How, Why, and Where to Buy Gold Coins
Gold coins are one of the most popular types of bullion investment. There are many reasons why gold coins are more popular than other forms of investment and we thought it would be useful to write a comprehensive guide to buying gold coins. If anything in this article inspires you to invest in your first gold coin, visit our extensive gold coin collection here at London Gold Bullion. In this article, we’ll talk about the benefits of buying gold coins, the different kinds of gold coins you can buy, and where you can buy gold coins.
Why Should You Buy Gold Coins?
There are many reasons to invest in gold coins, some advantages are relevant to all gold bullion, including gold bars, and some are specific to coins. First off, let’s look at the advantages of investing in any kind of gold bullion:
- Gold is a liquid investment as it is considered valuable all around the world and there are gold dealers in every city as well as numerous online retailers.
- Gold is a physical asset. Unlike many other kinds of investment where all you have to show for your investment is numbers on a screen, gold is a physical, tangible asset that you can hold in your hands. Gold will never disappear as a result of a computer systems failure, and it can’t be hacked or erased. Gold will never decay or spoil the way some other investments will, such as agricultural commodities and some oil products.
- There is no counterparty risk with gold. You do not need to involve a third party or a contract to actualise your gold investment. This means that no third party (such as a bank) can sink and take your gold with them.
- Gold’s value is very stable over time. Whereas pretty much every other kind of asset you buy changes drastically over time, gold’s value tends to change very slowly, predictably, and only slightly, over time.
- The value of gold tends to rise when the economy takes a downturn and most markets decline. This is because many investors view gold as inherently valuable and try to protect and hedge their other investments by buying gold bullion when times are tough. The more people that buy gold, the higher its demand; the higher its demand, the higher its value.
- There are very few extra costs, such as VAT or stamp duty, associated with investing in gold. Gold is unlike real estate, where you have to pay for a survey, home insurance, life insurance, mortgage advisor, and many other things including stamp duty if you go over the £125,000 threshold.
- With gold, as it is so expensive in accordance with its weight, you only need to pay for a very small amount of space in an assay office or vault and its insurance isn’t expensive. Saving money on tax and extra costs means that more of your money can go into your gold investment.
- Gold is incredibly valuable in relation to its weight. The average 1-ounce gold coin at the time of writing this article is worth approximately £1,053. If you had £10,000 to invest in gold, it would buy you nine coins with a little bit left over. This makes it easier to handle, store, transport, etc. and it is perhaps the biggest advantage gold bullion has over silver bullion (the same investment in silver coins would give you 504 silver coins to store).
All of these advantages apply to gold coins and gold bars, but there are some advantages specific to gold coins alone:
- Gold coins have greater liquidity than gold bars, as they’re smaller and easier to sell in specific amounts. For instance, if you have 10 gold coins, you can sell one, two, five, or all of your gold bullion. But if you only have one gold bar or two gold bars, then you can only sell all or half of it.
- You can buy gold coins over time, as you can afford them and the prices are lower than usual. This allows you to jump on an investment opportunity as soon as it arrives in a way you can’t really do with large gold bars or many other kinds of commodities that require a larger initial investment.
- Britannia gold coins, gold sovereigns, and many other gold coins have an official currency denomination. This denomination is always far lower that the coin’s gold value, but its status as legal currency means that investors are not required to pay any capital gains tax on profits made from this kind of gold coin.
- Many gold coins have a numismatic value that makes them considerably more valuable even than their weight in pure gold. Numismatic coins are rare/limited-edition collectable items that tend to increase in value over time.
What Are the Best Gold Coins to Buy?
Now that we’ve covered all of the reasons why people invest in gold, and in gold coins specifically, it makes sense to look at the different kinds of gold coins you can invest in, helping you find the best option for your investment needs. There are three main kinds of gold coin: sovereign coins, gold rounds (also called private mints), and numismatic coins.
Sovereign coins are coins minted by a government made from investment-grade gold, which means they must have a minimum purity of 995 parts per thousandth (99.5%). A sovereign coin’s true value is derived from its weight in gold as opposed to any additional source of value. Governments mint gold coins each year and they are given a currency denomination worth far less than their weight in gold. These coins are often referred to as ‘sovereign’ coins because they have been made by a government and this government has guaranteed the value and validity of the coin. This protects against counterfeiting as to counterfeit a sovereign coin is to commit perjury against the state.
Investors are attracted to sovereign bullion coins over other kinds of gold coins because they provide a loophole in the capital gains tax and their value correlates directly to the value of gold as opposed to other independent factors, making them easier to understand than numismatic coins. Gold sovereign coins are the ideal investment for anyone new to gold investment.
Gold Rounds (Private Mints)
Gold rounds differ from sovereign gold coins because they haven’t been minted by a government and do not come with government backing. This means that you do not get the capital gains tax exemption you get with sovereign coins and people tend to not be as attracted to private mints as government-minted coins. However, if they are made to 99.5% purity, as all the best private mints are, then they are just as valuable as sovereign gold coins.
Privately minted gold coins are also a great option for new investors as they do not come with the added complications that numismatic coins do and their value is more or less consistent with their exact weight in gold (minus production overheads).
From all of the benefits you’ve read about sovereign and privately minted coins, you’d be forgiven for being put off numismatic coins. They are a much more complicated investment option because you’re dealing with so many other variables. They behave like collectables, such as antiques or artwork and have more or less value based on special factors, such as date minted, whoever designed them, the number of coins minted, year of mint, historical significance, and a myriad of other potential factors. The advantage of all of these factors is that one gold numismatic coin can be worth significantly more than its weight in gold if you know what to look for and you keep track of the global numismatic market. This isn’t impossible to do and it can be a very worthwhile enterprise. It is, however, very time consuming and not recommended for anyone who just wants to include a small amount of gold bullion in their overall investment portfolio. Another negative of investing in numismatic coins over other kinds of gold coins is that it can take a lot longer to find a buyer, so they are nowhere near as liquid.
Where is the Best Place to Buy Gold Coins?
Online retailers like London Gold Bullion are now widely known to be the best places to obtain gold bullion coins. This is because they enable investors to order gold coins exactly when they want to when the price of gold suits them. This can help investors jump on a particularly good opportunity (if the price of gold falls more than usual, for example) and not have to deal with the delay and frustration that can sometimes come from talking to a sales person over the phone or in person.
As it is also cheaper to run an online bullion dealership, the sellers pass on these savings to their customers. Online gold retailers want to attract as many customers as possible and to beat their competition (which is usually countrywide as opposed to local competition with in-store gold dealerships).
Online gold retailers also usually offer the greatest selection of gold coins to choose from as it’s much easier to include an image and description of a gold coin on a webpage than it is to create space for one in a display case. In-store gold retailers will run out of display room, whereas online retailers never do.
The only thing to really be careful of when buying gold coins online is that the website has a good reputation. Look for websites with a high Trustpilot rating or some other rating system that prioritises customer feedback and doesn’t allow the retailer to edit or manipulate their rating in any way.
I hope this guide to gold coins has proven useful and that anyone sitting on the fence feels knowledgeable enough to buy their first gold coin. If you have any questions about our gold coins or any of our other bullion products, please don’t hesitate to get in touch.