.

Gold Bullion coins are made in a two step process where carefully measured blanks are first cut from a large sheet of gold. These blanks are then fed into a press machine, where a “strike” forces the blank between two negatively engraved formers (coin die) which imprint the blank with a pattern, edging, and a display of fineness and other information. Coins don’t typically carry serial numbers as bars do.

Coins Offer a Wide Selection of Choice

There is a staggering choice available in bullion coins and rounds, with some being truly beautiful examples featuring ornate designs with UK Britannias and Austrian Philharmonics being two notable examples – verging on collector quality.

Other bullion coins like US Gold Eagles or American Buffaloes from the United States Mint are of course extremely popular in the US ticking the patriotic buy-America box in a way that little else in the market can

Coins from prestigious mints and legal tender government mint coins will normally carry a higher premium in comparison to generic rounds from workaday refiners.

Other Considerations

Although the purpose of investing is usually buying as low as possible, premium mints and legal tender coins are usually more expensive than generic rounds.

One advantage of this, is it is usually easier to resell a well-known mint’s coin in any market compared to generic rounds – or at least they will command a higher price due to their desirability, often higher than spot.

Dealers will rarely offer anything at spot or higher for generic rounds.

Secondary Market Coins

Secondary market coins (pre-owned coins) are as you would expect typically closer to spot than new.

This can offer investors some significant savings especially when buying at quantity. Although scratches and scuffs are inevitable these can run from almost none to substantial wear – with a damaged coin only ever selling at it’s basic scrap price.

Even when a damaged coin is from a premium mint, it will most likely only ever resell below spot.

Gold “Stackers”

Home-storage stackers tend to buy whatever coins or rounds are available at the lowest price on the day and can quickly develop a wide collection of varied designs, nationalities and sizes.

This can make the investment process more fun and almost addictive, verging into a collector’s territory.

For a home stacker it can be very easy to flip from being an investor into a hobbyist then into a numismatist collector – which is a danger. Numismatics is a highly specialist field where it’s possible to lose a lot of money if you lack knowledge, due to the vast premiums involved.

This is why we always recommend sticking hard and fast to bullion.

Buying gold bullion coins is gold investing at it’s most enjoyable – a simple and relatively affordable process where you can own a safe and solid investment at that’s easy to liquidate when the time comes.

Learn more about the place bullion coins have in any diversified portfolio – inside Goldco’s free Gold Investor Guide
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Is Investing in Gold Coins a Good Idea?

As we’ve established, gold bullion coins are easy to buy, easy to sell, universally popular and they’re an excellent combination of size and premium – as well as being more immediately relatable to most than bullion bars.

In our book that makes investing in gold coins a very good idea. And besides who doesn’t love the idea of a chest full of gold coins!

In some jurisdictions specific legal tender gold coins are exempt from Capital Gains Tax. This means when gold rises significantly in value and you come to resell you will avoid a tax bill. In a state or country with zero sales tax or VAT on investment gold, your gold bullion coins could and up being fully tax free at both the buying and selling end of any deal.

Although capital gains tax exempt coins can save you significant sums when you make a large gain at liquidation, their initial purchase price can be as much as 10-15% higher than an equivalent generic round.

You need to weigh up savings at purchase versus anticipated savings at sale, but given gold has gained an average of 9% per year over the past 45 years, it shouldn’t take long for the tax benefit to be felt.

Are Gold Coins a Safe Investment?

Gold is regarded as a safe investment and gold coins are one of the most plentiful and universally accepted form of gold investment – therefore gold coins are definitely a safe investment.

But not all gold coins are as they seem.

We’re seeing a tidal wave of fake gold coins coming onto the market, most of which are very obvious Chinese copies of popular coins like Canadian Maples, Gold Eagles and American Buffaloes.

Other common fakes are weird foreign coins, antiquities and the ubiquitous Nazi gold. These coins are usually sold on the large Chinese exporter sites as novelty gifts but when they get into America some unscrupulous sellers can find ways to fool newcomers looking for a bargain.

There are also more sophisticated copies designed to defraud even experienced investors where a solid gold coating covers a tungsten core (tungsten has a very similar density to gold so weights and coin dimensions will seem almost correct). Only an expert eye can tell these are copies spotting the often slight giveaways where positioning or fonts don’t quite tally. Acid and magnet tests don’t work with these but dealers with XRF (x-ray fluorescence) machines can literally see through them for the fakes that they are.

Finally pure gold coins from little-known manufacturers usually in the Middle East are being minted to resemble known coins such as UK sovereigns and South African Krugerrands. These are often crude copies intended for the local market but some do find their ways into the West.

