Gold Coins vs. Gold Bars: Making the Right Investment Choice

Having decided to invest in physical gold, perhaps the first consideration that comes to mind is the choice between gold coins vs gold bars. Seasoned and first-time investors alike ought to weigh up the advantages of both to ensure they make a decision aligned with their investment goals and personal preferences.

Comparing Gold Coins and Gold Bars

Both gold bar and gold coin investments provide different advantages. Before making any decision, it’s best to consider factors such as:

Your desired investment horizon
Liquidity requirements
Potential tax efficiencies available with certain types of metal

Portability, Liquidity and Flexibility

If portability and liquidity are high on your list of wants, then gold coins may be better suited to your needs. This is because gold coins are smaller and more lightweight than gold bars, rendering them much more portable.

Key points to consider:

Gold bars are available in smaller weights than you might expect. At Sharps Pixley, we stock bars starting from 1g.
A combi-bar option is available, comprising a sheet of small individual 1g gold bars.
Gold coins tend to change hands faster due to their collectibility and historical significance.
Gold bars remain liquid if purchased from a refiner on the London Bullion Market Association (LBMA) good delivery list.
Smaller denomination bars and coins offer greater flexibility for portfolio rebalancing or in scenarios of systemic risk.

Purity, Authenticity and Counterparty Risk

Ensuring purity and authenticity is crucial when buying gold. Tips include:

Use a reputable dealer, ideally with a physical location.
Gold coins vary in purity:
- Gold Britannias are 24-carat
- South African Krugerrands are 22-carat (copper-gold mix)
Gold bars usually include serial numbers and certificates from the refiner. All Sharps Pixley bars are 24-carat gold.
Bullion coins do not typically come with certification, as mint marks and purity are indicated on the coin itself

Tax Considerations for Buying Gold

Since 1st January 2000, investment-grade gold has been exempt from VAT in the UK. To be classified as investment gold, there are specific criteria regarding purity and form. For example, gold bars and ingots must contain at least 99.5% purity, while gold coins must be at least 90% pure. Investment-grade gold coins must also be manufactured by a world-renowned mint. We would highly recommend a UK investor to look no further than Royal Mint-issued coinage. Gold Britannia and Sovereign coins are two highly-sought after examples.

If collectibility is of interest, one might also be drawn to the Royal Mint’s collectable series, such as the Queen’s Beasts and Royal Tudor Beasts. It is important to note that bullion gold coins that are classed as legal tender in the UK are exempt from Capital Gains Tax (CGT). Meanwhile, gold ETFs, gold bars and other minted coins do not benefit from CGT exemptions. As of the time of writing in July 2024, the CGT individual allowance is £3,000 in realisable gains per year. This could change if thresholds become aligned with income tax, and CGT exemptions for bullion coins will become even more attractive.

Market Value and Premiums

The premium is the extra cost above the spot gold price, covering:

Production
Handling
Packaging
Insurance
Delivery

Most bullion dealers will only charge as small a percentage as possible and should be able to explain the cost breakdown transparently. Gold bars typically trade at a lower premium than gold coins due to the manufacturing process: the bigger the bar, the lower the premium. For example, it would be much more lucrative to buy a 1-kilo gold bar rather than ten 100g bars, and although there is no difference regarding the amount of gold, you would be looking to make a considerable saving. Moreover, larger gold bars may be more suited to a long-term investment strategy due to the initial saving made, but may not offer the same flexibility to liquidate a proportion of your investment that smaller denomination bars or coins offer.

Storage and Security

When investing in gold bars & coins, you must consider how and where you plan to store your assets. Several options are available; you could choose to use a home safe, a bank vault, third-party storage facilities, or private vaulting. At Sharps Pixley, we offer vault storage facilities at extremely competitive rates with the highest level of security. Our vaulting service is fully insured and underwritten by Lloyd’s of London.

Choosing a storage option should align with your risk tolerance and investment objectives. It is important to examine the financial standing of whichever organisation you select as your custodian for precious metals. You should choose an established company that is focused on longevity to withstand the test of time. With that in mind, don’t hesitate to ask about the lease risk of the vaulting facility you choose. Ideally, any vaulting partner you choose should have no mortgage liabilities outstanding and, therefore no lease risk.

Collectibility and Aesthetics

Whilst both gold bars and gold coins are visually alluring, gold coins trump gold bars in terms of detail, intricacy and personality, which therefore provides them with a higher numismatic or collectable value. Due to their desirable aesthetics, gold coins can make wonderful gift pieces to commemorate special occasions for friends or family. Certain types of gold bullion coins have limited mintage, rendering them even more desirable due to their scarcity. One such example is the intricately illustrated China Panda Gold Coin. The Royal Mint has produced a number of collectable series over the years, including the Queen’s Beasts collection, comprising of ten individual coins, each showcasing a beast and culminating in the completer coin featuring all ten - a truly striking coin. It is due to the added collectable value that gold coins may see a higher appreciation over time, thereby increasing the return on your original investment.

Making Your Choice: Gold Coins vs Gold Bars

In summary, various factors should be considered when choosing between investing in gold bars, coins, or a mix of both. Available budget, investment horizon, investment goals, and desired storage solution should all be taken into consideration. If you are looking to begin your journey into gold investment and would like to find out more, please contact one of our experts on +44(0) 207 871 0532 or at [email protected].

09 Jul 2024 | Categories: Gold, Coins, Bars, Beginner's guide