Pros and Cons of Buying Gold Bars vs Gold Coins
By StoneX Bullion
Every gold investor starts their journey by making a crucial decision: should you invest in gold bars or gold coins?
Both gold coins and gold bars hold a unique allure that make them an attractive choice, but there’s more to consider beyond their glittering appearance. Each investment has its own distinct set of advantages and drawbacks that make them suitable for different investors and strategies.
Before diving into the precious metals market, it’s worth taking the time to understand these two investment options carefully. In this guide, we discuss the difference between gold bars and gold coins and the pros and cons of each depending on several factors.
By understanding the benefits and limitations of each gold investment, you can make a purchase that’s aligned with your unique interests, financial goals, and circumstances.
Why should you invest in gold?
There are many reasons why gold is a valuable investment. Below are just some examples of why you should buy gold bullion coins and bars.
- Inflation hedge: Gold has long been considered a reliable shield against inflation because it tends to increase in value when the cost of living surges. This has been seen over the last five decades as gold prices soared while stock markets plunged during years of high inflation. In the end, gold tends to hold its value and purchasing power despite fluctuations in currency.
- Portfolio diversification: The key to holding a diversified portfolio is to invest in gold as well as stocks and bonds. This is because gold has been shown to have a negative correlation to stocks and other investments. For example, between October 9, 2007, and March 9, 2009, the S&P 500 (often used to represent the US equity market) fell 56.8%. Over the same period, gold increased by 25.5%.
To properly diversify your investment portfolio and decrease risk and volatility, combine gold with stocks and bonds.
- Highly liquid: Gold is one of the few tangible assets that can be liquidated easily. Unlike real estate, stocks, bonds, or collectibles, gold can quickly be exchanged into cash. Almost any jewelry dealer, pawn shop, or coin shop in the world will recognize and buy gold. This aspect of gold investments is especially important during recessions or economic downturns, when you may want to sell your assets quickly to stay afloat.
What’s the difference between gold bars and coins?
There are many differences between gold bullion bars and gold coins, including their form, size, purity, and production methods.
- Form and size: Gold bars are typically rectangular or square-shaped and often have a standardized appearance. Coins are usually round and available in various denominations and sizes.
- Purity: Gold bars generally have higher purity levels while gold coins can vary in purity depending on the type.
- Production methods: Gold bars are usually produced through casting or minting processes which keep them uniform. Gold coins are minted using presses in government or private mints and feature specific designs, inscriptions, and sometimes come in limited editions.
To give you a better outline of the differences between gold bars and gold coins, and help you decide which is best to invest in, we discuss the pros and cons of buying gold bars and gold coins below.
Pros and cons of buying gold bars versus coins
The best way to compare gold bars vs gold coins is through specific criteria: purity, premiums, storage, risk of counterfeits, collectibility, ease of selling, and liquidity. These are all important factors in a gold investment strategy that can help ensure your purchase aligns with your objectives, budget, and preferences.
Below, we examine the pros and cons of gold bars versus gold coins according to each criteria.
Gold bars often boast higher purity levels than gold coins, usually between 99.5% and 99.99%. This makes them a more attractive option for investors who prioritize purity in their gold investments.
On the other hand, gold coins can vary in purity depending on their historical significance and minting process. Some gold coins maintain high purity levels on par with gold bars while others have lower purity with alloyed metals added for durability or design.
Summary: If you prioritize gold purity in your investment, then bars may be a better option.
Premiums are one of the biggest considerations when choosing between gold bars or coins.
Buying gold coins usually means paying a higher premium due to the additional costs involved with fabrication, design, and distribution. Rare or collectible coins may carry even higher premiums because of their historical significance or limited mintage.
Gold bars tend to come with lower premiums and sell for closer to the gold spot price when compared to coins. This is due to their larger unit size and easier production processes. Because of this, gold bars are a more popular choice for people making larger investments.
As an example, it’s more cost-effective to purchase a one kilogram gold bar over ten 100 gram gold bars. Although they both contain the same amount of gold, it’s easier to produce one gold bar than ten, resulting in lower premiums. If you plan to invest in a significant amount, paying attention to premiums can lead to substantial cost savings. Keep in mind, however, that investing in larger gold bars may mean less flexibility when it’s time to sell.
