In the past 12 years, the price of gold has increased substantially. While it has retraced somewhat since hitting it's recent high in August 2011, there are many investors out there that taking their first look at buying physical gold bullion. If you're in the market for gold coins, here are some options you should consider.
Buying physical gold has always had a certain shroud of mystery surrounding it. Most investors have spent the majority of their time looking at stocks and bonds, and don't really understand the gold market. They hear horror stories of scam artists that pass counterfeit coins, high transaction charges, and storage and insurance fees. But that has all changed. There are any number of reputable dealers online from which to choose. And the Internet has helped make the market even larger, driving down commissions and transaction fees.
Before deciding to buy gold coins as an investment, it is imperative to understand the difference between the various types of coins available. Pricing can be vastly different, even when they are struck with the same weight and purity of gold.
Essentially there are two different classes of gold coins. Investment grade coins are priced based on the value of the underlying metal contained in the coin, while numismatic or rare gold coins are valued based on gold content and demand as collectibles. (It is important to not that the IRS has designated both investment grade coins and numismatic coins as collectibles, and as such, gains are taxed differently than stocks and bonds)
Numismatic coins are a great investment if you are familiar with the market. One popular example would be the double eagle that you see in the TV commercials. But unless you are an expert in this field, it's best left alone. If you are dead set on buying rare coins, hire someone to help you make a sound investment.
Investment grade coins value is based on the actual gold contained in the coin. The most common sizes are 1oz, 1/2oz, and even 1/10oz. Because there is a small premium associated with any coin purchase due to minting fees, shipping, and insurance it is generally more cost effective to buy 1oz coins.
Throughout the world, three coins in particular are most widely known. They are the American gold eagle, the Canadian Maple Leaf, and the South African Krugerrand.
American Gold Eagle
Congress authorized the minting of the American Gold Eagle coin in 1985 as a method of allowing small investors to purchase physical gold for their portfolios. The designated sizes were those that are still available today. American Eagles are 22 karat coins. This means that they are 22 parts gold and 2 parts silver and copper. The reason behind this is that pure gold is soft and malleable. So the addition of copper and silver makes the coin sturdier.
Gold American Eagles are extremely liquid. They are recognized around the world and can be readily exchanged for cash almost anywhere you can find a coin or precious metal dealer. Technically they have a face value of $50, but since gold is currently trading at about $1600 per ounce, their true value is much higher.
Canadian Maple Leaf
Inspired as an alternative to Krugerrand of South Africa, the Canadian gold maple leaf was first struck in 1979. It is produced by the Royal Canadian Mint using .9999 gold. This makes the maple leaf he purest gold coin produced by a government mint. Some special edition coins contain as much as .99999 gold. This high level of gold makes the gold maple leaf more susceptible to scratches and scuffs. But since it is used as a bullion investment, it doesn't generally impact the value of the coin. Maple Leaf's are also recognized around the world and are therefore highly liquid investments.
South African Krugerrand
Production of the gold Krugerrand by the South African goverment began in 1967. They were the first investment grade coin of the era since bullion ownership had essentially been outlawed in the U.S. with the exception of numismatic or collectable coins. Since they are considered legal tender in South Africa, Americans were allowed to purchase them on the technicality that they are allowed to own foreign currency. The Krugerrand inspired the creation of the Canadian maple leaf as an alternative to owning currency created by a government that supported apartheid.
The Krugerrand is struck in 22 karat gold, similar to the gold eagle. But the Krugerrand uses only copper as an alloy, thus giving it a distinct orange color.
The Krugerrand, like the maple leaf, often carries a very low premium, thus making it a very efficient means of investing in gold bullion.
From a liquidity standpoint, these three coins are typically the readily bought and sold on the gold market. Other countries such as China, Austria, and Mexico also produce gold coins, but they are not typically as liquid.
Buying physical gold has always had a certain shroud of mystery surrounding it. Most investors have spent the majority of their time looking at stocks and bonds, and don't really understand the gold market. They hear horror stories of scam artists that pass counterfeit coins, high transaction charges, and storage and insurance fees. But that has all changed. There are any number of reputable dealers online from which to choose. And the Internet has helped make the market even larger, driving down commissions and transaction fees.
Before deciding to buy gold coins as an investment, it is imperative to understand the difference between the various types of coins available. Pricing can be vastly different, even when they are struck with the same weight and purity of gold.
Essentially there are two different classes of gold coins. Investment grade coins are priced based on the value of the underlying metal contained in the coin, while numismatic or rare gold coins are valued based on gold content and demand as collectibles. (It is important to not that the IRS has designated both investment grade coins and numismatic coins as collectibles, and as such, gains are taxed differently than stocks and bonds)
Numismatic coins are a great investment if you are familiar with the market. One popular example would be the double eagle that you see in the TV commercials. But unless you are an expert in this field, it's best left alone. If you are dead set on buying rare coins, hire someone to help you make a sound investment.
Investment grade coins value is based on the actual gold contained in the coin. The most common sizes are 1oz, 1/2oz, and even 1/10oz. Because there is a small premium associated with any coin purchase due to minting fees, shipping, and insurance it is generally more cost effective to buy 1oz coins.
Throughout the world, three coins in particular are most widely known. They are the American gold eagle, the Canadian Maple Leaf, and the South African Krugerrand.
American Gold Eagle
Congress authorized the minting of the American Gold Eagle coin in 1985 as a method of allowing small investors to purchase physical gold for their portfolios. The designated sizes were those that are still available today. American Eagles are 22 karat coins. This means that they are 22 parts gold and 2 parts silver and copper. The reason behind this is that pure gold is soft and malleable. So the addition of copper and silver makes the coin sturdier.
Gold American Eagles are extremely liquid. They are recognized around the world and can be readily exchanged for cash almost anywhere you can find a coin or precious metal dealer. Technically they have a face value of $50, but since gold is currently trading at about $1600 per ounce, their true value is much higher.
Canadian Maple Leaf
Inspired as an alternative to Krugerrand of South Africa, the Canadian gold maple leaf was first struck in 1979. It is produced by the Royal Canadian Mint using .9999 gold. This makes the maple leaf he purest gold coin produced by a government mint. Some special edition coins contain as much as .99999 gold. This high level of gold makes the gold maple leaf more susceptible to scratches and scuffs. But since it is used as a bullion investment, it doesn't generally impact the value of the coin. Maple Leaf's are also recognized around the world and are therefore highly liquid investments.
South African Krugerrand
Production of the gold Krugerrand by the South African goverment began in 1967. They were the first investment grade coin of the era since bullion ownership had essentially been outlawed in the U.S. with the exception of numismatic or collectable coins. Since they are considered legal tender in South Africa, Americans were allowed to purchase them on the technicality that they are allowed to own foreign currency. The Krugerrand inspired the creation of the Canadian maple leaf as an alternative to owning currency created by a government that supported apartheid.
The Krugerrand is struck in 22 karat gold, similar to the gold eagle. But the Krugerrand uses only copper as an alloy, thus giving it a distinct orange color.
The Krugerrand, like the maple leaf, often carries a very low premium, thus making it a very efficient means of investing in gold bullion.
From a liquidity standpoint, these three coins are typically the readily bought and sold on the gold market. Other countries such as China, Austria, and Mexico also produce gold coins, but they are not typically as liquid.
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