Investing in Gold: Gold Bars or Gold Coins?

Gold has the reputation of a stable crisis currency. In recent years, the price of gold has risen considerably and a growing number of investors are resorting to physical gold. Those who want to invest in gold can choose between different forms. The most common form of investment is to invest in coins or bars. The question is which option is best for an investor.

Why is gold popular?

Gold is one of the oldest means of capital investment and savings. No wonder, because for a long time gold has been a symbol of wealth, is associated with royal power and, above all, is a precious asset in many countries.

Characteristics determining the position of gold

In order to answer the question of why it is worthwhile to invest some of your savings in gold, it is worth first taking a look at the history of this gold. In hundreds of cultures around the world, this metal was the basic means of theorization, i.e. the storage of capital. It is also worth remembering once again about many symbols of wealth and power, which were created – and still, are – from gold. But why did this happen? Why did gold become a basic intermediary in exchange and de facto money? What makes investing in gold profitable?

This is due to a number of factors, the first of which is an adequate supply. First of all, the supply of gold is limited – despite the search for the famous philosopher’s stone, gold cannot be produced. Moreover, it cannot be destroyed – gold always remains gold, it can only be freely formed and divided.

And this is another advantage of gold as an investment gold – gold is very easily divisible, which means that it can be used to make coins or bars very small (e.g. 1-gram), as well as much larger (e.g. 1-kilogram).

At this point, it should be emphasized that physical gold is indestructible. This means that if you bury your investment in the proverbial garden in 200 or 500 years, you will dig up exactly the same gold. There will be no process that can reduce the value of gold.

Furthermore, it is worth noting that the amount of gold in the world is large enough to be in circulation, which is not true of diamonds, for example.

The best gold investment products

Gold bars

Gold bars are offered on the market in various sizes and weights. The standard bars weigh 12.44 kg, which corresponds to 400 ounces. Common versions can weigh between 1 g and 1 kg. Well-known suppliers of gold bars include Heraeus, Perth Mint and Umicore. Each manufacturer imprints its logo as well as information about the fineness and weight on the bars.

The purity of bars is usually 99.99 %. They can be produced without great effort. Of all physical investment options, your purchase price is based most strongly on the current gold price. Because the pure material value of a bar is decisive, the price difference between buying and selling is small. Gold bars, therefore, offer investors an easy way to invest in pure gold.

According to auragentum.de, when buying bars, weight plays an important role. The manufacturing costs are low. However, the ratio between production costs and material value is unfavorable for investors with lighter bars. For this reason, bars weighing five grams or less are not worth buying gold for profit. For example, to resell a 1-gram bar profitably, the price of gold would have to rise by about a third. Investors speculating on a rising gold price should invest in bars that are as heavy as possible in order to maximize their return.

Gold coins

The popular alternative to bars is gold coins. A distinction must be made between traditional investment coins on the one hand and special coins and collector’s pieces on the other. Collector coins are sold with a strong price margin, which does not reflect their pure material value. Such a collector’s items are not suitable for investment purposes. Who wants to invest with profit intention in gold coins, must fall back on investment coins. Similar to gold bars, their value is based on the material value of the coin.

Investors can choose between different recognized investment coins. The best-known coins are the Krugerrand, the Vienna Philharmonic, the Maple Leaf, the Eagle, the Britannia, and the Kangaroo. The purity of gold coins, with the exception of the Maple Leaf, is lower than the purity of gold bars. For this reason, gold coins have a higher difference between the purchase price and the sale price. To compensate for this disadvantage, you should invest in heavy coins that weigh at least one ounce. These coins have a lower trading margin of approximately 3 to 4% and are easier to sell at a profit.

Beware and Protect Against Counterfeiting

Counterfeiting is a danger when buying gold bars. Simple counterfeits can be made of gold-plated brass. These fake bars can be recognized by their lighter weight. Gold is a heavy metal. Heavy fake gold bars consist of a tungsten core, which is wrapped in real gold. In contrast to investment coins, smaller bars do not have to have standardized dimensions. Counterfeiters can take advantage of this variability. The purchase of bars whose manufacturers have been certified by the London Bullion Market Association (LBMA) offers greater security.

A key advantage of bullion coins over bars is their increased security against counterfeiting. The true-to-detail minting of a coin requires more effort than the stamp on a bar. Counterfeiters, therefore, prefer gold bars. Investment coins enjoy great trust among investors and traders worldwide.

Which investment is worthwhile?

Investors looking for pure profit maximization receive the best price/performance ratio with certified gold bars. Due to their high degree of purity and low production costs, bars yield a return even with a slight increase in the price of gold. On the other hand, those who prefer a higher degree of security and an easily tradable investment can fall back on investment coins. Collectables and gold jewelry are meanwhile unsuitable investments and only intended for personal use.