Investing in precious metals is another way of diversifying your portfolio. You can own various assets, and if your risk tolerance leans toward long-term investment, precious metals can also be beneficial for you.
There are many ways of investing in precious metals, but it’s possible to own them physically and through legal and regulated means. If that sounds good, then it’s time to dive deeper into the coin and bullion market.
What Are Coins And Bullions?
Before anything else, this article will explain what coins and bullions are.
Collectible coins are either stored as an investment or as part of a personal collection. This includes rare, ancient, limited edition or commemorative coins, and old coins that are out of circulation. These coins come in varying purity and weight. Their value is usually determined according to the material used and its rarity.
There are coins that are highly valued because of the material that was used to make them. Typically, these coins are made from precious metals like:
- Gold: This has always held the highest prestige among all types of currency since ancient times. Different cultures have been using gold to trade and build economies. Gold coins are exceptionally rare, and the last known ones were minted in the 1800s
- Silver: Like gold, silver was once a popular precious metal used to make coins. The Ancient Greeks and Persians were known to use silver coins. The British Empire also used pennies made of Silver.
- Palladium: This precious metal is currently priced higher than gold because the demand is soaring more than the supply. Palladium looks like Silver, but this precious metal is rarer. The first Palladium coin was minted in Sierra Leone in 1966. Several countries followed suit, but as of today, Russia holds the record for producing the most number of Palladium coins in the world.
- Platinum: Like Palladium, Platinum bears a striking resemblance with Silver. It was first used as a coinage by Spain and was also adopted by Russia. Today, Platinum is still used to make commemorative coins—which are also a collector’s favorite.
If you want to grow your coin collection, you can look around for worthwhile ones from physical and online shops. Some dealerships like Infinity Coins have an inventory of rare old coins and coins made from precious metals. You may also look for a coin collector that is willing to sell an antique coin from his or her collection.
When people speak of bullion, what usually comes to mind are gold bars and ingots. While bullion does refer to gold bars and ingots, it also includes gold coins and silver bars. In other words, bullion pertains to pure gold and silver that are melted to form bars, ingots, or coins.
Gold and silver bars are popular for investors who want to buy precious metals. Bullion bars vary in denominations, weight, and price. They are also easier to sell if they come from well-known resources, albeit they come at a higher premium. And when you purchase legitimate gold bars, they also come with a Certificate of Authenticity.
Bullion bars can come in varying sizes, they may come in one, 10, 20, 50, 100, and 1,000 grams and one, 10, or 100 troy-ounce denominations. It works for beginner investors who want to explore precious metals. Aside from Gold and Silver, bullion can be also made from pure Palladium and Platinum. You can also buy them in Rhodium and Copper.
Governments use gold bars as a reserve currency, and central banks use them to boost reserves. Since the price of gold moves against the economy’s direction, they have always been used as hedges against inflation.
How Are Spot Prices And Costs Determined?
Investing in precious physical metals in coins and bullion means that you may be paying for more than the product’s premium or spot price. Pure gold, for example, will cost you shipping, handling, and insurance. There are also processing fees to think about.
Which Is Better To Invest In?
Both coins and bullion are just great for investment, but some may prefer one over the other depending on certain factors.
Bullion bars are better if:
- Commoditized investments that help you save up to 1% of the total purchase value.
- If the sentimental value is not a deciding factor for you.
- If you want to save on premium prices.
- If you can afford a higher minimum investment.
Coins are best for:
- Beginners and small investors.
- Avoiding capital gains tax.
- Assets that are easily tradeable or easier to liquidate.
When Is The Best Time To Buy And Sell Coins Or Bars?
Knowing when the best time to buy and sell coins or bullion is the best way to maximize your investment in precious metals. Investors who value long-term investments often turn to gold because its market price is unpredictable. Those who own gold or silver assets may always be wondering if there’s a way to determine when the value will rise again.
If one analyzes history, you can base it on the recurring pattern that the market tends to fall into annually. The value hikes up during the first few months of the year and lowers during the spring and summer seasons. Later during the fall, the price will rise again.
Based on the information, you can buy bullion coins and bars during April, June, and July. During these months, you can take advantage of the low market price so you can eventually sell them when the price goes higher—usually during January, February, March, and the fall season.
However, it’s recommended for investors to hold onto their assets for a longer period and take advantage of increasing prices. While physical gold and silver cannot be used on anything other than for your financial security, it makes perfect sense to keep at least 10% of your portfolio in physical gold assets to protect your wealth in a time of economic turmoil. Your physical gold and silver will help you tide over financial straits.