On smaller investments of one ounce or less, the premiums between gold bars and gold coins can be fairly equal. In some cases, gold coins can even carry less premiums as they’re produced in larger volumes. If you’re investing in bars of 100 grams or more, however, it’s better to go with gold bars for lower premiums.
Summary: For investments of one troy ounce or less, the premiums between gold bars and gold coins are roughly equal. If you’re investing in 100 grams or more, then gold bars tend to carry lower premiums than gold coins.
Ease of storage
Storage is an important consideration when choosing between either gold coins or gold bars, and each has their own unique advantages.
Gold coins are generally considered to be easier to store discreetly. Because of their small size, you can fit a substantial amount in most standard home safes. If you do invest in gold coins, it’s important to store them carefully so that they’re well-preserved and maintain their resale value.
Gold bullion comes in larger sizes that can make them more difficult to store. That said, if you’re investing large amounts then they can be more space efficient than gold coins of equal value. This makes them a more practical purchase for people making substantial investments.
Summary: For smaller investments, gold coins are easier to store, although careful attention should be paid to preservation. For larger investments, gold bullion are more space efficient.
Risk of counterfeits
No investor wants to find out that their gold investments are counterfeit. But as the demand for gold increases, so too does the risk of purchasing low quality or fake bars and coins. Being aware of this risk should be at the forefront of any investor’s mind when buying physical gold.
Gold bars are generally considered to be less susceptible to counterfeiting than gold coins. That said, it can still happen. If you’re making a high-value bullion investment, be sure to verify it carefully to validate its authenticity before purchase.
Coins are more prone to counterfeiting than gold bars, especially rare or collectible coins. When investing in gold coins, be sure to choose a trustworthy and reputable dealer who can guarantee their authenticity.
Summary: Gold coins carry a higher risk of counterfeiting than gold bars. Be sure to buy from a reputable dealer to guarantee authenticity.
If you’re attracted to the idea of buying rare and collectible gold, then coins are the way to do it. They hold a substantial amount of collector value way beyond that of their gold content. Most gold coins are historically significant, have limited mintage, or feature unique designs that commemorate events or historical figures. This makes them an excellent investment as some people are willing to pay high premiums for rare coins or those with historical and traditional value.
Gold bars lack the numismatic or collector value that’s usually associated with gold coins. They’re often a better choice for investors who are interested in the value of the gold content itself rather than its collectibility or rarity.
Summary: Gold coins are a better option for investors who are interested in rare and collectible gold. Gold bars are a better option for those interested in the value of the gold content itself.
Ease of selling
Both gold bars and gold coins are highly liquid and can be sold easily, especially when compared with other tangible assets. That said, gold coins offer greater divisibility and flexibility when it comes to selling. They can appeal to a broader range of buyers and are easier to sell in smaller quantities.
Gold bars are also highly liquid and can easily be traded, however divisibility is limited when it comes to smaller transactions, especially with larger bars. In most cases, you can’t sell just a portion of a bar, you have to get rid of the whole thing. This makes coins a better option for short-term investors and gold bars more suited to long-term investors looking to preserve their wealth.
Summary: Both gold coins and gold bars can easily be sold, however gold coins offer greater divisibility and flexibility. In the end, gold coins may appeal more to short-term investors while gold bars tend to be a better option for long-term investors.
Should you invest in gold bars or coins?
In the end, the choice between investing in gold bars or gold coins depends on your investment strategy, interests, and priorities. If you're looking for an easy and flexible way to diversify your investment portfolio, and are interested in rare and collectible items, gold coins may be a better option for you. If you're looking for a larger long-term investment, and want to avoid paying higher premiums, then gold bars may be the right choice.
Of course, to properly diversify your portfolio, a combination of gold coins and gold bars is recommended. If you’d like further guidance on making the right purchase for your needs and circumstances, our team will be happy to help.
Buy gold bars and gold coins from Europe’s leading online store
Whether you’ve decided on gold bars or gold coins, start your investment with high-quality precious metal from StoneX Bullion. We stock a wide range of investment-grade gold coins and bars that will crown your gold coin collection or preserve your wealth for years to come.