This article will demystify some of the mystery that is involved with buying and owning bullion coins and bars. This is the first in a 3-part series that will address: 1) bullion coins 2) collectibles 3) graded bullion coins.
According to Dictionary.com, bullion can be defined as precious metals that are “considered in mass rather than value”. The concept is that the asking price of the product will be relatively close to the spot price of the metal that was used to create the product. Bullion coins, bars, or rounds are distinguished by an explicit statement of weight (or mass) and fineness of the product.
Today it is common to see bullion coins and bars priced between 5%-20% over the spot price. The premium over the spot price can be determined by which sovereign mint creates the coin, the reputation of the private mint, the supply of precious metals in global markets, and is the accreditation of the manufacture that created the product.
The Gold and the Silver American Eagle coins are among the higher priced bullion coins. The Gold British Britannia is among the lower priced. Bars will typically carry the lowest premium. Some designer rounds and bars can be priced a bit higher because of the design, popularity, and the input involved with creating the product. Today a 1 oz. silver Buffalo round is less expensive than a 1 oz. silver bar. A 5 oz. Scottsdale Stacker round’s premium is a bit higher that the most basic silver bar yet lower than coins like Silver Eagles or Silver Maple Leaves.
Over time the year, grade, or mintage figures can impact the overall asking price of a bullion coin or bar. We’ll address this much more in our article on graded bullion coins.
THE PROS OF BULLION
Bullion has several great attributes. Here are a few of them:
Inflation Hedge/Store of Wealth
Bullion coins’ most attractive attribute is gold’s performance in the face of inflation. Whereas dollars that are held in a bank take a beating from inflation, gold hold its value and often compensates for losses in other areas of the market. One hundred years ago a gentleman could buy himself a fine suit with an ounce of gold, which was valued at $20.66 in the year 1922. In the year 2022 $20 won’t get you a fine suit. However with the current spot price of gold being about $1,800, an ounce of gold would certain get you a fine suit.
Not only does gold hold its value, it compensates for a collapsing equity market. For example, old skyrocketed to a new all-time high of $1914 in the year 2011 when the stock market collapsed.
Low Premiums
Based on my experience, the low-price premium is the factor that attracts most buyers to bullion. Surprisingly though, most buyers that buy coins object to collectibles or graded bullion coins because of their higher premium. For our clients that believe that “gold is gold”, we usually make sure that they are aware of the even lower premium on the bars and rounds.
Availability
Bullion coins and bars are also attractive because of their availability. They are minted by the millions and have no special requirement other than being authentic products of the mint or manufacturer that created them. Almost all precious metals dealers have popular products like Eagles, Maple Leaves, or Gold American Buffaloes.
Recognizability
The most popular bullion coins are highly-recognized. The producers of these coins, like the US Mint or the Royal Canadian Mint, have built trust with buyers over several decades. This familiarity creates some degree of comfort for both buyers and sellers.
Liquidity
Owners of popular bullion products are able to liquidate their coins more easily and universally because of the recognizability and trust that popular bullion producers have built over the years. There is a strong demand for these products on the secondary market. Your Eagles, Kruggerands, and Libertads for example would be well-received by gold dealers across the world.
IRA Eligible
The Taxpayer Relief Act of 1997 opened the door for Americans to hold precious metals in a self-directed Individual Retirement Account (IRA). The most popular coins and bars are eligible to be held in IRAs. These would include Eagles, Maple Leaves, Philharmonics, Buffaloes, accredited bars, and a few others.
Discretion
Precious metals transactions are very discreet relative to stocks or bank accounts. If the spot of gold goes up and increases the value of your metals, you will not be required to pay a tax on the increase in the asking price (check with your accountant for laws specific to your location) unless you sell your metals.
THE CONS OF BULLION
Volatility
The greatest drawback to bullion coins and bars is that their value is shackled to the spot price, which can be volatile. After gold reached an all-time high in 2011 many people rushed to gold. They bought at the top of the market and then gold rolled back to a plateau of about $1,300 for several years. Those who had been in gold before the bottom fell out of the stock market achieved sizable gains in gold.
In the year 2020 gold reached a new all-time high of $2,067 in the midst of “the Wuhan Flu”. It has since plateaued at about $1,800. Although it appears that now would be a great time to buy bullion, volatility is a legitimate concern for bullion coin owners and buyers.
Counterfeit
Over the course of recent years there has been an upsurge counterfeit coins and bars that originate from China. Sometimes the fake coins are difficult to differentiate from authentic bullion coins. The most counterfeited bullion coin is the Silver American Eagle. A specialist can easily tell the different however the fakes are often good enough to mislead a non-specialist. This happens more often with the bullion coins since they are not graded by the third-party grading companies.
Do extra research on offers that appear are too good to be true. Make sure that the company that you buy from stand behind their product. If you need more assurance then get them on the phone or communicate with them by email.
CONCLUSION
It is apparent that there are far more reasons to own bullion gold and silver than there are not to own them. Considering our current economic climate, it is just a matter of time before we see a big jump in the spot price of gold, silver, and platinum.
I believe that collectible coins can also be great investments and I’ll explain why in the next video. However, bullion is a good place to start and a great asset to own.
Bullion coins are attractive for their familiarity as I explained earlier and the bars enable buyers to buy precious metals at an even lower premium. Since gold, silver, and platinum have traded within the same range for over two years and is poised for a breakout. We suggest buying your bullion now before the stock market and the dollar totally collapse.
THE GOLD MARKETPLACE WORKS FOR YOU
The Gold Marketplace, LLC offers a wide range of high-quality tangible precious metals like gold, silver, and platinum. We offer a Gold and Silver Bullion Package that has the most inexpensive bars and rounds. Click here to see the Gold and Silver Bullion Package, it is a great offer. Watch this video for evidence that the market will collapse this year and gold will be the last safe haven.
If you have more questions about the market or investing in physical precious metals, reach out to us anytime at 800-960-6280, and we will gladly answer your concerns and inquiries. We appreciate you and we are looking forward to speaking with you.
God bless you,
Cullen Banks
The Gold Marketplace, LLC