There are multiple ways to enter the world of investment in
precious metals: coins and bullion, ETFs, shares of mining companies, futures,
'over the counter' markets, 'online' platforms for selling gold ... Without a
doubt, the formula most suitable for retail investors and citizens interested
in taking advantage of this form of investment is the direct purchase of coins
and bars regal assets.
Its advantages, as explained in the book The World of
Leading Bullion Coins, published by the consultancy Metals Focus, are considerable:
firstly, it is an investment accessible to all budgets, since it is possible to
invest from a moderate amount of money, thanks to the availability of gold
coins in fractions of up to 1/20 ounce (1.55 grams), up to gold bars of more
than one kilo.
Second, investment gold is exempt from tax in the European Union.
In some cases, some gold coins are even exempt from capital gains tax, such as
the Britannia in the UK or the American eagle and Buffalo in some US states.
Furthermore, when buying precious metals there is no
so-called counterparty risk inherent in other investments such as stocks or
bonds.
Another of its advantages is portability: it is not
necessary that they be guarded or managed by any entity, from which they have
to be requested to have them available. Ingots and coins are perfectly portable.
In the event of the collapse of the financial system, their
liquidity is immediate, since they serve as a means of payment recognized
throughout the world and with a normalized value known to all.
For this reason, they are ideal to constitute a safe haven
to maintain the purchasing power of investors in the event of a geopolitical or
economic crisis.
Coins
As for investment coins or bullion, they are available in
the four precious metals: gold, silver, platinum and palladium. In gold,
bullions of 1/20, 1/10, 1/4, 1/2, 1, 2 and 5 ounces, and even one kilo, can be
found.
Although when buying these coins you have to pay a premium
over the price of the metal they contain, this is usually very low in the case
of the one-ounce coins, which are the most sold.
As for its purity, it ranges from 91.67% for the Krugerrand,
Sovereign and Eagle, to 99.99% for the Philharmonic, Maple Leaf, Kangaroo and
Panda.
Silver coins, on the other hand, are not usually minted in
pesos less than one ounce due to the lower price of the metal. Its purity
ranges from 99.9 to 99.99%.
Platinum and palladium bullions are struck from 99.95% pure metal.
In the case of palladium, minted bullions are very rare: just the American eagle
from the United States Min, the Ballerinas from Russia and, in certain years,
the Maple Leaf from the Royal Canadian Mint.
Investing in coins or bullion also has another advantage:
the primary market, which includes sales of newly minted pieces, through the
network of dealers and distributors, is joined by an active secondary market
for bullion. In it, coins are sold that have been minted in previous years and
are sold by their owners again to traders or other investors. It is a
fundamental component of the bullion market to maintain liquidity and reduce
the 'spread' between purchases and sales.
The fact that there is such a secondary market also gives
the investor peace of mind, as it guarantees the existence of a transparent and
efficient mechanism in case the investment needs to be settled.
In these cases, bullions are a key advantage, as the
reputation of the mints that minted them and the production processes that have
followed guarantee their purity, weight and provenance.
The price of coins in this secondary market varies depending
on the price of the metal with which they are minted, its availability, the
interest of the investor for a certain type of currency or year of issue or
other factors such as the state of the same or, where appropriate, the cost of
refining.
Of course, if the supply of coins for a given year is very
wide, its discount with respect to newly minted coins will be greater. On the
other hand, if there is a significant demand for coins for a given year, it
will happen the other way around.
Therefore, small investors will tend to target those
currencies or issues that are most affordable for them.
Similarly, the amount of premiums can also influence the
behavior of merchants and distributors. Thus, they tend to buy currencies from
countries with significant liquidations, at a more favorable price, and sell
them in countries with more important demand, increasing premiums.
Ingots
As for the ingots, they can be manufactured from molds
(cast) or stamped on a gold foil (minted) . The first method is the most common
for large ingots, from 100 grams in weight.
Its purity usually varies between 99.5 and 99.99%, or even
less in some local markets. In fact, investor preferences for weight, metric,
or purity vary across markets. In China, for example, 10, 20 or 50 gram
“minted” bars are very popular, while in the United States they prefer one
ounce bars.
There are also local peculiarities, such as the tael ingot
in East Asia (99.9% purity and 37.5 grams in weight). Premiums also vary: those
for cast ingots are lower than those for "minted" . There is also an
inverse relationship between the weight and the premium: the higher the
premium, the more it is reduced.
