There is no shortage of advertisements encouraging people to invest in either gold or silver bullion as “the greatest investment of all time.” If you watch television, you’ve probably seen them and wondered if the hype about bullion is real. While it’s true that gold does retain value over time better than many other investments, you are guaranteed to lose money on gold if you buy it when the price is high and sell it when the price is low - just like with everything else. So what is bullion and why should you consider including it in your investment portfolio?
Bullion is “a bulk quantity of precious metal, usually gold or silver, assessed by weight, typically cast as ingots or bars, and sold by major banks and dealers.” Bullion is also available in coin form. Since 1986 the U.S. Mint has produced gold, silver, and platinum coins - the American Eagles - for banks, coin dealers, precious metal dealers, and brokerage firms to purchase, guaranteeing their precious metal content. There are two types of bullion coins. These are:
- Proof bullion coins - These are specially minted for collectors and typically sold in a protective display case.
- Uncirculated bullion coins - These are minted for investors and sold to authorized buyers at whatever the current market price is plus a small premium.
Other countries, including Australia, Canada, and South Africa, mint bullion coins. Examples include the Canadian Maple Leaf and the South African Krugerrand. Their value is always calculated by their precious metal content or melt value. Unlike collectible coins, the value of bullion coins is not determined primarily by grade, rarity, condition, or age.
Investors seek out bullion and bullion coins because they are a tangible investment that is easily stored and maintains its value. If you would like to enter this market, it’s smart to know what you are getting into. Do your research, consult with a reputable and trustworthy dealer, and shop around to get an idea of the value of these coins before you purchase any. Do not believe anyone who tells you that bullion coins are a “risk free investment.” Any investment has risks, and as the price of precious metals fluctuate so will the value of these coins.
If you are thinking of purchasing bullion coins, you should also consider how you will store them. You may have to purchase a safe or rent a safety deposit box. Consider insuring your bullion or coins as well. Remember, anything tangible can be stolen.
Coins and bullion are long-term investments. The price of both gold and silver varies, so it’s better to purchase them with the idea that you will hold them for some time. At Grand Rapids Coins, we advise our customers to acquire high quality collector coins and gold and silver bullion coins in addition to a diversified portfolio of other investments. Bullion coins can be a great hedge against economic or market instability, but they should never be the only investment you have. If you have other questions about bullion or bullion coins, do not hesitate to call us. We’ll be happy to advise you.