The Different Types of Gold and Their Investment Potential
This post was last updated on October 18th, 2023
Image Credit: Hamilton Leen
Many gold investors make the mistake of thinking that one type of gold is like another. This is not the case, especially where it comes to investment. For a gold investment to be truly investment grade quality. Full and Half Gold sovereigns are ideal for gold collectors and investors in the UK since they are tax-free and CGT-free. Here, we explore the various types of gold and their investment potential.
What is investment grade gold?
Gold is classed as investment grade if it takes the form of a coin or bar and is of a purity of 22 karats or higher. Investors should always try to buy this level of purity of gold.
1. Gold Bars
Here we have gold in its purest form. With a gold bar, there are no thrills, it’s purely gold shaped in the form of bars. Gold bars are often out of the reach of some investors, with a 1KG gold bar currently trading at around $42,000 as an example!
With gold bars, investors receive the maximum amount of gold for their money. The manufacturing costs to Mints like Metalor and Umicore are much reduced compared to coins and jewellery manufacturers. Also, because of the amount of gold being bought, there is a volume discount already applied before purchase.
Popular sizes of bars to buy include 50g, 100g, 250g, 500g and 1KG. Purchases below 50g in size are often at a premium and the buyer doesn’t get as much gold for their money!
Gold bars are a particularly efficient form of gold investment.
2. Gold Coins
Gold coins are a very popular method of investing in gold and are popular with coin investors (Numismatists too). Buyers of new issues of gold coins always pay a manufacturer’s premium when compared to bars as the production costs are significantly higher.
It’s this buyer’s premium, which can impact the investment potential. Although, as coins mature with age a collector’s premium over and above the core metal value (based on the gold spot price) can arise. The better an investor buys, the more potential there is for an increase in price. Investors should buy gold coins from popular Mints, which are printed in limited edition runs.
3. Gold Wafers
Gold wafers are hard to find with few suppliers and are Minted by Valaurum Inc. One quality of gold wafers is that they are affordable with the Valaurum shop having items for $11. Although the wafers are minted at investment grade level and are 24 karats, they are sold at a considerable premium to the gold spot price. With 1oz of gold wafers costing $3,100+ and the current spot price being $1318 per oz, these have a 235% premium and are not a credible investment.
4. Gold Nuggets
Gold nuggets are not really ideal for the private gold investor. Although each nugget is unique and appealing, they need refining and converting into other forms of gold before they can be converted into 22 karats or higher levels of purity. There is an open market for gold nuggets and for investors who want something a little different, they may be of interest but are not investment grade gold.
5. Gold Jewellery
Gold jewellery is available in many forms, (e.g. necklaces, rings, brooches, etc.) and is often bought in conjunction with gemstones (e.g. diamonds, rubies, sapphires, etc.) It’s tricky to price jewellery as a number of factors will determine its value, not just the price of gold, but also the other elements of the jewellery too. As a classic gold investment, gold jewellery is best avoided as it doesn’t maximise the amount of gold the buyers receive for their money.
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Which type(s) of gold to buy?
The standout candidate to buy is gold bars. Buyers will receive the maximum amount of gold for their money and know that when it comes for the time to sell, they will have a liquid asset, which is easy to dispose of.
Gold coins are another suitable alternative. They have more appeal than gold bars and a collectability factor. If an investor buys well, he may make more profit long-term through buying the best new gold coin releases or by investing in vintage rare and collectable gold coins.
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