Pros and Cons of Buying Gold Coins or Bullion
Buy Gold Coins or Buy Gold Bullion the Key Factors of Gold Ownership
Feb 18, 2009
Buying gold physically will be coins, gold bars or gold bullion and is a direct alternative to buying gold via a paper-based investment vehicle like gold shares or gold ETFs. Buying physical gold is a personal choice that involves a different set of considerations to buying gold derivatives. The key factors of gold ownership include cost, storage, security and insurance.
Buying Gold Coins, Bars or Bullion
How to buy gold coins or gold bars and bullion covers the basic gold buying process and in summary:
- Buy Gold Coins and Gold Bars through coin/bullion dealers or a mint, often with a price premium varying between 3% - 15% over the spot price of gold. If buying coins, then ideally buy the cheapest of the common gold coins such as the South African Krugerrand
- Buy Gold Bars and Bullion – this gold can be bought from a member of the LBMA as well as various storage services like GoldMoney, BullionVault and Perth Mint Depository
Pros and Cons of Buying Gold Coins or Small Gold Bars
- Gold is widely available through dealers and mints
- Gold can be privately held and stored locally
- Satisfaction of owning gold that can be seen and handled personally
- Gold coins tend to be easily recognisable and popular gold coins are easily bought and sold
- Gold content of coin should be known, unless it has been tampered with
- Gold bars will need to be tested for gold content if held privately to ensure it has stated gold content
- Privately held gold may need to be insured against loss or theft, which may require secure storage facilities or other insurance stipulations
- It is possible to inadvertently buy fake gold from less reputable suppliers or gold has less gold content than expected
- Usually a small premium is paid for gold and so it is more expensive to buy initially
- Selling gold may incur some return cost that the dealer covers through their dealing price spread so again is more expensive
Pros and Cons of Buying Gold and Holding it at Storage Service
- Gold held within a storage service is safe and secure and typically insured
- Gold content is known because gold will typically stay within storage service and is not privately held
- Gold buying and selling costs are typically less than for gold coins and prices quoted are closer to the actual gold price
- Storage service will wrap up costs into a regular storage charge that is applied for as long as the gold is stored there. These costs could become substantial
Pros and Cons of Buying Gold Coins or BullionKey factors of gold ownership include:
- Buying and selling costs
- Storage, security and insurance costs
- Personal satisfaction from type of gold ownership
For those who want the satisfaction of physical gold ownership:
- For modest amounts of gold then gold coins are simple and straightforward and if held for many years the additional buying and selling costs will be relatively insignificant
- For larger amounts of gold then using storage services may be more cost effective, especially as it relates to storage and security
In the final analysis there are many different ways to purchase gold and buying it physically involves some additional factors for consideration. These should be considered carefully before making a final decision.
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