Bullion Coins

Okay, you know you want to buy some gold & silver bullion, or at least you think you do, but how do you know what all this stuff is? You hear about Eagles and Krugerrands and Coronas, where do you start? Right here, with our primer on bullion - coins, bars, rounds, etc.

Let's start with a discussion of spot price. That's the price of gold, silver or platinum you see in the newspaper or on the Internet. Your first question is: Why can't I buy gold at that price? You can, if you buy direct from the commodity exchange in 1000 ounce bars. This is usually out of the reach of most folks, and not very practical at that. That's why people buy bullion coins - easily bought and sold, transportable and reasonably priced.  The cost of the bullion coin over the gold content is called the premium. This takes care of minting charges and a profit for the dealer selling the coin. The goal is usually to buy the most gold and/or silver for the lowest premium.

Gold bullion

Gold bullion comes in several types, including bullion coins and bars.  It can be obtained in fractional sizes: 1/20, 1/10, 1/4, 1/2 ounce coins as well as 1 ounce coins and bars. Larger sizes are also available, although not generally purchased.

Since gold has had value for centuries, there are a number of gold coins available for bullion related uses.  We will cover the most common of these in this primer to provide you with the background needed to intelligently deal in them.

American Gold Eagles, available in 1/10, 1/4, 1/2 or 1 ounce coins, are the most popular bullion coin on the market today.  They were first produced in 1986 by the U.S. Mint. They are 22 karat gold, meaning they are an alloy of gold and certain other metals designed to produce a long wearing coin.  They are legal tender in the United States, starting at $50 and going to $5 face value.

Canadian Maple Leafs are also available in 1/10, 1/4, 1/2 and 1 ounce coins. They also have face values of $50, $25, $10 and $5. The primary distinction between the Canadian Maple Leafs and the American Gold Eagles is that the Maple Leafs are 24 karat or .9999 fine gold. This means they are somewhat softer and don't wear as well.

South African Krugerrands were widely popular for the first 20 years or so, but have dropped in popularity since the introduction of the American Gold Eagles in 1986.

Although fractional denominations are produced, they are extremely rare outside South Africa. The premium over gold content is usually less than the Gold Eagles and Maple Leafs because they are not as popular as they once were.

Chinese Pandas were first introduced in 1982.  They come in 1 oz, 1/2 oz, 1/4 oz, 1/10 oz and 1/20 oz sizes, and are 24 karat fine gold. The Chinese government issues these in face value denominations of 100 yuan, 50 yuan, 25 yuan, 10 yuan and 5 yuan. These generally have a higher premium to gold content because of their popularity.

Old English Sovereigns have been minted since the mid-nineteenth century.  Each contains .2354 ounces of gold, and are useful as fractional gold coins.

Silver Bullion

American Silver Eagles were first produced in 1986 and are U.S. legal tender. They are available in the 1 oz size and have a $1 face value. Because of their popularity, the U.S. Mint is having difficulty meeting demand, and thus these coins are currently commanding a high premium to silver content.

Canadian Silver Maple Leafs contain 1 ounce of .9999 fine silver and are legal tender in Canada with a $5 face value.
 
Silver bars are generally availabe in 1 oz, 10 oz and 100 oz sizes.  They are produced by several well known private refineries, including Englehard and Johnson Mathey.

Pre-1965 U.S. silver coins, including Mercury and Roosevelt dimes, Washington quarters and Franklin and Kennedy halves are 90% silver by weight. This provides very small fractional silver coins at a reasonable price. 90% silver coins are sold by the face value, e.g. $5.50 per $1.00 face( 10 dimes, 4 quarters or 2 halves). Currently the premium to silver content is fairly high and expected to climb, but everyone should have some of these small fractional silver coins on hand.

From 1965 to 1969, Kennedy halves were made with 40% silver by weight.  Each coin contains .14792 ounces of silver.  40% silver halves make an excellent addition to your silver portfolio because there is a low premium over silver content. Because the face value is $.50, if you purchased a coin for example for $1.00, the most you would lose if silver fell to zero would be $.50. Look for these to become more popular as the market in 90% silver coins dries up.

Silver rounds come in 1 troy ounce weights*, usually of .999 fineness or better.  Often referred to as "miscellaneous silver rounds", these medallions are not legal tender and are produced by private refineries instead of national governments.  These are excellent and inexpensive means of buying easily tradeable units of silver.

*Troy ounces are heavier than regular ounces. There are only 12 troy ounces in a pound.

BE AWARE: Sometimes premiums reflect the activity in the market, and can flunctuate pretty wildly.