Gold bullion vs. gold coins

What is gold bullion?

When someone says “gold bullion,” they are usually referring to gold bars or coins. But gold bullion can be purchased in many forms — the most popular being in bars or coins. Here’s the difference between each type of gold bullion:

• Gold bars are usually refined gold produced at a mint or refinery. These bars vary in weight but are typically stamped with information on where it was minted, the purity of the gold and the weight.
• Gold coins are round pieces of gold that are usually from 1/10 ounce up to 1 ounce. They are usually at least 22-karat (around 91% purity).
• Gold ingots are much larger pieces of gold usually formed into a rectangular shape (similar to a brick). Ingots may not be refined and are used more in industrial gold production than in the finance world.
• Gold jewelry can be rings, chains, necklaces or other wearable gold that is typically refined. The purity of the gold is usually stamped somewhere on the jewelry and ranges from 10-karat to 24-karat.

In general, bullion is a term used for precious metals available in bulk. Gold bullion is desired for its physical properties (great conductor of electricity, resistant to corrosion) and its global value for investors.

Gold bullion prices

Gold bullion prices are determined by the weight of the gold and the purity. The gold spot price (per ounce) is determined by market demand, but the value will diminish if you have gold bullion that is not 100% pure. For example, if gold is $3,000 per ounce, but you own 18-karat gold, your gold is about $2,250 per ounce. Here’s a quick cheat sheet for determining the value based on purity.

What are gold coins?

Gold coins are a popular form of investing in gold — and are usually minted by a national government or gold refinery. Gold coins have been around for thousands of years as currency and more recently as an alternative investment.

Gold coins are a type of bullion that is usually at least 22-karat purity and weighed in “troy ounces.” According to the U.S. Mint, because gold coins are a global investment, many governments have their own gold mints in place. You can purchase gold coins directly from the government.

Gold coins and gold bars both meet high purity standards but differ in size. Bars usually start around 1 ounce but go up to 1 kilogram (around 32 ounces) or larger. Gold coins typically start around 1/10 ounce and only go up to 1 ounce in weight.

There are several types of gold coins, with many being issued by national governments worldwide, such as the Canadian Gold Maple Leaf, South African Krugerrand and American Gold Eagle.

These alloyed coins contain 22-karat gold plus a small mixture of silver and other metals (for durability). There are also rare historical gold coins that carry a much higher value. Since these are considered collectibles, they’re typically more expensive than an equally weighted modern coin.

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Investment considerations

There are a few considerations you’ll need to understand before investing in either bullion or coins to ensure you’re choosing the right one:

• Purity: Whether you choose bullion or coins, make sure you’re buying gold at least 22-karat pure (for coins) or 24-karat pure (100% pure gold). The spot price of gold (by weight) is 100% pure gold, so make sure you’re paying accurately for either.
• Weight: As of publishing, gold is currently over $3,000 per ounce. It’s important to review your budget to see what you can afford. In general, gold coins can be found in smaller increments (down to 1/10 ounce) — while gold bullion bars can be found in larger increments (up to 1 kilogram or more).
• Purpose: Choosing between gold bullion bars and gold coins may come down to what you plan to use the gold for. Bullion may make more sense if it’s a long-term investment in a large amount of gold. If you simply want a collectible that has some value, gold coins are easier to transport and store. Plus, there are many collectible options.
• Storage: If you plan on keeping your own gold, make sure you have adequate storage and security. Gold bullion bars require more space and are typically more valuable. Gold coins are easier to manage and store but also easier to lose track of.
• Dealer considerations: Make sure any gold dealer you work with is reputable, licensed and has a track record of transparent pricing.
• Investing strategy: Gold is an alternative asset and can help bolster your investment portfolio diversification. Gold is a historical store of value and helps keep your purchasing power in the face of mounting inflation. But gold is also a volatile investment that can quickly drop in price.
• Tax considerations: The IRS considers gold bullion and gold coins collectibles. This means if you buy physical gold and sell it later for a profit, you’ll pay a much higher tax rate of 28% compared to the long-term capital gains tax of 0% to 20%. In other words, you must be prepared to pay this tax when selling physical gold.

Storage and security

Investing in physical gold gives you direct custody of your gold assets — but you are also responsible for storing and securing your gold. If you lose your gold (or it gets stolen), you’re out of luck in most cases. For storage, both gold bullion and coins should be secured in a fireproof safe at a minimum. You may consider storing it in a bank vault or lockbox.

Unfortunately, most home insurance policies have low limits on the amount you can insure for your precious metals. This means you may not be reimbursed for the total loss of your gold bullion or coins if you store them at home and they are stolen or lost.

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