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What is a Legal Tender and Why is it a Good Investment?

Published by honor in category Precious Metal Information Guides on 04.01.2024
Gold price (XAU-GBP)
1,831.75 GBP/oz
- GBP2.07
Silver price (XAG-GBP)
23.35 GBP/oz
+ GBP0.20

In the world of investments, one often comes across various asset classes like stocks, bonds, real estate, and cryptocurrencies. However, there is another intriguing option that has been gaining popularity among investors: legal tender coins.

When considering an investment, legal tender coins are popular as they tend to hold a lower of a degree of risk than stock market investments or government bonds which have a high risk portfolio. Hailed as a safe haven asset over other products or services, these coins boast investment potential over a long time horizon.

In this article, we will explore what legal tender is and why it is considered a smart investment choice.

What Is Legal Tender?

Legal tender refers to a form of currency that is recognised by a government as a valid means of payment for goods and services within its jurisdiction.

These currencies are typically issued and regulated by the government’s central bank

While legal tender can take various forms, including paper money and coins, we’ll focus on coins which hold a legal tender status, which have a unique appeal to investors.

Legal Tender Coins: An Overview

legal tender

Legal tender coins are specially minted coins that hold a dual status. They are not only considered valuable collectibles but also carry the status of being a legitimate form of currency within a specific country.

These coins often feature intricate designs, historical significance, and are minted in limited quantities, making them highly sought after by collectors and investors alike.

At Tavex our selection of coins with a legal tender status include:

Benefits of Investing in Legal Tender Coins

King Charles III Sovereign

Now that we have a basic understanding of what legal tender coins are, let’s explore why they are considered a good investment choice.

1. Historical Significance

These coins often commemorate important events, figures, or cultural aspects of a nation’s history

This historical significance can make them highly collectible and increase their value over time. Collectors and history enthusiasts are often drawn to these coins, creating a robust demand in the market. For example, the British Britannia holds this status, and has been in circulation since 1987.

2. Intrinsic Value

Unlike paper currency, legal tender coins are typically minted using precious metals such as gold or silver

This inherent value provides a level of security to investors, as the value of the metal itself can fluctuate independently of the coin’s collectible value. This dual value proposition makes legal tender coins a unique investment opportunity.

britannia-1-oz-gold-coin-reverse-2024 In Stock

1oz British Britannia Gold Coin 2024

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3. Limited Mintage

Some legal tender coins are minted in limited quantities, often with strict issuance guidelines set by the government or central bank. This limited mintage enhances their rarity, driving up their demand among collectors and investors. As the supply remains limited, the potential for price appreciation is substantial.

4. Diversification

Investors often seek to diversify their portfolios to spread risk. Legal tender coins offer a unique way to diversify beyond traditional investments like stocks and bonds. Their relatively low correlation with other asset classes means that they can act as a hedge against economic uncertainties.

5. Worldwide Recognition

Legal tender coins are universally recognised as a form of currency within their respective countries

This recognition ensures their liquidity, allowing investors to convert them into cash or use them for transactions if needed.

Guidelines and Regulations

It’s important to note that not all commemorative coins qualify as legal tender. Governments often issue guidelines and regulations to distinguish legal tender coins from regular collectibles. These guidelines may specify the coin’s denomination, design, and issuance criteria.

For instance, the Royal Mint in the UK provides clear guidelines on what qualifies as legal tender coins

Their coins must meet specific criteria, including being denominated in pounds sterling and having the monarch’s effigy on the obverse side.

Key Takeaways

Legal tender coins offer a unique blend of historical significance, intrinsic value, limited mintage, diversification benefits, and worldwide recognition when it comes to considering investment options. These factors make them a compelling investment choice for those looking to add an element of diversity and historical depth to their portfolios.

However, it’s crucial to understand the specific guidelines and regulations set by governments to ensure that the coins you’re considering truly qualify as legal tender. By investing wisely in legal tender coins, you can potentially enjoy both the joy of collecting and the benefits of a valuable investment.

When considering your type of investment, in the short term and long term, it is important to consider a legal tender coin as an investment decision as it comes with the security of being produced in high quality by The Royal Mint. Depending on the type of investment you are looking for, and your risk tolerance, legal tenders could be the investment for you.

Gold price (XAU-GBP)
1,831.75 GBP/oz
- GBP2.07
Silver price (XAG-GBP)
23.35 GBP/oz
+ GBP0.20

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