How & Where to Buy Gold Coins (2017 Buying Guide)

Jeff Clark, Senior Precious Metals Analyst, GoldSilver

There’s nothing quite like holding a gold coin in your hand. And owning some real gold offers a number of ­­­­­advantages you simply can’t get with other investments. And since gold is a natural hedge against the stock market, it’s an excellent way to diversify, too.
This article will cover the basic do’s and don’ts of buying gold coins, including the advantages of owning them, the best gold coins to buy, the best places to buy (including if you should buy online or on eBay), and how to avoid getting ripped off. With a few simple guidelines you’ll be on your way to owning one of mankind’s longest-living assets.
Let’s start with something about gold coins that many investors aren’t aware of…
The Many Reasons for Buying Gold Coins
Gold offers benefits far beyond the fact that its price can rise.
Considerable all the advantages you gain by buying gold coins. Gold is…

• A tangible asset. You can hold $50,000 of gold coins in your hand, which you can’t do with most any other investment. It can’t be destroyed by fire, water, or even time. And unlike other commodities, gold coins don’t need feeding, fertilizer, or maintenance.

• Free of counterparty risk. Gold coins require no paper contract to be made whole. Gold is the only financial asset that is not simultaneously some other entity’s liability. It doesn't require the backing of any bank or government.

• Highly liquid. Gold coins can be sold virtually anywhere in the world. There are gold dealers in just about every major city on the planet. And in a crisis, gold will be in high demand. Other collectibles, like artwork, take longer to sell, have a smaller customer base, and will likely entail a big commission.

• Value dense. You can hold $50,000 in gold coins in the palm of your hand. Gold coins take up such little space that you can store more value of them in a safe deposit box than stacks of dollar bills.

• Private and confidential. How many assets can you say that about in today’s world? You must pay taxes on any gain, of course, but if you want a little privacy or confidentiality, just buy some gold coins!

• Portable. You can take gold coins with you wherever you go in the world.

• A store of value. The gold price fluctuates, of course but its value is timeless. Consider that gold retains its purchasing power over long periods of time, while the US dollar, for example, has lost 98% of its purchasing power since the creation of the Federal Reserve in 1913. And since gold will outlast you, it is an ideal asset to pass on to your heirs.

By the way, it’s a faulty argument that gold doesn’t produce any income. That’s not gold’s role. Its function is as money and a store of value, similar to a currency. That’s also why it shouldn’t be viewed as a commodity; it doesn’t get used up, like oil or corn. In other words, gold is money!

• Can’t be hacked or erased. It’s probably not a good idea to keep all your wealth in digital form today. That’s easy to do if you own some gold coins.

• Requires no specialized knowledge. If you don’t know how to spot a real diamond, aren’t familiar with the painter Van Gogh, or don’t collect comic books, just buy some gold bullion. No special skills or training needed.

• Comes with low maintenance and carrying costs. Even if you pay for storage, compare that to the costs and taxes and headaches of, say, real estate. You don’t even need a stock broker to buy and sell gold coins.

The Best Gold Coins to Buy
There are a lot of gold coins on the market. But they all fall into two basic categories: standard bullion coins, or numismatic (rare) coins.
Bullion coins simply refer to gold coins that are made almost exclusively from precious metal, in this case gold. Their attraction is that they consist of highly refined gold and are viewed primarily as an investment. Some bullion coins have an alloy to make the coin more durable, since gold is a “soft” metal. Bullion coins are not regarded as a “collector” coin, which is a different class of coin (though all gold is taxed as a collectible).
You can buy bullion coins from a number of government mints that produce them each year. These are generally referred to as “sovereign” coins, meaning they are manufactured (and in most cases guaranteed) by that government. They also come with a face value (except the South African Krugerrand). These face values are mostly symbolic at this point, since the gold content of the coin makes them worth a lot more than the value printed on the coin. But each government guarantees they will always be worth the amount stated.
Private mints also make gold coins, called “rounds.” While usually of good quality, they don’t come with a face value or the same government backing. This makes them less attractive than sovereign gold coins, and thus the popularity of gold rounds is limited not high (this is not the case for silver rounds).
Numismatic coins refers to rare coins, ones that are bought and sold by collectors. Unlike bullion coins, their value isn’t based on the gold content, but rather on their rarity and condition. Their premiums (or mark-ups) are usually much higher than bullion coins, and can stretch into the thousands of dollars (and in some cases, millions!).
The best rule of thumb on whether to buy numismatic coins is this:

•  Unless you plan to become a coin collector, avoid numismatics.

