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Whether you’re a new or seasoned bullion investor, the question of whether to buy gold bars or gold coins is a common occurrence. It’s important to carefully consider which option to invest in, as there’s no one definitive answer that suits everyone. Conducting thorough research is advisable, as the choice can depend on the specific needs and circumstances of the individual investor.
Market trends can also change over time, so it is necessary to consider several factors before deciding on an investment option. These factors include the value of your investment, the premiums charged for the product, the length of time you plan to keep it, the location where you intend to store it, capital gains tax, and how you plan to realize the value of your investment.
The premium is an additional cost charged above the gold spot price, which includes manufacturing costs, handling, packaging, insurance, and delivery. Although reputable bullion dealers charge investors small percentage premiums in a bid to stay competitive, the additional cost is unavoidable since even bullion dealers have to buy gold above the spot price.
To keep premiums to a minimum, buying gold bars, or silver bars if you intend to invest in silver bullion, is the most effective way. Gold bars attract a smaller premium than bullion coins due to their larger size resulting in lower manufacturing costs.
For instance, buying a 1 kilo gold bar is more cost-effective than buying ten 100g gold bars. Although both bars contain the same amount of gold, you can expect to save around 1%, which can be a substantial saving for larger values. If you plan to keep your gold for a long time and don’t intend to sell part of your investment, then larger gold bars are ideal for you. However, keep in mind that this relatively small saving would result in a lack of flexibility.
The premium is one of the major factors to consider when deciding between gold bars or coins. For smaller investments, especially 1oz and under, premiums are roughly equal, and coins can even be less expensive as they are produced in far greater numbers than similarly sized bars. However, for larger bars, 100 grams and larger, premiums per gram will generally be lower than any coin.
The tax status is the second crucial factor to consider when deciding whether to buy gold bars or coins. In the UK, all investment gold is free from VAT, so you can be confident that your gold purchase will be free from VAT at the time of sale, allowing you to maximize your investment.
However, when it comes to selling, Capital Gains Tax (CGT) is a critical consideration. UK coins, particularly those produced by The Royal Mint, have a face value and are legally classified as tender in the UK. As a result, they benefit from a unique exemption from CGT.
Buying multiple gold coins may cost slightly more per gram than purchasing a larger bar, but it could yield greater returns upon sale, given the absence of CGT to pay. As a result, many investors prefer to purchase CGT-free gold coins.
The primary objective of most gold bullion investors is to preserve their wealth and generate returns on their investment. While larger gold or silver bars provide the best value when purchasing, they may not necessarily represent the best value when it comes to selling your gold or silver at a later stage.
Smaller unit gold bars, such as the 1oz, 50g, and 100g bars, as well as gold and silver coins, provide greater flexibility when it comes to resale. This flexibility can be useful in a variety of situations, such as when an investor wants to release part of their investment for quick cash access or when they want to sell a portion of their investment to maximize returns.
As time passes, investors often want to adjust the balance of their portfolios. For instance, an investor may have 20% of their liquid wealth held in a 1 kilo gold bar, but want to release half of it to reinvest in stocks. In this case, the investor would have to sell the entire gold bar or leave it and miss out on other lucrative investment opportunities.
However, if they had initially invested in ten 100g gold bars, they could have easily sold half the bars to gain instant access to half of their money. Bullion coins, which offer even more flexibility, are a popular choice for new and experienced investors who anticipate selling part of their bullion in the near or distant future.
Gold coins are available in various sizes, such as 1oz, 1/2oz, 1/4oz, and 1/10oz, making them highly versatile, easy to store, and ideal for trading if the banking system were to collapse.
Famous gold coins, like the South African Krugerrand coins, tend to attract the lowest premiums, making them ideal for smaller or first-time investors. Alternatively, British bullion coins, like the gold Sovereign, Half Sovereign, and gold Britannia, are perfect for coin investors who hold a significant amount of money in gold bullion because they are CGT-free.
For maximum flexibility, investors may consider purchasing silver coins, which are substantially lower in value than gold coins and come in a 1oz size. Popular silver coins include silver Maples, the silver Philharmonic coin, and the silver Britannia coin, which is usually the cheapest coin to purchase. Despite slightly higher premiums, purchasing silver coins for investment is recommended for ultimate flexibility.
For small or first-time investors, it is recommended to consider both coins and bars, even though coins are the obvious choice for lower-value investments. Depending on market conditions and stock availability, a dealer may offer a bar at a reduced premium. Some bar manufacturers, such as PAMP, offer impressive designs that may appeal to collectors. We suggest finding items with the lowest premiums within your budget to maximize your returns when selling. The cheapest bar Tavex offers is the 1g Tavex bar that you can find below.
For silver investment, there is a wide range of 1oz silver coins available that are an ideal starting point. Ideally you should aim for the lowest cost coin. We recommend this because when selling your bullion, you will only receive the intrinsic value of the metal, so the cheaper you bought them initially, the higher the return on investment you will make.
For individuals who wish to invest significant amounts of money in gold bullion, the decision can be simplified by focusing on obtaining the best value for their money in order to maximize their return on investment. It is recommended to purchase larger unit sizes such as 250gold bars and 1 kilo gold bars as they offer the best value. Additionally, buying gold in bulk can result in further savings as the unit price is reduced when multiple units are purchased, due to lower costs incurred by the bullion dealer.
Moreover, it is suggested that wealthy investors diversify their holdings by adding gold coins to their portfolio, especially British coins. Gold Britannia coins and Sovereigns are particularly attractive as they do not incur any Capital Gains Tax (CGT) since they are considered British Legal Tender.
Although purchasing Sovereigns may come with a slightly higher premium than buying larger gold bars, they offer the best value for wealthy investors looking to generate significant profits from their investment. To obtain the best value Sovereigns, it is recommended to purchase cheaper mixed year gold Sovereigns rather than specific year Sovereigns, which command a slight premium.
In conclusion, the decision to invest in gold bars or gold coins depends on various factors, including the value of the investment, the premiums charged, tax implications, and flexibility in reselling. While larger bars may offer the best value when purchasing, smaller unit bars and coins provide greater flexibility when reselling. For small or first-time investors, it is recommended to consider both coins and bars, finding items with the lowest premiums within your budget. For bigger investments, purchasing larger unit sizes such as 250g gold bars and 1 kilo gold bars can offer the best value, and it’s suggested to diversify holdings by adding gold coins, especially British coins, to the portfolio. By carefully considering these factors, investors can make an informed decision and maximize their returns on investment.