What to look out for

Be wary of any deal that seem too good to be true. Gold coins seldom sell retail at spot and never below spot – so unless a big name dealer is having a loss-leading offer to bring in new customers, beware.

Because gold is always in such demand, even a seller in a hurry will be able to get close to spot at any number of coin or pawn shops, so there will be no need to sell at a big discount.

If a gold coin is available on sale to the public at more than 5% below gold’s market price then it’s a fake, with no exceptions.

To be absolutely sure that your gold coins are a good investment, you should only ever buy from a reputable source – either a major gold dealer, direct from the mint or through a professional gold investment company.

Bargains in precious metals are almost never what they seem.

Discover the secrets unscrupulous coin and bullion dealers use to scam, rob and con you – inside Goldco’s free Gold Investor Guide
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How Much do Gold Coins Cost?

Gold coins are a special investment commodity and in order to be treated in a tax advantaged way in many jurisdictions they must be priced close to the spot price of gold.

In reality legitimate gold coins will always sell for more than spot due to the cost of mining, refining, minting, packaging, storage, insurance and transportation plus a small profit for the wholesaler.

Once at the retailer or bullion broker there needs to be an allowance made for business and marketing expenses and yet another small profit.

The biggest price differential will be based on the coin’s size.

The built in costs and expenses per coin are more or less the same for standard 1oz coins as they are for fractionals (½ ounce, ¼ ounce, 1/10th ounce etc) and so when investing in gold bullion coins you will typically find the premiums on fractionals are much higher in relation to their unit price than on standard coins.

Further price differences can be found between gold coins and rounds from different mints, whether governmental mints of private mints with some of the most respected mints carrying a higher premium on a like for like basis than those from smaller, less well known mints or on generic rounds.

A 1oz Britannia from the UK’s Royal Mint is going to cost more than a 1oz round from APMEX, or a lookalike gold sovereign from Kaloti in Dubai.

Certain gold coins are also classed as legal tender and as such they will be free from Capital Gains Tax in certain jurisdictions. These tend to carry a higher premium at purchase but this should be more than made up for at sale.

How does this translate into the real world?

The overall premiums on gold bullion coins and rounds can range from as little as 2% over spot for generic rounds to 40% on big-name mint fractionals.

On the subject of premium brand and generic rounds – well respected and premium mint coins are typically easier to resell and can command a higher price than generic or unknown brand rounds in the secondary market due to trust and the higher demand of known coins.

Dealer premiums can often be reduced by ordering multiples of an item allowing the dealer to share some of their wholesale discount with you due to economies of scale. The more you buy, the greater your’ discount on the dealer’s premium.

The following chart shows price premiums per coin size and across different mints from generic rounds to the most desirable coins – all premiums based on average price at 5 major e-commerce bullion dealers.

Average Premium By Coin Size for Branded, Generic and Bulk

Key Takeaways:

• Highest premium is 40% for a premium-branded 1/10oz coin, lowest premium is 2.9% for bulk-bought generic 1oz round.
• The best buys for any coin investors are 1oz generic rounds or 1oz Krugerrands – bought in bulk.
• Anything smaller than 1/4oz – epsecially those from big-name mints – should be classified as a novelty or collectable as premiums are too high to make these coins a solid investment.

Buying gold coins and round in different sizes and from different mints can carry a significant range of premiums.

Get the best gold coins for the lowest premiums with little-known buyer secrets – inside Goldco’s free Gold Investor Guide
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Where Can I Start Investing in Gold Coins?

Due to the popularity of coin collecting in the US, coupled with the dominant power of the United States Mint, it’s possible to pick up your first gold bullion coin at almost any pawn shop, local coin shop and even some jewelers – meaning almost every small town is going to have at least one local source for gold coins.

But in this internet-connected world there are also literally 1000’s of coin stores and bullion dealers with an online presence and e-commerce facility.

And if that doesn’t work for you there’s always Amazon!

To get the best prices most Americans will either:

1. Take a DIY route and go with an e-commerce store, where prices are lowest but advice is thin on the ground as these are typically a self-service operation, or
2. Work with a professional gold investment company, where prices may be fractionally higher but expert service and advice tailored to your needs are included with every transaction. This is our preferred option, especially for new investors.

Before making a large investment with an e-commerce company it helps if you make one or two smaller transactions first to see how service quality and delivery compare with expectations.

