How do I Invest in Gold and Silver Coins?

There are two ways to invest in gold and silver coins. The first focuses on the value of the precious metal content of the coin itself, and is promoted as a hedge against inflation. These coins are available directly from government mints in some countries, but in the United States must be purchased from a dealer. Collecting gold and silver coins for their numismatic, or collectors' value, is another way to invest in gold and silver coins. This approach is considered far more risky because the coins derive most of their value from variables like their age, quality and rarity.

Some nations, such as the United States, Canada, South Africa and others, produce investment-grade gold and silver coins, often called bullion coins. These are most often minted in one ounce (28.35 gm) sizes, and some nations also mint other sizes, both larger and smaller. Bullion coins are clearly marked with the actual amount of precious metal in the coin, which is guaranteed by the issuing government. A premium is added to the cost of the precious metal in the modern coins smaller than one ounce (28.35 gm), making these smaller sizes more costly per ounce and diminishing their investment value.

The gold in bullion coins is usually alloyed with a small percentage of another metal like copper to make the coin harder. These coins are usually 22- or 23-karat gold. Gold that’s 100% pure is rated as 24-karat, but it’s also very malleable and easily scratched. Some investors avoid buying 24-karat gold coins, such as Canada’s Maple and Austria’s Philharmonic, because they’re easily damaged, which could reduce their value upon resale.

Some governments sell their bullion coins directly, while others, such as the United States, distribute them to dealers which sell them to the general public. In addition to bullion coins, many investors buy common date gold coins — gold coins minted before 1935 for general circulation, which are common enough that there’s no significant markup due to their rarity. For example, from 1907 until 1933, the US minted a beautiful $20 US Dollars (USD) gold coin designed by Augustus St. Gaudens. Many of these coins, often called Double Eagles, are valuable numismatic specimens, but those minted by the Philadelphia Mint in 1924, 1927 and 1928 are common-date gold coins frequently purchased for their precious metal value alone. In addition, investors interested in coins less than an ounce (28.35 gm) but who want to avoid the premium on fractional bullion coins can buy older European gold coins, such as British sovereigns, French or Swiss 20 francs, or Dutch (Netherlands) 10 guilders.

Investing in gold and silver coins for their numismatic value can be risky. These are coins issued by governments for general circulation, although some are specially packaged for collectors. Their production is limited to the year they’re minted, and production figures are published that help collectors determine their rarity. Growth in value for these coins is often very slow, and individual coins may lose value if they’re damaged or if more of them come onto the market from private collections or other sources.

From a collector’s perspective, a coin’s rarity and condition are the most important considerations in determining its value, although it will never drop below the value of the precious metal content. Collectors’ coins shouldn’t be confused with so-called "collectible coins," which are novelty items minted both by governments and private mints and sold at a premium. The value of these coins rarely appreciates sufficiently for them to be considered a good investment.

As a general rule, investing in gold and silver coins is something that should be undertaken only after a number of other investment goals have been met. Establishing a six- to 12-month emergency fund for expenses in easily accessible form, such as a money market fund, is a goal most experts agree upon. Another is opening a retirement savings program, contributions to which won’t be affected by the investor’s purchase of gold and silver coins.