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.

What does it all mean?

BU

Brilliant Uncirculated. A standard coin term describing the condition of a coin in the condition that it leaves the mint. Since few if any bullion coins circulate, most bullion coins are in BU (or better) condition. See also Proof, Proof-Like.

 

BU Proof-Like

See Proof-Like.

 

Bullion Coin

A coin made from a specific amount of precious metal, usually designed to be bought and sold for a small premium over the precious metal content of the coin. See also true bullion coin, major collectible bullion coin, minor collectible bullion coin

Copy

One of two types of counterfeit coins. A copy is designed to be exactly like the real thing (although there are almost always noticeable differences). Specifically, it is made from the correct metal. Since they are made from the correct metal, copies are usually only made of rare coins. The other type, and more prevalant among bullion coins, is a fake.

 

Counterfeit

A coin that is not one that was made by the mint. Counterfeit coins are illegal. There are two types: copies and fakes.

 

Fake

One of two types of counterfeit coins. A fake looks a lot like the real thing, except that it is made of the wrong metal (for example, a gold bullion coin made out of copper). Because they are made out of the wrong metal, they are easier to detect. In most cases, they are either significantly lighter than the real thing, or are bigger (usually thicker, but could be wider). The other type of counterfeit coin is a copy.

 

Fractional

A bullion coin made out of an odd amount of metal. For example, British Sovereigns contain .2354oz of gold, so they are considered "fractional gold".

 

Major Collectible Bullion Coin

A coin designed for bullion coin collectors, rather than investors. It must be minted for at least 2 years, and certain years will command significant premiums over current bullion coins (10% or more higher). The gold Panda, Isle of Man Cat series, proof Eagles, and Singapore Lunar series qualify as major collectible bullion coins. They are typically "BU proof-like" in appearance, or may be proof.

 

Minor Collectible Bullion Coin

A coin designed for people other than bullion coin collectors or investors. A coin only minted in one year will qualify as a minor collectible bullion coin, as well as 'specialty' bullion coins (garfield coins, cinema coins, etc.). Although these can be considered bullion coins (IE, they are available in 1/10 oz, 1 oz, etc. sizes), they may or may not be a part of bullion coin collectors collection. They are typically low in mintage. Examples of minor collectible bullion coins include the Bahamas Golf coin.

 

Mintage

The number of coins a mint produced. Usually, the government that creates bullion coins releases the exact number of the coins that they produced. However, this information is often hard to find.

 

NIB

Non-Intentional Bullion Coin. A coin that was originally designed for circulation, but now can be bought or sold close to bullion value. An example would be French Roosters, many of which can be bought for about 15% above their bullion value. These coins would not typically be part of a bullion coin collection, but could be.

 

Proof

A standard coin term describing a coin that the mint has created in a special manner not used for circulating coins, where the coin has a mirror-like finish. Proof coins are created by striking the coin multiple times, using higher pressure, and polishing the dies. See also BU, Proof-Like, Reverse Proof.

 

Proof-Like

A coin that is in a condition similar to proof, but is not technically a proof coin. Since many bullion coins have low mintages, they often are minted before any significant wear occurs to the dies, giving them a better appearance than a BU coin. Often dealers will mistakenly refer to these as proof coins. If you compare a proof coin to a Proof-Like coin, you can usually see the difference (the proof coin is shinier and more mirror like). Also called BU Proof-Like. See BU, proof, reverse proof.

 

Reverse Proof

A coin that is minted using the same techniques as a proof coin, but the background is frosted and the foreground is mirror-like. Most Australian bullion coins are like this. See also proof, proof-like.

 

Spot

The current price of a precious metal.

 

True Bullion Coin

A bullion coin designed for investors, not collectors. This will be defined as a bullion coin that is minted for at least 2 years, and most or all years can be bought or sold at a reasonable premium over spot (close to current bullion coin premiums). True bullion coins include the gold Krugerrand, BU gold Eagle, and gold Maple. They are typically of BU condition, rather than proof.