Since gold and silver rise in value, they are also good investments for your retirement. As long-term investments, you can hold them in gold IRA accounts. They are special depositories approved by the IRS where you need to keep your assets instead. Gold and silver coins and bullions make great inflation hedges, keeping you protected against global instability.
If you’re like most investors who bought gold out of speculation, you may be thinking of selling it in time of the price hike. However, it’s advisable to only sell a fraction of your gold and silver holdings. Your portfolio should always contain gold and silver assets as insurance against further economic turmoil.
Where Can I Purchase Coins And Bars?
Bullion coins and bars are available in both online dealerships and physical stores. Banks may offer bars, but they are rare and are often too expensive.
- Physical Shops
Physical stores have been around longer and evolved from pawnshops into specialized locations where customers can view available inventory. It is an obvious choice for experienced investors with a discerning eye for the precious metal they want to purchase.
While their presence is far older, they also present a few inconveniences to customers.
- They are bound to a single location
- Buyers are restricted to specific business hours.
- Inventory for showcasing is limited because there may not be enough display cases to house them for public viewing.
What they lack in convenience, they make up for safety. Physical shops directly acquire their inventory from legit distributors and mints. It’s still essential to do your research first before purchasing from a dealership so you can get the real deal.
- Online Shops
Online shops are a newer option and may also be extensions of brick-and-mortar shops. But online stores may come at a disadvantage as well:
- It’s impossible to view the actual product before purchasing
- You have to wait for your product to arrive, so there’s a bigger risk of getting lost or stolen.
Online stores also carry benefits such as anonymity, because you can shop from the comfort of your home. Online shops also have no overhead utility costs, so dealers don’t top the product to raise prices.
How To Buy Coins And Bars
Investors like the look and feel of silver and gold, which is why many prefer bullion coins and bars instead of exchange-traded funds (ETFs). Buying coins and bars is relatively simple, whether you’re purchasing them from a physical shop or an online store.
First, you can browse the inventory or choose to inquire about a specific coin or bar if the dealership carries it. Depending on where you’re shopping, you can directly ask the proprietor questions or use a live chat feature if it is available on the website. Once you found what you wanted, you can pay for it and take it home or wait until it’s delivered to your home.
How To Avoid Fraud
The bullion coin and bar dealership is an industry that’s very susceptible to fraud. Some scammers sell products with questionable purity and the last thing you want to get is something that is not worthy of what you’re paying for.
You can avoid fraud by checking the reputation of the dealership and look for reviews. Another way you can do this is to check for the realness of the precious metal. It’s best to have the material appraised by a reputable professional who can give you a true valuation of the item.
Are Bullion Coins And Bars Taxable?
Investors who chose to invest in physical gold assets are required to pay capital gains tax once they’ve earned from their investment. They are taxed as collectibles, and any gold held over a year is treated as an income and therefore, taxed as one.
However, if coins and bars are sold lower than the actual purchase price, you don’t have to pay back taxes—albeit it could mean investment losses. If this happens, you’ll be allowed to take off USD$3,000 from another income that you have instead.
Reporting Online Purchases
The government requires buyers to report the purchase of coins and bars only when the dealership’s payment exceeds USD$10,000 in cash. The government mandates it in every business that payments this large must be reported to them. Business owners must file a Form 8300 within 24 hours. Forms of payment include cashier’s check, traveler’s check, bank draft, and money order.
Where To Store Bullion Coins And Bars?
Some investors opt to keep physical precious metal assets at home, but there are risks that come with this. First, there are security issues since physical gold can be robbed from your home. Aside from that, it is susceptible to damage from house fires and extreme temperature conditions. If you have a large amount of gold or silver in your home, it’s better to invest in a safe, a security alarm, and a fire alarm as well.
You may also search for offsite options since these are safer. Reputable depositories or safety deposit boxes at a bank may be able to provide better security for your physical gold in return for fees. Searching for depositories, you might as well inquire how much you’ll have to pay since the rates will vary.
Investing in coins and bullion is a great way to diversify your portfolio as these assets are rarely affected by economic downturns and instability. But before deciding to buy, it’s important to know the basics first—especially when you’re new to bullion coins and bars.
It’s better that you are aware of the first steps so that you’d know what to expect once you finally add precious metals into your investment portfolio. Besides, there are additional costs if you choose to invest in these items. Aside from the actual value of the items, you may also be paying taxes, storage or deposit fees, and handling costs. Most importantly, it’s best to know when are the best times to sell your gold or silver. After all, the ultimate goal is to maximize the returns of your investment.