This is because there have been several budget-end bullion dealers who have gone bankrupt or been closed down due to fraud in the past few years, so watch out for unnecessary ordering problems, shipping delays or other red flags that suggest cash flow is tight. If all is well and once you’re certain the company is right for you – then you can make larger purchases.

It’s a little different with the big gold investment companies as these will typically have minimum order values of $10-25,000 thanks to the very tight margins they work with.

By the time you make a purchase you’ll be on very good terms with at least 2 of their specialist advisors, depending on your needs and will no doubt have a very good feeling as to whether they’re a company you want to do business with.

The slightly higher fees they charge for such service-intensive is often more than made up for by the wholesale discounts they can obtain by their close direct relationships with all major mints and refineries.

Ultimately the choice is down to you – bare bones service on a e-commerce platform where you can buy individual coins one at a time, or a full advisory and custom portfolio building service at near wholesale pricing.

Learn how to find the bullion dealer who’s perfect for your needs and will never let you down – in Goldco’s free Gold Investor Guide
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What are Popular Gold Coins for Investment?

This varies considerably depending on the local market. In the US, Gold Eagles and Buffaloes are always going to sell well due to trust, ease of purchase and a certain degree of patriotism. Gold Maples from Canada are also extremely popular.

American based private mints do well thanks to their excellent value gold rounds with names like Lady Liberty, Prospectors as well as generic mint branded rounds from the likes of APMEX and Sunshine Minting.

American Investors also like to buy UK coins such as Britannias and Sovereigns, Australian Kangaroos, and Austrian Philharmonics although none of these come close to the popularity of Eagles, Buffaloes, Maples and US minted rounds.

What are Popular Gold Coin and Round Mints?

Specific gold coin popularity varies by country although most investors in the West will be aware of the major mints operating across the US, Canada and Europe. Some European mints tend to carry a higher premium in America due to shipping costs and their comparative rarity.

APMEX

APMEX, Inc., are based in Oklahoma City, Oklahoma, and are the world’s largest online retailer of precious metals, having sold over $10 billion in precious metals since being founded in 1999. As well as being a bullion dealer selling a wide range of coins from around the world, APMEX produce their own rounds in 1/2oz and 1oz weights at 0.9999 fineness (99.99% pure gold).

Austrian Mint

Founded in 1194 the Austrian Mint is located in Vienna and is responsible for minting Austria’s coins. Since 1989 it has been a public limited company and a subsidiary of Austria’s central bank Oesterreichische Nationalbank. Although it does produce bars, the mint is best known for it’s coins, the most popular being Vienna Philharmonics in 1oz, 1/2oz, 1/4oz, 1/10oz and 1/25oz sizes, all minted in 0.9999 fine gold. Other gold coins include Ducats, Crowns and Gulden (.986 fineness) although these are uncommon in US.

Engelhard – now closed

Although New Jersey based Engelhard were acquired by BASF in 2006, their gold bullion rounds were highly popular with investors across America with 1oz American Gold Prospectors being the most commonly traded. Many are now carrying a higher collector’s premium due to their increasing rarity.

Heraeus

The Heraeus precious metals refinery has been based in Germany for over 160 years and Nanjing, China since 2018. Heraeus mostly produces investment bullion bars, but 1oz and 50g rounds are available in 0.9999 fine gold, some of which come featuring a a rainbow colored security hologram, dubbed a Kinegram®

Perth Mint

Established in 1899, The Perth Mint is Australia’s official bullion mint and wholly owned by the Government of Western Australia. Perth Mint branded bullion coins and rounds are available in a wide range of sizes and designs with Lunars, Kangaroos and Koalas being popular investments with most available in 1/20oz, 1/10oz, 1/4oz, 1/2oz, 1oz, 2oz, 10oz and 1kg sizes – minted in .9999 fine gold.

Rand Refinery

South Africa’s Rand Refinery is the largest single-site precious metals refining complex in the world. Established in 1920 it has refined almost 50,000 tonnes of gold. Best known for its Kruggerrand coins, Rand also produces large cast bars for central banks, bullion banks, institutional and larger scale investors. Kruggerrands are most common in 1oz sizes but are also available in fractionals 1/2oz, 1/4oz and 1/10oz – at .917 fineness.

Royal Canadian Mint

Established 1908, the Royal Canadian Mint is a Crown corporation, operating under the Royal Canadian Mint Act, producing all of Canada’s circulation coins, and a wide range of investor bullion. RCM’s principal gold bullion coin The Gold Maple is minted in .9999 fine gold and comes in 1oz plus 1/2oz, 1/4oz, 1/10oz and 1g weight fractionals.

