Coins and bullion: the best way to invest in precious metals

 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.