Gold coins have been used as a universal currency for over 5,000 years and today legal tender gold coins are minted by government mints and they are used as a from of money and a store of value.
To this day, gold coins represent the ultimate form of money; their value is inherent and is never related to any other asset or government fiat. Furthermore, gold coins are now the most liquid, divisible and most accepted form of gold bullion in the world.
Buying gold coins is easy, hassle-free and can be done conveniently online with your trusted dealer. What’s more, these coins come in several aesthetic formats from different sovereign mints around the globe. Taking into account the wide variety of choices, which are the best gold coins and how do you make your choice as a new investor in the gold market?
Let’s examine gold coins in detail to help you select the best coins that suit your budget, investment objectives as well as personal preferences.
Gold Coins: The Origin of Money
Gold has been used for thousands of years as a medium of exchange, which is merely an agreed form of payment for goods or services. In fact, money, as we know it today, originated from the recognition and universal acceptance of gold as an inherently valuable commodity. The very first gold coin was struck for circulation as currency around 600 BC under King Alyattes of the kingdom of Lydia. With a gold content of less than 50%, it was stamped with different pictures to denote various denominations and became the first standard coinage in history.
Ancient Greece, Carthage, and the Roman Empire subsequently established the use of gold coins in Europe, and every other civilisation since then has used gold to settle debts, finance wars, and procure goods. The Italian florin, German Augustulus, and British Noble are all gold coins that circulated as money hundreds of years ago. A few examples include the German Augustulus in Ancient Gaul, the British Noble in the late 14th Century and the Italian florin from 1252 to 1533. Every other part of the world including China, Africa, and South America, have used various forms of gold coins over millennia as their most valuable, trusted currency and standard of value.
What Are Gold Bullion Coins?
Gold bullion coins are flat, disc-shaped legal tender coins made from gold whose weight and purity are guaranteed by a sovereign state. For a gold coin to be considered a bullion coin, its value must be derived solely from the weight of the gold in it, which is closely directly related to the spot price of gold. This contrasts with numismatic and semi-numismatic coins whose value is mainly due to their historical significance and rarity. Gold jewellery, on the other hand, derives its value mostly from its craftsmanship, while the gold content forms only a tiny percentage of the price.
In 1967 South Africa pioneered what was to become the first mainstream gold bullion coin, a circular coin with a precisely one ounce of gold. Made from 11 parts of pure gold and 1 part of copper, the Krugerrand was designed to be a gold bullion coin for the international market, with a value determined solely from its gold content. This model became very successful and was soon replicated in other countries including Canada, UK, Australia, China, and the US.
Gold bullion coins come in various weights, with the most popular being one troy ounce. Fractional weights include ½ ounce, ¼ ounce, and 1/10 ounce, although larger ten ounce and one-kilo Australian bullion coins are also in existence. These tend to be more popular with collectors rather than investors and store of value buyers. The size of a gold coin also varies from mint to mint. For example, a one-ounce American Gold Eagle is 32.7mm in diameter and 2.87mm in thickness, while a Krugerrand is 32.77mm in diameter and 2.84mm thick.
Today, gold coins such as the South African Krugerrand, British Sovereigns and Britannias, the American Gold Eagle, Canadian Gold Maples, Gold Australian Kangaroos and Austrian Philharmonics are accepted globally as the most convenient, recognisable and accepted and liquid form of gold bullion.
Are Bullion Coins Pure Gold?
The composition of gold coins has evolved over the centuries. Ancient coins were made of a naturally occurring alloy of gold and silver known as electrum, which consisted of about 45% gold content. By around 450 BC, Darius The Great introduced an 8.4-gram gold coin with 95.85% purity. With increasing technological advances in metal refinery, gold coins such as the Canadian Maple Leaf and the American Gold Buffalo now boast a world-leading gold purity of 99.999%.
Bullion coins are different from gold jewelry and other golden trinkets; they are refined to a purity of between 99.5% and 99.99% and this is classed as investment grade gold. In contrast, jewelry is made of gold of varying purity alloyed with other metals such as copper or silver. The gold content in jewelry can range from 37.5% in 9-carat (9/24) gold to the highest purity of 99% in 24-karat gold jewelry. It is important to note that the weight of precious metals is measured in troy ounces which is equivalent to 31.07 grams, rather than the regular or avoirdupois ounce which is equal to 28.35 grams.
Today, beautifully crafted and ornate coin bullion is composed of perfectly refined 99.99% solid gold, although some, like the Krugerrand, American Gold Eagle, and British Gold Sovereign, are strengthened by adding copper and silver. The added metal makes the coin less likely to get scratched or damaged while in general circulation. At the same time, adding another metal raises the weight of the coin past the one-ounce mark. For example, a Krugerrand weighs 33.93 grams, which is the total weight of 1 oz of pure gold plus 1/11 oz of copper.
Whatever the composition of gold in a bullion coin, the quantity of refined gold in a gold bullion coin is strictly adhered to and guaranteed by the sovereign mint. For example, although Krugerrands and American Gold Eagles are 22 karat gold coins with a fineness of 0.9167 or 22/ 24 pure gold, they contain exactly 1 ounce of gold. However, smaller coins such as Gold Sovereigns have a gold content of 0.2354 ounces. The value of a gold bullion coin is therefore calculated by multiplying the spot price of gold with its gold content measured in troy ounces.
