When investing in gold, investors have two main options: gold coins or gold bullion. Gold coins like the American Gold Eagle provide the benefits of easy storage, recognition, and potentially higher future collectible value. However, they come with higher premiums resulting in lower immediate returns compared to gold bullion. Gold bullion bars and rounds from mints provide lower premiums over spot price but require secure storage arrangements. Ultimately, gold coins can make sense for investors focused on long-term holding and portfolio diversification, while bullion appeals more to short-term traders looking to profit from moves in the gold spot price.
gold coins provide benefits like easy storage and collectibility but have higher premiums
Popular gold coins like the American Gold Eagle provide investors with the benefits of easy recognition, storage, and transport compared to larger gold bullion bars. Smaller coins can easily be stored at home in a safe. Coins also tend to have higher collectible value over time, especially for earlier years and rarer issues. However, the tradeoff is that gold coins have a higher markup or premium over the underlying gold spot price. This premium, which can range from 5% to over 50% over spot, eats into investor returns compared to cheaper bullion options.
large gold bullion bars and rounds have lower premiums but require secure storage
Large gold bullion bars and rounds typically have much lower premiums over the gold spot price compared to collectible gold coins. This makes investment-grade gold bullion more appealing for traders looking to profit from short-term moves in the price of gold. However, storing large amounts of bullion requires more security like a bank safe deposit box. The lack of easy recognition and transport also makes gold bars less useful as currency compared to minted coins.
In summary, gold coins and bullion bars/rounds provide different tradeoffs for investors. Gold coins offer collectibility and recognizability benefits but have higher premiums that cut into returns. Bullion products meanwhile allow traders to gain purer exposure to gold prices but require expensive secured storage arrangements.