Royal Mint

Established in 886 The Royal Mint is the oldest refinery still in existence and is a government-owned mint producing coins for the United Kingdom. The Royal Mint’s principal gold bullion coins are Britannias (.9999 fine gold, 1oz, 1/2oz, 1/4oz and 1/10oz sizes) and Sovereigns (.9167 gold – full sovereign, half sovereign, quarter sovereign plus £2 and £5 denominations) although they do make a wide range of other higher premium collectables.

Scottsdale Mint

Arizona based Scottsdale Mint is a very popular private mint, best known for their silver but increasingly producing a wide of gold coins and rounds mostly in 1oz sizes with some 1/5oz fractionals – all from .9999 fine gold

United States Mint

Founded in 1792, The United States Mint is a unit of the Department of the Treasury responsible for producing coinage for the United States, as well as controlling the movement of bullion. US Mint gold bullion coins are the most popular gold coin investments in the USA today and consist of American Gold Eagles (1oz, 1/2oz, 1/4oz and 1/10oz – in .9167 fine gold) and American Buffaloes available in the one-ounce size and .9999 fineness.

Valcambi

Established in 1961 Valcambi is a leading Swiss metals refinery, 95% owned by REL Singapore. and 5% by Rajesh Exports Limited India. Valcambi produces a wide range of gold bullion rounds minted in 100g, 1oz, 10g 5g 2.5g and 1g sizes. All Valcambi rounds are .9999 fine.

Scotiabank

Scotiabank describes itself as Canada’s Precious Metals Bank and it is one of the world’s largest precious metals dealers, with a 340 year history as a market maker in precious metals. ScotiaMocatta the precious metals banking division of the bank was closed in January 2019 due to knock on effects of the 2016 dirty gold scandal which took out several global refineries, but Scotiabank branded bullion rounds remain popular investments available in 100g, 1oz, 10g and 5g sizes. All Scotiabank rounds are manufactured by Valcambi from .9999 fine gold.

Become an instant expert on the world’s most popular bullion coins – with Goldco’s free Gold Investor Guide
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Is There Tax on Gold coins or rounds?

The tax investors pay on gold rounds depends on which state the round is bought and stored in as each of the 50 states can set it’s own level of sales tax.

While some states are zero-rated on investment grade bullion rounds, other states can charge up to 10%. This basic state-wide tax is in addition to any local county or city sales tax.

Investment bullion rounds bought outside of state can be subject to a “use tax” at the same rate as the sales tax.

This does not apply to US Legal Tender bullion coins – which in most cases are exempt from sales tax (unless sold as collectibles).

This means a 1oz American Gold Eagle is going to be sales tax exempt even in states with a sales tax on gold – whilst a 1oz gold bar will be taxable.

Foreign Legal Tender bullion coins are only exempt from sales tax if sold at face value – something that would not be likely with as an example a UK £2 sovereign!

Capital Gains Tax on Gold Bullion Coins

Although there are legal moves being made to clarify that the sale or exchange of precious metals bullion and coins are not to be included in capital gains, losses, or any other type of federal income calculation – the present situation is that the IRS considers bullion to be both a Capital Asset and a Collectible, so Capital Gains Tax (CGT) will be payable on any gains made when bullion is sold, and this is set at a maximum of 28% (collectibles).

In reality the actual rate paid will vary depending on a number of factors including the seller’s income and the length of time the assets have been held.

To discuss specific CGT liabilities you should speak with a licensed accountant or tax specialist.

Can Gold Coins be held in an IRA?

The IRS now allows specific grades of investment bullion coins to be held in an IRA allowing for gold to be bought in a highly tax-advantaged way.

As can be expected from the IRS there are strict rules governing what coins can be bought and where they should be stored which we cover in detail in our Gold IRA section.

Gold coins for IRA use must meet minimum fineness requirements and be manufactured by a NYMEX or COMEX-approved refiner/assayer and should be ISO9001 Certified. The minimum purity should be .995 fine (99.5% pure gold) or greater with an exception being given to American Gold Eagles.

For more details on Gold IRAs including specific advantages, rules and regulations click here.

Want more? Get our free Gold Investment Guide – a unique physical investor kit delivered direct to your door.

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Also, here are reviews of local coin companies you can visit in retail locations or find in your home state:

About Tim Schmidt

 
Tim Schmidt is an Entrepreneur who has covered retirement investing since 2012. He's also a published author, and his views on investing have been featured in USA Today, Tech Times, The Huffington Post, Nasdaq, and many more.