Gold Bars vs. Gold Coins: Which is a Better Investment?

Gold has been a symbol of wealth and a reliable store of value for centuries. When investing in gold, individuals often face the choice between gold bars and gold coins. Both options offer unique advantages and serve different purposes depending on an investor's goals.

Gold bars, known for their purity and efficiency in storage, are often favored by those seeking to hold significant amounts of gold at lower premiums. On the other hand, gold coins provide versatility, aesthetic appeal, and historical significance, making them attractive to collectors and smaller investors.

This guide will explore the key differences, advantages, and considerations of gold bars vs. gold coins to help you make an informed decision that aligns with your financial objectives.

Why Invest in Gold?

When comparing gold bars vs. gold coins, one may align better with your investment strategy than the other. However, you can typically feel confident investing in gold bullion bars or coins.

Investing in gold is a stable and reliable way to hedge against inflation and diversify your investment portfolio. As inflation increases and the U.S. dollar loses value, gold prices typically rise. Historically, investors have found a haven in gold during economic turmoil to preserve wealth and retain buying power.

As measured by the Consumer Price Index, the U.S. inflation rate dropped to 0.3% in November from the 9.2% high reached in June 2022. However, it remains sticky and above the Federal Reserve’s target of 2%. Along with expected interest rate cuts and wars in Europe and the Middle East, most analysts believe the price of gold will continue to rise.

Beyond safeguarding the value of your portfolio, physical gold is more liquid than other assets. As such, it lets you quickly turn your gold bars and coins into cash.

Pros and Cons of Investing in Gold Bars

If you have to choose between gold bars vs. gold coins, here’s a look at the advantages and disadvantages of buying gold bars.

Pros

Gold bars are typically 99.99% pure gold and can be purchased near the gold spot price. With a lower premium than gold coins, you can stretch your dollars further and buy more gold in weight than you can with gold coins. 

Gold bars come at a lower price because they cost less to produce. The trapezoidal bars of refined gold are typically stamped with the logo of a mint, along with the bar’s purity and weight. You can buy a bar as small as one gram or as large as one kilogram.

Cons

The gold spot price will be the same from dealer to dealer. However, each dealer could charge a different premium. This may force you to shop around to find the best price. 

Storing your gold bars also has downsides. Stacking gold bars can take up space, and you must pay for a safe or storage area and insurance, all of which can eat into your returns. 

While gold is a reliable investment, it still comes with risks. Market conditions can impact gold bar prices, too, and larger investments in gold bars can be harder to turn into cash than gold coins.

Pros and Cons of Investing in Gold Coins

Depending on your situation and investment strategy, gold bars vs. gold coins may not matter to you. However, to make a direct comparison, here are the pros and cons of investing in gold coins.

Pros

Investing in gold coins has several advantages. Many of these coins have a face value and are legal tender, and their worth is often more than their face value. Coins, such as the American Eagle from the U.S. Mint, are collectibles and may hold a numismatic value, too. 

As an investment, gold coins provide more flexibility because they are easier to sell than gold bars. Smaller denominations can offer even more convenience, with lower amounts of money potentially leading to faster exchanges. 

Certain coins that complete a series or were never circulated can also hold higher resale values. The sale of legal-tender gold coins also won’t result in a capital gains tax on the profit. 

Cons

Like any investment, gold coins have drawbacks. For instance, they carry a higher premium than gold bars because they cost more to manufacture. The intricate designs that make them valuable to collectors also add to the price. 

The value of gold coins can also be difficult to figure out, as a coin’s numismatic value may not align with gold prices. A coin’s collectability may also make it difficult to sell. It might not fetch a reasonable price if it falls out of popularity. 

And as a collectible, profit from the sale can be taxed as a capital gain. How much you pay would depend on how long you’ve held the coin. If it were less than a year, you would pay a higher tax on your profit as ordinary income. If you’ve had it for over a year, you would see a lower capital gains tax on the profit.

Factors to Consider When Buying Gold

Investing in gold bars vs. gold coins is a personal choice. You might prefer one based on your investment goals and strategies. However, you must consider these same factors no matter the direction you choose:

• Find a Reputable Dealer: Check reviews and ask other investors before choosing.
• Understand the Gold Spot Price: This is the amount you would pay for gold delivered right now.
• Understand the Premium: Dealers can charge different markups on the gold spot price, so shop around to find the lowest premium. 
• Find Secure Storage: How you store your gold can impact your return.

Several factors must be considered when storing physical gold. For instance, you’ll need more space to store gold bars than coins, but either can be stored at home, in a safe deposit box, or at a certified bullion storage facility. 

Even if you store your gold at home, you might consider investing in a safe. Additionally, the amount and type of bullion you have – gold bars vs. gold coins – can determine what kind of off-site facility you use for storage.

Start Investing in Gold Bullion

Investing in gold bullion, whether bars or coins, can be a reliable place to park your money, especially as an inflation hedge and a way to diversify your portfolio during economic uncertainty. In the ongoing battle of gold bars vs. gold coins, you can be the winning investor regardless of which one you choose.

Frequently Asked Questions