Bullion Takes Center Stage – Part 1

2012 American Eagle Gold Proof ObverseAt Mullen Coins, we have had a lively uptick in bullion sales for investment purposes this year. We’re often asked where gold and silver prices are headed – if we knew with absolute certainty, we’d be living a life of leisure and luxury! As a Grand Rapids coin dealer, one of our services is to help novices understand the fundamentals of investing in gold and silver, although we urge all of our clients to do further research before making a move.


What is bullion?

Bullion refers to an item made of precious metal, and signifies the value of the metal alone. Investors may purchase physical gold or silver (and less commonly, platinum or palladium) simply for its investment value. You may opt for bullion bars or bullion coins, and select from a variety of weights from troy ounces to fractions of an ounce. Bullion coins are Gold bullion coins are produced by several countries, and the American Gold Eagle is the world’s most popular choice in gold coins. Some of the others are the South African Krugerrand, Canadian Maple Leaf, Chinese Panda, and Australian Kangaroo.


How is bullion different from collectable coins? 

The value of bullion is based on its metal content with no attention paid to numismatic characteristics. Coin collectors, on the other hand, make selections based on a coin’s appearance and rarity. Prices for both bullion and collectable coins are based on market demand. Collectors pay extra for a nice coin in high demand – called the premium.


Why do people invest in bullion?

Much investment is related to an individual’s belief about the future of the US and world economies, financial markets, debt and deficit, and uncertainty.

Reasons for bullion investments include:

  • Portfolio diversification.
  • Hedge against currency devaluation (i.e., the situation where currency drops in value if more is printed in response to a deficit, or if it drops relative to other world currencies).
  • Defensive posture. Stocks and bonds perform best in stable political climates and economic certainty. Historically, gold has done especially well in negative or slow economies.


Why would people collect coins rather than bullion?

Collectors love their hobby. It’s addictive – looking for coins to complete a set, searching for the best you can get for your budget. Investors, on the other hand, are looking specifically for a return. Coin collectors can collect with an eye toward an eventual return, but investors aren’t looking for the next perfect rarity.


How do you decide whether to purchase bullion or collectable coins?

The only way an investor who has little knowledge or personal interest in collecting should invest in numismatic coins is with the aid of a trusted adviser. This adviser could be a reputable dealer or an experienced hobbyist.  Even so, you have to understand that investing in rare coins carries the same risk/reward element that stocks, real estate, and every other investment does.

Stay tuned for our next article about bullion investment, or contact the experts at Mullen Coins if you are interested in learning more about bullion investment.

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