Gold bullion or coins, which is better?

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January 29, 2009

Commodity Online
Most of us are aware of the gold daily “spot” price that is updated and made available to us by the media. What the “Spot” value shows is the exact value of the one troy ounce of .999 fine gold bullion is at any given moment.

Gold bullion is usually presented in the form of bars and they do not have any numismatic value at all. Instead, the true price of gold bullion is judged squarely on its melt value.

When gold jumps $15 on one day, the price of the bullion jumps the exact same $15. If the “spot” value of gold falls $3 another day, then naturally, the gold bullion’s value falls down as well. Gold bullion is most often traded in 100-bar lots, named “contracts.”

Generally, the contracts are sold and bought without any physical exchanging of gold taking place. This is sometimes referred to as “trading paper gold.” The farther out the expiration date on the contract is, the higher the future value of the gold contract will be. The distinction between the daily “spot” price and the future delivery price is based on the interest of the money which is put up by the person guaranteeing the contract.

One of the advantages of buying gold bullion is that it is one of the most liquid tangible assets in the world, thus making it valuable everywhere you go.. No matter where you are – New Deli, Madagascar, France – everyone is familiar with the value of an ounce of gold.

However, one of the disadvantages of gold bullion is that a profit can only be made if the price of gold goes up. Any revenue you receive will be tied into the daily “spot” value of gold, unlike numismatic gold and to a somewhat lesser extent semi-numismatic gold. Buying Krugerrands, and other rarities Such items as Krugerrands, Canadian Maple Leafs, and American Gold Eagles, are also considered to be bullion gold. These are frequently called bon “coins,” although they aren’t coins at all, as they were never intended to circulate.

Semi-Numismatic Gold

According to US based International Rarities Corporation (IRC), a facilitator for investing in gold and silver coins, semi-numismatic gold coins of USA and other countries behaves differently from bullion in the sense that apart from spot price variations that affects its prices, coin gold will rise on its own depending on how far demand outstrips supply. This is because supply of coins is fixed as they aren’t being made anymore. The mintage figure for a circulated $20 Liberty gold piece of 1898 will be the same 500 years from now as it is today and was over 100 years ago.

The term “semi-numismatic gold” usually refers to circulated United States gold coins struck prior to 1934 that carry a relatively small premium over their melt value.

Unlike bullion gold, semi-numismatic gold involves actual coins of the realm, both from the United States and foreign countries. The prices, at times, will rise and fall with the price of “spot” gold, but at other times semi-numismatic gold will rise on its own, as demand outstrips the supply. This happens because the supply of semi-numismatic gold is a fixed quantity, and a large gold strike in South Africa (or anywhere else, for that matter) won’t affect the supply. Why? Because unlike gold bullion bars and gold bullion “coins,” they simply aren’t making them any more. Yes, the supply will be much less due to attrition, but the mintage figure is a constant.

Another popular semi-numismatic coin is the Swiss 20 Franc gold piece. This coin is about the size of a United States $5 gold piece, and contains a little less than one-fourth of a troy ounce of gold, according to IRC.

Semi-numismatic coins do not offer the best of both worlds, but they offer a significant segment of both worlds, and make a viable investment alternative for certain portfolios.

Quality Numismatic Gold

IRC claims it is special to them. This category covers the very finest United States gold coins minted before 1934. These are the third-party certified coins of the highest quality that are hand-picked by the veteran senior numismatists at IRC.

Quality numismatic gold is restricted to Mint State 63 and better US gold coins. This includes high quality $20 St. Gaudens gold coins that were issued from 1907 through 1933, choice hand-picked $20 Liberty gold coins that were minted from 1850 through 1907, attractive $10 Liberty gold pieces that were struck from 1838 through 1907, dazzling $10 Indian gold pieces that were issued from 1907 through 1933, and other beautiful and desirable United States gold rarities. These coins are the performers, the ones with the best track records, the issues with the greatest demand and the smallest supply, according to IRC coins

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