Pros & Cons of Buying Gold Bars vs. Ingots vs. Coins (+32K Views)

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It is during difficult times [such as these when] quantitative easing and currency wars have highlighted the volatility and vulnerability of currencies…that the true, safe value of gold really stands out…Fortunately, it is now easier for you to convert your savings into gold… [than ever before and this article outlines the reason for buying physical gold and the advantages and disadvantages of buying gold bars, ingots and/or coins. Read on!]

Buying

If you decide to go to a dealer… in London,  New York, Sydney or Toronto, they probably sell whole gold bars or smaller fractions as gold ingots and it all seems very safe and easy – but be careful what you pay.

The price of a 1Kg bar should be just a few percent above the price of gold but the smaller ingots do not compare so well. They are often sold up to 50% higher than the spot price.

You buy the gold over the counter and then what?

• Ideally you should store it in a vault for security.  This protects the integrity and value of your investment because it never leaves the professional circuit and there are no unnecessary transport costs to eat away at your investment. It also makes resale very simple because the gold does not have to move. Remember that your bar or ingot will lose value immediately if it has left the professional circuit.@Investment Insights

Selling

When it comes to selling you will need to pay (and find) a professional to assay (verify) your gold…

• In the case of expensive smaller ingots the gold price will have to increase drastically to recoup the 50% premium before any return is made.
• In the case of a 1 Kg bar you will need to find a buyer who has the money for a whole bar and trusts you that it is what you say it is.
• A kilo bar is difficult to transport. At airports it is considered as a blunt instrument. It can only be insured at the post office for a maximum value of five thousand Euros (or equivalent).
• There are also false ingots which are either plated or filled with tungsten.
• The price of bullion bars only increases with the spot price. This is important to remember at resale. The most important moment for a gold investment is the moment at which you choose to sell it i.e. for a maximum return on investment.

In summary,

• beware of over-priced small ingots,
• do not take possession of gold and
• when you buy a 1Kg bar ensure that it is from a reputable professional source and close to the spot price.
• [While] bars and ingots do not maximise the benefits during periods when the price of gold is high…allocated physical gold is always preferable to “paper” gold as an investment.

A Better Buy: Gold Coins

Gold bars and ingots, however, are not the best physical gold investment. Gold coins are.

• Why?  Notwithstanding the possible 50% upcharge one must pay for the convenience (portability, weight, cost, ease of storage, etc.) of owning gold coins:

a) they rise in price with the gold price reflecting the pure gold content they contain,

b) their “premium” increases when demand is high and

c) the “premium” can be different depending on:

• which country the specific coin brand (South African Kruggerand; American Eagle; Canadian Maple Leaf; the Swiss Vrendi; the UK Sovereign; etc.) is being sold in,
• the demand for specific brands and
• the extent of supply of specific brands by location.

When the premium of a gold coin rises dramatically, even if the gold price doesn’t, it means buyers are seeking the coin as a store of wealth and safe haven.

Physical gold investment is an excellent way to protect your wealth, especially during times of crisis and instability.

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*Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.

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