Which Gold Coins Are Popular with Investors?
Top sovereign mints such as the US Mint, British Royal Mint, Perth Mint, and Royal Canadian Mint, South African Mint, and Austrian Mint strike gold coins that are internationally recognised as tangible investments and a hedge against economic and geopolitical uncertainty. Gold coins may look very different depending on their country of origin. However, popular gold coins are widely accepted because of their gold content and guarantee of purity. Some bullion coins may have a nominal face value which underlines their status as legal tender.
The top 10 most popular gold coins include:
- Canadian Gold Maple Leaf: 24-karat (99.99%) pure gold coins with a weight of 1 oz
- American Gold Eagle: 22-karat gold coin containing 1 oz of 99.99% gold and 1/11 oz of a silver/copper alloy
- South African Krugerrand: 22-karat gold coin with 1 oz of 99.99% gold and 1/11 oz of copper
- British Gold Britannia: 24-karat one-ounce pure gold coin with 999.9 fineness and a face value of £100
- British Gold Sovereigns: 22-karat gold coin with a ¼ oz 99.99% gold content and 1/12 of copper
- Austrian Philharmonic: 24-karat gold coin with 1 oz 99.99 % gold and face value of €100
- American Gold Buffaloes: 24-karat gold coin with 1 oz gold of 999.9 fineness
- Australian Gold Nuggets: 99.99% 1 oz gold coin produced between 1987 and 1990 by the Perth Mint
- Australian Gold Kangaroos: 99.99% 1 oz gold coin that features the image of a kangaroo, which replaced the original Gold nugget in1990
- Chinese Gold Pandas: 1 oz pure gold coin produced by The People’s Republic of China with a 999.9 fineness and a 500 Yuan face value
What Are Numismatic and Semi-Numismatic Gold Coins?
Numismatic and semi- numismatic coins are different from bullion coins because, for the most part, their value derives from their collectible value, rather than the weight of the precious metal they contain. Numismatic coins have a higher cost because of their collectability, rarity, and age. The price of a numismatic gold coin is determined primarily by demand from global collectors. Such coins usually represent a significant era in the history of civilisation, commerce, or important economic and political events.
Numismatic coins offer investors another way of profiting from gold with potentially lucrative returns. This is especially so when the history of the gold coin is significant. For example, a $20 - 1907 High Relief Double Eagle St Gaudens coin produced by the Philadelphia Mint can be worth more than five hundred times the spot price of gold.
Unlike bullion gold coins, numismatic coins have serious concerns when it comes to authenticity. Additionally, the value of numismatic coins can be inflated by misplaced speculation and overselling by self-serving collectors. For an investor looking for the best exposure to the gold price, and the hedging and safe haven qualities of gold, numismatic coins are not a prudent choice.
Why Buy Gold Bullion Coins?
As an investor, allocating a portion of your investments to gold bullion coins offers many benefits that include flexibility when buying/selling, affordability, and portability, durability, liquidity and gold’s store of value qualities. Although banks, large institutional investors and governments prefer large gold bars as a financial instrument, bullion coins are an excellent way to get into gold investment for a new investor or indeed a sophisticated investor looking to protect and grow their wealth.
Gold coins are also extremely popular with investors primarily due to their low premiums. The difference in the spot price of gold and that of gold bullion is referred to as a premium; this covers the cost of minting the coin, transport and storage and a small margin for the gold dealer. Despite the added cost, the price of a gold coin is very close to the spot price of gold.
Gold coins offer other advantages as compared to gold bars including:
- Bullion coins are beautifully minted which gives them a high aesthetic appeal as compared to gold bars
- Gold coins come in numerous varieties and designs to choose from unlike gold bars
- Gold coins have a higher commemorative value and depending on their age, may have numismatic or collectible value as well
- Gold coins are internationally recognised and do not need an assay when selling them
- Gold coins come in smaller weights as compared to gold bars, which makes them ideal for investors with smaller capital outlays
- Bullion coins are harder to counterfeit due to their intricate designs, unique markers and anti-counterfeiting measures such as micro-graving.
Where Should You Store Your Gold Coins?
Once you pay for your gold bullion coins, where is the best place to store such a valuable investment? Although buying physical gold in the form of gold coins is one of the best way to way to gain exposure to the gold market, where you store your coins is equally essential. As a highly valuable metal, gold is a favourite target of thieves and should be stored in a secure hiding place, possibly safe in your home. If you do not feel comfortable storing gold coins in your home than you should opt for Secure Storage.
Considering that gold coins offer protection against economic and geopolitical uncertainty, storing your gold bullion coins in high security and the insured vault is the most recommended option for the smart investor. By storing your gold coins with professional custodians in secure jurisdictions such as Ireland the UK, US, Switzerland, Singapore, and Hong Kong, your gold investment will be fully insured and protected by state of the art security measures and robust legal protections.