One of the more common ways people buy gold is by investing in gold coins. However, most people do not know how to buy gold coins and as a result rarely make much return on their investment (or worse – take a loss) simply because they do not know what they are doing when they purchase the coin.
Investing in Gold Coins
Personally, I think investing in gold coins is an oxymoron. You might collect gold coins or invest in gold, but you do not invest in gold coins (at least not very profitably). Although gold bullion often comes in the form of coins, coins just are not profitable for investors just learning how to invest when compared to other methods of buying gold.
The Problem With Investing in Gold Coins
The problem with buying a gold coin is that there are a group of people who value it as a collectible (coin collectors) and people who value it as being made out of gold (investors). Both of these factors drive the price of gold coins.
The problem is that these values peak at opposite points of the market. Collectors like to buy things when the economy is good, because that is both when they have the money to afford collectibles. Coin markets suffer terribly in recessions.
However, the exact opposite is true with gold. The price of gold soars in a recession and drops when the economy is strong. As a result, when gold is a highest, collectibles are at their lowest.
Why is this a problem? Well, when you want to buy a gold coin, dealers love to try to charge you a higher-than-market price for the gold because it is a “collectible”. After all, just how many coins do you think a dealer might sell in a day? Not many, at least not many expensive ones. Because of this it is important that a dealer makes a large profit when he sells a coin.
However, when gold prices are good, collectors will rarely pay more than the a few percent over spot price of gold for the coin. This makes such coins bad for investing purposes.
You will always have trouble getting the full value out of any coin. Just look up dealer prices for any coin, and then go on eBay or another auction site and see what people are actually getting for the coin. You will note a large discrepancy.
As a result, if you want to know how to buy gold coins, know that your first step is finding a dealer that is not charging much past market rate. This may take awhile to find and usually you are better off buying online.
How to Buy Gold Coins
If you still want to know how to buy gold coins after reading that disclaimer, there are several ways you can do this.
First, you can visit a coin dealer or gold exchange. While there might be only 1 gold or precious metals exchange every 100 miles or so, it is typically worth the drive instead of going to the local coin dealer as mark-ups tend to be much lower.
You always want to buy the most reputable and standard gold bullion. In the USA, this would be the American Buffalo or American Gold Eagle. If you remember one thing about how to buy gold coins, follow these two rules:
Never pay more than 5% over spot (market) rates for gold. If you are paying more than that you are throwing money away, as you can find much cheaper vendors online. See more in our article: How to Buy Gold Online.
Never buy “proof” coins as an investment. Proofs generally cost more because they are collectible, but as mentioned they are so hard to sell at “value” that they are not a good investment.
If you do decide on investing in gold coins, make sure you have somewhere safe to keep the coins. Many banks to not guarantee the safety of gold deposits or if they do they will make you take out an insurance policy. If you store them at home, know that there is always the risk of them being stolen. Your homeowners insurance may require you to sign a disclaimer or increase your rates if you are storing gold in the house as well.
How to Buy Gold Coins – Investing in Gold Coins
Let’s recap everything we learned about how to buy gold coins. First, gold coins are typically not a good investment for the small-time gold buyer. Unless you can afford to buy in bulk, you will likely pay a high mark-up. If you do decide on to invest in gold through coins, your best bet is to pick up non-proof bullion from a gold exchange. Alternatively, if you are looking for methods on how to invest in gold with less overhead, I recommend reading our article: How to Buy Gold Online. There you will find information on two methods you can use to buy gold with much lower maintenance fees. These are much more profitable for smaller investors without the budget to purchase large amounts of bullion.