Most people know that gold and other metals like silver and platinum can be used to make coins. However, not everyone knows these coins can be broken down into two distinct investment types: bullion vs. numismatic coins. If you're considering investing in coins for your portfolio we will share some information that may help you better understand the differences.
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Bullion vs. Numismatic Coins: Which is the Better Investment?
Knowing and understanding the difference between coin types will help you determine which investment strategy is best for your portfolio. In a nutshell, bullion buyers are investors who understand the value of the coins are based on the spot price plus a markup for the seller's profit.
For those interested in the rare coin you are a collector. A collector can make a profit from their coins, but understanding the market, values, rarity, and intrinsic value is different and more complex.
The Plug will share with you some insights into the Bullion and Numismatic Coin world. Keep reading to get more information.
U.S. Minted American Eagle Bullion Coin
What is a Bullion Coin?
A bullion coin is a coin whose value is based on its intrinsic precious metal content. Bullion coins can be minted by sovereign mints or private mints, but carry a completely different image to investors. Sovereign mints produce coins with a value associated and are recognized as a currency. Private mints produce bullion rounds that have no inherent face value and are worth only what the spot price of the precious metals market will bear.
Bullion coins tend to be easier to find, acquire, and sell. This makes them a popular choice for investors who trade in physical precious metals. Buyers and sellers can use online calculators to determine the coin's value based on the current spot price of the precious metal it is made from.
What is a Numismatic Coin?
A numismatic coin is one whose value is based on factors such as age, rarity, condition, and the demand for the coin. These coins are typically sought after by collectors and are often more challenging to find and value than bullion coins.
Numismatic coins can, in general, be more valuable per troy ounce than a bullion coin. The value of these coins lends more to the rarity than the metal content. Many rare coins' have melt value less than face value or worth of the coin to a collector. This is where the certification and grading of the coins are important.
Don't confuse numismatic coins with "collectible coins" that are produced and sold as collectibles.
History of Bullion Coins
The idea of bullion coins dates back to the Chinese, who used silver coins called Sycees as currency while the Romans also made silver coins used to pay taxes and other debts. Ancient civilizations used gold and silver coins because they were easy to produce, understand, store, and transport. Today bullion coins are coins made from precious metals such as gold, silver, platinum, and palladium. Individuals use bullion today for investment purposes and it is easily sold and traded as the world recognizes bullion and can value their coins or rounds based on the metal content.
History of Numismatic Coins?
Numismatic coins have a unique design and are typically worth more than their face value because of the rarity and age of the coin. Numismatic coins are typically older and hold more value to the collector than their face value. Once minted as currency, these coins are now used for investment. The rare nature of the coins calls for them to be certified and graded to understand the quality of the coin. Once they are certified having the coin appraised will help determine the value of the item for sale or for insurance purposes. Numismatic coins date back to Ancient Rome when people started to collect coins.
The Importance of Knowing the Difference
The distinction between bullion coins and rounds versus numismatic or rare coins is fundamental and each has its place in the investment of precious metals. The differences are night and day and understanding the differences will help you invest wisely.
Understanding that bullion coins are valued based on spot and probably a premium over spot price while numismatic or rare coins are valued based on the rarity of the coin, age, grading, and demand.
Differences Between Bullion and Numismatic Coins
- Premium: This is the amount of money you pay above and beyond the coin's intrinsic value. The premium on a bullion coin is typically the price above the spot. This can be $50 or hundreds of dollars depending on the seller. Understanding the spot price will help you determine a good price for the coin. On the other hand, a numismatic coin is typically old, graded, and has a limited supply. These factors influence the price of the coin. Other conditions including the number of coins in circulation and the demand for the coin can influence the price. Rare coins are typically not valued based on the spot price.
- Face Value: You have a Coin if there is a face value and you have a round when there is no face value. Coins are minted by Sovereign country mints. The U.S. Mint is a sovereign mint. They produce the coin with a face value as the government back the coin for its face value. If you have a Round, then you have a privately minted coin. The Rounds have no face value but typically are produced with the same metal requirements as a Coin. Rounds will typically sell for less than the Coin. Numismatic coins can also have face value. If they are rare, then the value will be based on the coin itself and not the face value.
