Buying gold bullion (bars, ingots, and coins) is the safest and easiest way to invest in gold. However, not all gold coins are the same, and there are some facts that should be considered before entering into this field of investing. In the following paragraphs we’ll discuss some of the most influential factors that will determine what type of return you’ll be able achieve through your gold coin investments:
What Coins Should You Buy?
For most people the best gold coins to buy are those minted by official government mints within North America, such as the American Eagle, the American Buffalo, and the Canadian Maple Leaf. These government-backed coins are very easy to liquidate when you need cash because they are practically ubiquitous and are trusted by dealers everywhere. American Eagle coins can even be deposited into Individual Retirement Accounts (IRAs). Although the 2006-released American Buffalo is the purest coin ever offered by the U.S. Mint, it is not as common as the American Eagle, and of course its purity gives it a higher price tag. If you live in South Africa a good choice would be the Krugerrand, and if you live in Austria a good choice would be the Vienna Philharmonic.
Comparing Dealer Prices
Since the U.S. Mint does not sell their coins directly to the public, you’ll need to find a reputable dealer to buy from. Fortunately, you can use the U.S. Mint’s official bullion retailer list to drastically simplify the prospecting and comparison process. Dealers sell their gold coins at a set premium above the current spot price, which can be found on gold price tracking sites like Kitco.com. As a rule of thumb, you never want to buy coins that are sold at a premium higher than 5% of the spot price. Obviously, the goal is to be persistent in order to find the dealer with lowest premiums on the coin you’re shopping for. It should also be noted that one ounce coins carry lower premiums than one-tenth ounce, quarter ounce, and half ounce coins, and are therefore the cheapest by volume.
Avoid Rare Collector’s Coins
Collector’s coins typically have more of a mark-up than officially minted gold coins. In addition, rare coins are not as easily appraised, and many brokers and dealers are hesitant to buy them, so you would have a hard time turning them into cash. While some rare coins will appreciate in value and may wind up being worth a lot more in the future (especially those that are government-backed and are considered legal tender) there is no guarantee that this value appreciation will occur, and if it doesn’t you’ll earn less of a profit than if you invested in of the aforementioned U.S. Mint or Royal Canadian Mint coins.