What Are Bullion Coins? Investing in Bullion Coins

by | May 7, 2021

Gold, one of the world’s most stable currencies, comes in many forms. This precious metal is available as unrefined gold, scrap gold, gold leaf, numismatic coins, bullion coins, ingots, and bars.

In fact, bullion coins were the primary form of currency until the launch of the international fiat currency model. Since then, their role has shifted to more of an investment or collectible item. The value of these coins is determined by the quantity of precious metal in them, usually platinum, gold, or silver.

For investors, bullion coins are an excellent investment for asset protection and diversification. They hedge against inflation and protect during recessions, which are often caused by government and bank fiscal irresponsibility. However, for collectors, bullion coins are prized for their numismatic value.

If you’re thinking about purchasing bullion or bullion coins, do your research first to avoid getting ripped off. The Federal Trade Commission (FTC) advises investors to take certain measures, such as:

  • Investigating the bullion coins’ metal value
  • Only dealing with government-approved or reputable dealers
  • Considering additional transactional fees and costs to avoid losing out

Now, let’s look further at bullion coins and how to invest in them.

What Are Bullion Coins?

Bullion coins are minted from precious metal, typically platinum, gold, or silver. These coins are available for purchase from government agencies, approved banks, private precious metal dealers, coin dealers, or brokerage firms.

The value of bullion coins is assessed by the amount of high-grade precious metal each coin contains rather than the condition or rarity of the coin.

For investment purposes, the precious metal content should be at least 90%, and the issuing authority should stamp this content on the coin surface. Additionally, every coin should have the stamp of the institution that minted it. For instance, an authorized U.S. Mint American Eagle gold bullion coin should have the purity and the weight visible on its surface.

The price of gold bullion coins fluctuates like any other investment. While this investment is considered relatively stable compared to stocks and shares, investing in gold bullion incurs a certain level of risk. There is no guarantee that the price will increase or maintain value in the long run.

Top World Bullion Coins

canadian maple leaf coins

Since 1986, the U.S. Mint has produced two types of platinum, gold, and silver bullion coins:

  •     Uncirculated bullion coins minted for investment purposes and sold to a few authorized buyers based on the spot price plus a small premium
  •     Proof bullion coins that are specially minted for collectors and sold directly by the U.S. Mint in a protective display case

Globally, the American Eagle gold bullion coin is the most common and widely traded. These coins are available as 91.7% 22-karat gold coins in 1/10, 1/4, 1/2, and 1-troy ounce weights.

Many countries also produce their own official bullion coins. The most popular foreign bullion coins include:

  •     Canadian Maple Leaf
  •     Australian Kangaroo
  •     Austrian Philharmonic
  •     Chinese Gold Panda
  •     South African Krugerrand

However, before investing in international bullion coins, you should be aware that the U.S. government does not guarantee them. This reluctance stems from the government not being able to confirm the coins’ purity and standards of production.

Investing in Bullion Coins – The Do’s and Don’ts

Bullion coins can provide a hedge against inflation and diversification for investment risk in areas like currency or stock trading.

When people buy precious metals, they do so to diversify their investment risks and counter poor economic performance when economies fail. These precious metal investments enable investors to offset riskier investments, such as stock portfolios, and investors may choose to sell their precious metal when the stock market rises again.

If you’re thinking of investing in gold bullion coins, here are the do’s and don’ts that can prevent you from losing your money or falling victim to scams:

The Do’s

couple seeking advice about gold coins

Always Ask for the Coin’s Melt Value

The coin’s precious metal content determines the melt value, be it gold, silver, or platinum. This value tells you what your coin is worth if melted down, regardless of the coin’s condition.

Seek Professional Advice

Always consult with a reputable financial advisor with specialized precious metal investment expertise before investing in gold bullion coins. These advisers will point you toward the most suitable types of gold bullion and where to buy them.

Shop the Market

Before making a purchase, shop around to determine the most cost-effective agency, bank, brokerage firm, or coin dealer to buy from. Most banks sell gold bullion at a lower markup than private dealers, which could save you money. Also, before making a purchase, obtain an independent, third-party appraisal of the bullion coin, as the seller may inflate their assessment.

Consider the Associated Fees and Costs

Consider the costs and fees associated with your investment before signing on the dotted line. Your seller may include transactional fees, and you may need to rent storage, obtain a safe deposit box, or purchase insurance for your bullion.

When buying gold bullion, you have essentially borrowed money. You must ensure that your equity remains at an excellent level to avoid losing money on your investment.

Once your equity falls to a level that is not profitable, you may find yourself paying costs and fees that devalue your investment. If you borrowed money to buy your bullion, the financial institution that lent you the money might make an “equity call” if the precious metal price stays the same, falls, or doesn’t rise enough to offset the storage and interest charges.

Know Your Seller

Always investigate who is selling the gold bullion coins to you, especially if you are not getting your investment from a government agency.

Check out the company online and read about what other investors have to say about the firm.

Contact the Federal Trade Commission (FTC), your local consumer protection agency, or the State Attorney General to ask about your chosen company and determine whether these firms have had any complaints made against them with the authorities.

Verify the Authenticity of Your Investment

Always demand a certificate of authenticity or a guarantee of the coin’s precious metal content. Research the issuing authority behind the certificate or guarantee, as some are known to be fake. Also, always obtain a receipt for your transaction.

The Don’ts

trucks in a road

Don’t Pursue Leveraged Investments

Do not get your bullion from leveraged investments. These investments are high-risk and use panic to sell to clients. Often stating that the precious metal price is about to go sky high, leveraged investments urge you to make a down payment to ensure significant profits. However, you could end up losing your original investment if the precious metal price falls.

Don’t Buy From Sellers Delivering to “Secured Facilities”

Some sellers deliver gold bullion coins or bars to a secured facility rather than to you directly. In such cases, you can not know whether your investment actually exists or not. Even worse, you are not in a position to determine its quality. Always take delivery of your gold bullion coins yourself so that you can make arrangements for their proper storage and insurance.

Don’t Buy Under Pressure

Never succumb to sales pressure, and always take your time when buying gold bullion coins. These investments are long-term and tie up your money for years, so making the decision to purchase is not easy.

Walk away from high-pressure sales pitches that minimize risk and always ask sales representatives for the risks upfront. Any sales pitches that urge you to buy immediately are almost always a scam.

Key Takeaways

  •     Bullion coins are precious metal coins, commonly occurring as platinum, gold, and silver coins. These coins make a relatively stable investment or collectible asset.
  •     Bullion coins are available from government agencies and approved private dealers and brokerage firms.
  •     Approved bullion coins must have the name of the mint, the content of the precious metal in regards to purity, and the weight of the coin stamped on their surface.
  •     The price of bullion coins fluctuates with the market, so there is no guarantee that prices will rise or remain the same over time.

In Conclusion

Investing in gold bullion coins is an excellent way to hedge against inflation. Although not used in daily commerce, these precious metal coins keep their value over time and prove to be a prudent investment during a recession.

The value of gold bullion coins is assessed by their precious metal content rather than by their condition or rarity. Before purchasing gold bullion coins, check the precious metal content to ensure that you’re getting your money’s worth.

Learn About Gold is your preferred professional and reliable source of investment information if you are interested in investing in bullion coins.

We offer expert advice that prepares you to make good investment choices. We also refer you to various reputable gold investment partners that can give you the best deals on gold bullion.

Contact us today to learn more.

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