Buying Gold Bullion Vs. Coins: Which Is the Better Investment?

The traditional approach to investing calls for people to fill their portfolios with blue chip stocks and bonds that will steadily grow in value over the years. This philosophy is perfectly acceptable when the economy is booming, and markets are stable or expanding. Under those conditions, your portfolio will likely yield a 5-8 percent annual return, leaving you with a nice nest egg for retirement. But what happens during times of economic turmoil? When the bottom drops out of the market, an entire portfolio can be wiped out in a matter of months-which is why the shrewdest investors diversify by acquiring gold. Precious metals have proven that they can maintain their value regardless of the ebbs and flows of the financial markets, making the metals market a very desirable alternative to stocks, bonds, mutual funds, and even IRAs.

When it comes to acquiring gold, investors must decide which form they would like to purchase. The two major options are bullion (metal formed into bars or coins, where the value comes from the commodity value of the metal itself) or Investment Grade Coins (coins that have been certified for their age, condition and rarity, where the value is based on the supply and demand for the coin itself, independent from its metal content). Though both forms have their advantages, the average investor who is not highly experienced in commodities trading is better off sticking to Investment Grade Coins.

Here are two reasons why:

1.    Less Volatility. Since Investment Grade Coins are not subject to the “spot” price of gold like bullion is, their value is much more stable. It is driven by supply and demand. Since supply is constant (no more 1848 coins are being minted, for example) and demand tends to grow over time, there is historically much less volatility in the certified coin market.

2.    “Perfect Timing” Not an Issue. Many investors turn to precious metals to get off the roller-coaster ride of the stock market, only to find that investing in bullion has its own cyclical ups and downs. To make money, investors have to time it right and buy when it’s low and sell when it’s high. With Investment Grade Coins, the market doesn’t have the same peaks and valleys that the commodities market does, so investors can pursue a strategy of “acquire-and-hold” and watch the value increase over time.

Though many people may consider “coin collecting” more of a hobby than a serious financial strategy, more and more investors are realizing that getting into the Investment Grade Coin market is a viable strategy that can protect and grow assets over the long-term.