- Age: Numismatic coins minted decades ago often carry a higher price than bullion coins made from the same amount of precious metals due to their rarity.
- Condition: The condition of a coin can affect its price. For example, a rare coin in mint condition will be worth much more than a rare coin that's worn and ugly. If you have a dated rare coin you can have them graded and you will get a grade for the coin which will influence the value.
- Demand: The demand for a coin can significantly influence its price. More coins with similar conditions or ages will typically be sold based on the face value or the metal content. Demand can make rare coins or bullion more valuable if there are few in circulation.
How to Buy and Store Bullion Coins at Home
Start by researching the market to see what types of bullion coins are in high demand and readily available in the market. These coins will hold their value the most, as they are the most in demand.
You can buy bullion coins from retailers or precious metals dealers like Noble Gold. You should be looking for bullion from reputable mints to assist in finding available bullion and being able to sell the bullion at a later time.
You are able to buy standard US Minted bullion at local coin shops or online from a number of resources. Finding the most reputable company can be difficult. If you choose to purchase from an online retailer, make sure you understand the current spot price and then review any markups or premiums the seller has on their coins. If you work with a reputable company they will provide documentation showing your final price and how that purchase breakdown.
Storing the coins at home is possible if you are not purchasing within your self-directed Gold IRA. Take into consideration these factors when determining if storage at home or at a secure facility is best.
- How much gold do you own? If you own a significant amount of gold coins you may want to make sure you have a large secure safe. A quality fire and theft safe will secure your investment. But, if the safe is not affixed to the home, there is always the possibility of the safe being stolen. You may also consider insurance on your coins. While a fire safe will have a rating of 1 hour at a certain temperature, the results of a fire could permanently damage the coins. While the gold or silver is still valuable, the damage to the coin could influence its saleability later. Having insurance can help you recover the difference left on the table from the damage.
- Consider storing your gold bullion at a depository or vault for safekeeping. Vaults are secure and insured. The depository may cost you some money to store your gold or silver investment but the safety of having the coins outside the home may be good.
How to Buy and Store Numismatic Coins
Numismatic Coins can be purchased at auctions, estate sales, local coin dealers, and even online precious metals dealers.
Having an in-depth knowledge of how rare a coin is or how coins are valued will help you determine if you are making a good purchase or not. Work with reputable coin dealers that understand the certifications and the market for coins.
The Importance of Coin Grading
Coin Grading through organizations such as the NGC (Numismatic Guaranty Company) and ANA (American Numismatic Association) is well worth the time and effort whenever you're dealing with precious metals and especially rare coins.
Still, it's essential for coins to be graded and this is because the condition and authenticity of a coin are challenging to determine without specialized equipment and training. Having a coin graded ensures that the coin is authentic and has an impartial assessment completed by a trained professional. If a coin has been damaged or has less intrinsic value, grading through a reputable organization will ensure you have the most accurate assessment of the coin so you can correctly value it for insurance or purchasing.
Which Coin Is Better for My Portfolio?
That's a difficult answer to give. Are you an investor in Proof and Bullion coins and bars or are you a collector who is looking for those rare coins to add to a collection?
Both can and are good investment options, it just depends on how involved you want to be. If you love searching and looking for one of a kind and getting the returns that those searches afford you, then numismatics and rare coins are a good option.
If you are looking to hedge inflation, combat the depreciating dollar, and looking to invest outside the stock market, then physical bullion is the best option.
Both bullion and numismatic coins are great investments. The key is to know which type of coin is right for you based on what you're trying to accomplish. While they are both made from precious metals, they are very different and understanding that difference is just one step in making a good investment choice for your portfolio.
If you are looking for more information on investing in bullion through an IRA, check out our review of the 5 Best IRA Companies. These businesses are experienced with setting up a gold IRA and working with your IRA or 401(k) to do a full or partial rollover. Not to mention they all work with qualifying depositories to help you get your coins secured.
Additionally, if you are looking to buy gold or silver coins or bars with CASH, they too can help facilitate a transaction and can provide extensive education and customer service to help you fully understand the precious metals market and how you can take advantage.