Investing in Gold Coins Part 1 - Bullion Coins March 29 2015

Gold coins have been a store of value for over 2000 years, from the first natural electrum coins struck in ancient Lydia to modern American gold eagles.  Gold serves as a valuable hedge against uncertain financial markets, and coins are the most convenient way to hold physical gold.  Coins have more liquidity than gold bullion bars, and there's no excitement to investing in gold via a precious metals ETF - holding gold in your hand is half the fun!

Anyone interested in gold coin investment has an unlimited range of options.  But for the purposes of this article, I'll divide gold coins into just two categories - bullion coins and numismatic coins.  Bullion coins are coins that derive most, if not all, of their value from their gold content.  These include modern coins produced by the various national mints, like Gold Eagles, Krugerrands, and Maple Leafs, as well as a few 20th century circulating coins that were produced in large enough quantities to be common.  Numismatic coins (which I will discuss in a later article) are coins with collectible value beyond their bullion value - foreign and U.S. gold coins that were originally produced for general circulation.  

For investors looking for affordable gold coins, with the smallest premium over spot, bullion coins are the best bet. Many national mints produce their own series of gold bullion coins.  The first modern gold bullion coins, krugerrands, were produced by South Africa in 1967 - these coins dominated the market up through the 1980s. Krugerrands are struck in an alloy of .9167 fine gold and feature Paul Kruger, a South African president, on one side and a springbok antelope on the other.  Each krugerrand contains one troy ounce of gold.  Canada was next to join the party, issuing the gold Maple Leaf 1oz coin in 1979.  Maple Leafs have a .9999 pure alloy, making them the purest gold bullion coin worldwide.  The U.S. responded with their own coin in 1986, the American Eagle.  Featuring the iconic Lady Liberty design by Augustus Saint-Gaudens (originally used on circulating gold double eagle coins), the Gold American Eagle is also struck in an alloy of .9167 fine gold.  American Eagles quickly swept the market, and today remain the "gold standard" of international bullion coins.  Most recently, the U.S. Mint released a .9999 fine gold bullion coin of its own, the American Gold Buffalo.  

The chart below provides a quick breakdown of the top gold bullion coins on the market, including the alloy and the denominations (or sizes) in which each coin is produced.  


Top Gold Bullion Coins

   Picture Coin Name Nation Alloy Denominations
    American Gold Eagle United States .9167 1oz, 1/2oz, 1/4oz, 1/10oz
   Gold Maple Leaf Canada .9999

1oz, 1/2oz, 1/4oz, 1/10oz,

1/20oz, 1/25oz, 1g

    Krugerrand South Africa .9167 1oz, 1/2oz, 1/4oz, 1/10oz
     Chinese Gold Panda China .9990 1oz, 1/2oz, 1/4oz, 1/10oz, 1/20oz
   Gold Britannia United Kingdom .9170 5oz, 1oz, 1/2oz, 1/4oz, 1/10oz, 1/20oz
     Vienna Gold Philharmonic Austria .9999 1oz, 1/2oz, 1/4oz, 1/10oz, 1/25oz
     American Gold Buffalo United States .9999 1oz


Any one of these coins represents a viable investment opportunity, but with their ample supply and demand, American Gold Eagles have the best liquidity of the bunch.  Gold Eagles can be bought and sold in virtually every coin store in the country, whereas the others may be slightly more difficult to find.  

Of all the denominations and sizes of coins, 1 ounce gold coins are typically the best value.  The percentage premium that buyers should expect to pay on 1oz coins is much less than that charged on the lower-value coins. For example, a typical dealer might offer 1oz American Eagles at a 6% premium over spot price, and 1/10th oz Eagles at 15-20% over spot.  The lower the value of the coin, the more of a premium dealers will have to charge to make selling it worth their while.  


Where to buy gold coins

As mentioned above, any self-respecting coin store will buy and sell gold bullion coins, with buy/sell (bid/ask) prices linked to the current bullion value.  It may be worth calling ahead to each of the coin shops in your area to compare prices before making the trip.  Foreign gold bullion coins will typically have a larger bid/ask spread due to their decreased liquidity - that means that coin shop customers can expect to pay a higher premium over spot when buying, and receive a lower value below spot when selling back to the shop.  Because of the high demand for them, American Gold Eagles usually have the lowest bid/ask spread, making them the most economical option.  

People comfortable with buying gold coins online will find even better prices.  Many large national coin dealers offer low premiums on AGEs and foreign bullion.  APMEX and JM Bullion are two of the top online bullion dealers, both with accreditation and an A+ rating from the Better Business Bureau.  There are many other websites that sell gold coins, but not all are as reputable - do your due diligence and look up a company's BBB rating and/or customer reviews before committing to a big purchase. eBay is another great venue for buying coins close to spot price - check out our helpful guide on how to buy coins safely on eBay.