Dubai: People are often told to keep a percentage of their hard-earned savings in gold because the yellow metal is the most recommended way to protect wealth from inflation and economic uncertainty.
What form of gold is the best form of investment?
While other asset classes like stocks, real-estate, and cash can potentially lose a lot of their value because of wars, recessions, and inflation – gold, on the other hand, tends to retain value or even appreciate when everything else is crashing.
Although many gold investors have recently decided to get exposure to gold through gold exchange-traded funds (ETFs) and mining company stocks, these indirect forms of investing in gold are much riskier than physical metal.
With ETFs, for example, management fees on your holdings will add up, and in practice this can have much the same effect as inflation. As for mining stocks, the stock prices of these companies dramatically underperforms physical gold over the long run due to the risk of investing in individual businesses.
Prefer gold bars or gold coins over gold-linked assets?
Most investors buy physical gold or gold bullion with the intention of preserving wealth and making a return on their investment.
Where the larger unit size gold bars offer the best value when buying, they do not necessarily represent the best value when it comes to selling your gold at a later date.
However, smaller units of gold such as the 1 gram coins, 50 gram and the 100 gram bars offer greater flexibility at resale.
Gold coins are 90-92 per cent gold (22 karat). However, most of today’s gold coins are pure gold. For investors, buying gold coins can be easier when compared to jewellery.
How gold coins offer more flexibility than gold bars?
There are many reasons where flexibility of gold coins over gold bars would come in use.
For instance, releasing part of your investment for quick access to cash, or perhaps part-selling which is often an effective way of getting a maximum return on investment.
At this point, the investor would have to sell their entire gold bar or leave it and miss out on the other potentially lucrative investment opportunities. However, if they had originally invested in ten 100 gram gold bars, they could have easily sold half the bars to gain instant access to half of the money.
Better still, bullion coins represent even greater flexibility and are a very popular option for new and experienced investors alike who are mindful of this and anticipate selling part of their bullion in the near or distance future.
Gold coins are available in a variety of sizes, making them highly versatile, easy to store and ideal for trading if the banking system did ever collapse.
Are gold coins always better than gold bars?
One downside of gold coins is that if it is purchased from one source, they should be sold to the same source, as sometimes it might fetch lower resale value depending on the market price.
This is why it is advised that small and first time investors look into both coins and bars, despite coins being the obvious choice for lower value investments.
Moreover, gold bars are not easily sellable as compared to the smaller variant. This is because your choice of buyer gets restricted owing to the bigger size and consequently higher price of large gold bars.
Owing to their large size, these can also be difficult to melt and reshape. This is why it might involve additional handling charges when a gold bar or bullion owner tries to resell these.
Gold coins lag behind gold bars in terms of the price at which they come. However, apart from this one disadvantage, gold coins are generally better disposed to be useful as compared to gold bars.
Key takeaways
Physical gold is the best way to invest in the precious metal because it doesn’t come with the negatives associated with mining stocks and gold exchange traded funds.
However, buying physical gold is not completely straightforward because there are several different ways to buy physical metal, and the best method depends on your individual investment goals and situation.
Generally, gold investors must choose between gold bullion bars and coins. But how does one decide?
Gold bars are the largest and most efficient way to purchase and store large amounts of gold. They are usually also the most cost efficient.
This is because they have smallest premium over the gold price and the lowest mark-ups for design and transportation. They are also easier to stack and more difficult to counterfeit.
Gold coins are smaller and more convent than gold bars, but they are also harder to store because they are easier to lose.
Coins are less efficient than bars for holding large amounts of metal, and some of them may come with a higher premium over the gold price because they can be marked-up for design or rarity.
Verdict: Buy gold bar or gold coin?
The decision between physical gold bars or coins depends on your situation and goals.
Gold bars are good for investors who have a large amount of money that they want to put into gold while coins are better for investors who don’t have as much money up front but want to slowly accumulate gold holdings.
On top of that, coins are more useful for people who intend to use their gold as money – either now or at a future date.
