Dubai: People are often told to keep a percentage of their hard-earned savings in gold, as the yellow metal is the most recommended way to protect wealth from inflation and economic uncertainty.
While other asset classes like stocks, real estate, and cash can potentially lose a lot of their value due to wars, recessions, and inflation, gold, on the other hand, tends to hold its value or even to appreciate when everything else collapses.
Although many gold investors have recently moved to gain exposure to gold through exchange-traded funds (ETFs) and shares of mining companies, these indirect forms of investing in gold are much more risky than physical metal.
With ETFs, for example, the costs of managing your holdings will add up and, in practice, this can have about the same effect as inflation. When it comes to mining stocks, the stock prices of these companies significantly underperform physical gold over the long term due to the risk of investing in individual companies.
Do you prefer gold bars or gold coins to gold-linked assets?
Most investors buy physical gold or gold bullion with the aim of preserving their wealth and making their investment profitable.
While larger sized gold bars offer the best value when buying, they may not necessarily represent the best value when it comes to selling your gold at a later date.
However, smaller units of gold such as 1 gram coins, 50 gram bars, and 100 gram bars offer greater flexibility when reselling.
What are gold bars and gold coins?
Gold bars, also called gold bars, are made by pouring molten gold into molds, but smaller bars are made by stamping rolled gold foil. Central banks hold gold reserves in the form of gold bullion.
Gold coins are 90-92% gold (22 carats). However, most gold coins today are pure gold. For investors, buying gold coins can be easier compared to jewelry.
How do gold coins offer more flexibility than gold bars?
There are many reasons why the flexibility of gold coins versus gold bars would be used.
For example, freeing up some of your investment for quick access to cash, or perhaps selling some, which is often an effective way to get maximum return on investment.
An illustration to help you decide if gold coins are better for you
Over time, individuals often want to change the balance of their investment portfolios. So suppose an investor can hold 20% of his liquid wealth in a 1 kilo gold bar, but wants to free up half of it to reinvest in stocks.
At this point, the investor should either sell all of their gold bullion or leave it and miss out on other potentially lucrative investment opportunities. However, if they had initially invested in ten 100 gram gold bars, they could have easily sold half the bars to gain instant access to half the cash.
Even better, bullion coins represent even greater flexibility and are a very popular option for new and experienced investors who are aware of this and plan to sell some of their bullion in the near or distant future.
Gold coins come in a variety of sizes, making them very versatile, easy to store, and ideal for trading should the banking system ever break down.
Are gold coins always better than gold bars?
One of the disadvantages of gold coins is that if they are purchased from one source, they must be sold to the same source, as they can sometimes have a lower resale value depending on the market price.
This is why retail investors and new investors are advised to look to both coins and bullion, although coins are the obvious choice for lower value investments.
Additionally, gold bars are not easily salable compared to the smaller variant. This is because your choice of buyer is restricted due to the larger size and therefore higher price of large gold bars.
Due to their large size, these can also be difficult to melt and reshape. This is why it may involve additional handling charges when a gold bullion or bullion owner tries to resell them.
Gold coins lag behind gold bars in terms of the price at which they are sold. However, aside from this one downside, Gold Coins are generally more likely to be useful than Gold Bars.
Key points to remember
Physical gold is the best way to invest in the precious metal, as it does not come with the drawbacks associated with mining stocks and gold exchange-traded funds.
However, buying physical gold is not entirely straightforward as there are several ways to buy physical metal, and the best method depends on your investment goals and situation.
Generally, gold investors have to choose between gold bars and coins. But how do we decide?
Gold bars are the largest and most efficient way to buy and store large amounts of gold. They are usually also the most profitable.
This is because they have the smallest premium over the price of gold and the lowest margins for design and transportation. They are also easier to stack and harder to counterfeit.
Gold coins are smaller and more customary than gold bars, but they are also more difficult to store because they are easier to lose.
Coins are less efficient than bullion at holding large amounts of metal, and some of them may come at a higher premium over the price of gold, as they may be marked up for their design or scarcity.
Verdict: Buy a gold bar or a gold coin?
The decision between physical gold bars or coins depends on your situation and your goals.
Gold bars are good for investors who have a large amount of money they want to invest in gold while coins are better for investors who don’t have that much money upfront but who want to slowly accumulate gold holdings.
In addition to this, coins are more useful for people who intend to use their gold as currency, either now or at a later date.