The reason is simple: if you don’t know what you’re doing, it’s easy to pay a whole lot more than you should. Some dealers will try to convince you to buy them, claiming they’ll someday be worth more or would be exempt in a confiscation. These things may or may not come to pass, so these arguments are really just sales tactics. The bigger reason they want to talk you out of bullion coins and into rare coins is because they make a lot more money on them! Sales commissions are much higher on numismatics, which of course you pay for. My advice is don’t get talked into rare coins (or if you’d like to collect historic coins, get educated first).
Proof coins are another form of numismatics. These are high relief coins and are very eye-appealing, but also come with high mark-ups. Again, these are geared for collectors, and unless that’s what you want to be, you don’t need to buy these when you invest in gold.
“Semi-numismatic” coins is another term you might hear. This is more of a marketing term than anything else, and basically refers to gold coins (and more frequently silver coins) that are made to be collector coins but don’t yet have the historical significance of a true numismatic. They may or may not be worth more someday, but should not be viewed as a replacement for bullion. They are still part of the collector’s world, and as such you will pay more for them than standard bullion.
Because coin collecting is a different animal, there are many coin dealers that don’t sell numismatic coins at all (including GoldSilver). They don’t offer collector coins because, well, they’re not collectors, and also because they just don’t feel comfortable selling over-priced products to investors when all most investors need is bullion.

By the way, you’ll sometimes see a coin marked “BU.” This stands for “Brilliant Uncirculated.” It just means it’s a brand new coin, never before sold. If you’re buying the current year coin, it will be BU. Past years can be BU, too, if they were never sold. These older-dated gold coins are usually referred to as “common date” coins, or listed on a website as “year of our choice.” Again these are fine if they’re BU. If a coin is not BU, you might as well look for one that is, since they’re plentiful. All of our gold coins here at GoldSilver are BU.

There’s one more element that will help us identify the best gold coins to buy—and that’s being prepared to sell…
As an investor, you want to buy something that won’t just rise in value, but that will also be easy to sell. That’s generally easy to do in the stock market, as most stocks are highly liquid. But you’ve probably heard that some stocks have very low volume, which can make them tricky to sell. The same thing is true with gold coins: you want a class of coins that will be easy to sell. You want to avoid a product that could experience a delay when it’s sold, or cost you more than you expected, or won’t have a lot of buyers.
And those are exactly the concerns with rare coins. You could experience delays when you attempt to sell them—the dealer or buyer might want to confirm its value or authenticity, for example. Or they may offer you less premium than you paid. Or they may not want to buy it at all. On top of this, you have a much smaller pool of interested customers, as many investors are not coin collectors.
Sovereign coins, on the other hand, are easily recognizable literally the world over, can always be sold for the price of gold, and will have plenty of customers.
Add it all up and…

•  All investors should start by buying sovereign gold coins.

Government (sovereign) coins are the most widely known around the world and thus will be the easiest to sell. Even if you don’t sell them but pass them on to your heirs, they will need something that’s easy to sell.
So the golden rule when buying gold coins is this: buy the most common or popular items, so that you have high liquidity when the time to sell comes.
Here’s a summary table of the differences between bullion coins and collector coins:

Sovereign Gold Coins	Numismatic (Collector) Gold Coins
Value is based strictly on gold content.	Price depends mostly on rarity and condition.
Pricing is straightforward and transparent—what is today’s price of gold? That’s the value of your gold coin.	Pricing is subject to many factors. Deception is possible and novice buyers can be easily fooled.
Easy to sell, even in an emergency.	Selling could be subject to delays. Liquidity is lower.
Millions of potential customers. Can be sold anywhere in the world.	Buyers are limited to other collectors.
Standard gold bullion coins are mankind’s oldest form of crisis or wealth insurance. History shows gold in coin form is a strong investment.	Claims of greater future worth or protection from confiscation may not materialize. Buying rare coins is a speculation, similar to artwork.
Very little knowledge needed to buy bullion coins.	Study and education is a must. Also have to stay up on industry changes.

It’s easy to see that the average gold investor should stick to, or at least start with, common bullion coins.