Many people are confused when it comes to gold coins versus gold bullion. Some erroneously believe that gold bars are the only true form of bullion and that they are always more cost effective than coins. These individuals also feel that all gold coins are primarily reserved for collection and carry a higher premium as a consequence.

What is a Gold Bullion?

Bullion is defined as a piece of metal, usually a precious metal such as gold or platinum, which has been refined, processed and stamped at a specific weight. Bullion is not restricted to bars and also comes in the form of coins. Bullion, irrespective of what form it comes in, always closely follows the market price of the precious metals from which it is derived. For example, a one ounce gold bullion coin will typically be sold for a price which is very close to the market price of an ounce of gold. These coins are the most affordable as they are not priced in terms of their collection value, but for their weight in gold.

Gold bars serve the same purpose; they are usually priced in terms of their weight, as opposed to their collection value. Bullion is preferable whenever you want to buy gold with no regard to collecting it and are looking for something that can be readily traded. The biggest advantage of owning bullion is that it is easy to trade anywhere in the world, because weight is universal. An ounce of gold in New York carries the same price as an ounce of gold in London or Hong Kong.

What are Gold Coins (Numismatics)?

When people speak of collecting gold coins, they are usually referring to numismatics. These coins are similar to rare artwork, aged wine or vintage automobiles in that they have a collection value which exceeds their weight in gold. Whereas a one ounce bullion gold coin or bar won’t be priced much higher than gold’s current spot price, a one ounce numismatic gold coin can sell for $30,000 or more depending on its age, rarity and condition.

The biggest advantage of numismatic gold coins is that when cared for and stored properly they can increase significantly in value, similar to old comic books, baseball cards or stamps. The rarest gold coins can sell for millions, especially those in good condition minted in ancient or medieval times. However, there are several downsides to numismatics. First, unless you’re an expert, it is notoriously difficult to tell which coins are likely to appreciate the most in value as no one can predict the future. Second, unlike bullion, numismatics can be harder to sell, especially internationally.

For instance, while most experienced American coin dealers and graders will recognize rare American coins and will give you an accurate price for them, coin dealers or graders in Russia or India might not recognize them as readily and would be less inclined to pay you for their numismatic value. When buying numismatics you will pay a premium over the coin’s weight in gold and it could be years before you ever receive a significant return on your investment.