Gold is on the rise. Since 1971, when the U.S.’s last ties to the gold standard were severed, the most precious of precious metals has gained more than 4,800%! The S&P 500, by contrast, has gained only 1,300% – while the value of the dollar has gone down by 82%.
Even in the past five years, gold has posted huge gains. On February 12, 2007, gold closed at $664. Today, it’s at $1,720 – up 159%. The S&P 500, by contrast, is down more than 6%, even as the dollar has lost more than 10% of its purchasing power.
These are the reasons why gold is so hot right now. This is why you see “We Buy Gold” signs all over the place. And if companies are making a business out of buying gold, shouldn’t you make it your business, too?
But with gold so hot right now, there are lots of gold-buying options to choose from. You could trade futures contracts. You could buy gold-mining stocks. You could buy a proxy for gold in the form of a gold ETF. There are even gold mutual funds. But almost any expert will tell you the same thing: if you want exposure to gold, nothing is better than holding the physical metal.
Even still, there are options: You can buy bars, rounds, or coins. And even once you settle on one of them, choices still abound!
This article will focus on gold coins. Coins are different from rounds in that coins are issued by governmental authorities – rounds are issued by private mints. Libertarian sentiments aside, government coins are generally more widely accepted – not everyone is a libertarian, after all. Thus, this added liquidity generally makes these coins more preferable to rounds.
But which coins? Here we will examine ten, in descending order.
#10 – 1oz Mexican Gold Libertad
The 1oz Mexican gold Libertad is one of the most collectible coins in the world. They are .999 fine gold coins, unlike the Mexican gold pesos, but given a choice between the two, I prefer the peso coins. See #7 for more info.
Austrian gold philharmonics are the most beautiful coins in the world, in my opinion. I also like them because I’m a fan of Austrian economics. The coins are legal tender with a 100 euro face value. I wouldn’t part with one for that, though, as with current price of gold, 1 oz gold coins have a spot value of around 1,300 euros!
Chinese gold pandas are among the most popular gold coins – they make a great gift, especially to a young and budding goldbug. Pandas have been produced every year since 1982. Currently, mints in Beijing, Shenzhen, Shanghai, and Shenyang all produced gold pandas, which come in a variety of sizes ranging from 1/20 of an ounce to 1 kilo! The 1 oz coin is the most popular, and can be purchased for as little as $55 over spot. Another interesting thing about the Chinese pandas are that the face of the coin changes every year. This makes the coins fun to collect. However, the mark-up on these Chinese coins makes them a more speculative investment than a straight-up bullion play.
Mexico’s gold peso coins are some of the most beautiful in the world. They are minted in Mexico City and consist of 90% gold, 10% copper – this makes the coins more durable. Mexican gold pesos come in 2, 2.5, 5, 10, 20, and 50 peso denominations. The 2-peso coin contains 0.0482 troy ounces of gold, which makes it the most liquid of the coins. It sells for as little as $6 above spot price or around $90 at today’s current gold prices.
#6 – 1oz Canadian Gold Maple Leaf
One advantage of coins over rounds is that people (unfortunately) trust government mints more than private ones. What’s more, they trust their own government more than foreign governments. For this reason, American gold coins are the best in the U.S., and in many other parts of the world, and a second best in countries that mint their own gold coins. For Americans in particular, though, the Canadian gold maple leaf coins are a second-best to American eagles. Let’s face it, most Americans couldn’t find Austria on the map, but they’ve all held Canadian quarters and pennies. Canadian gold maple leafs are beautiful coins, too.
Worldwide, the gold Krugerrand is the second-best gold coin you can hold. This is because for many years, Krugerrands were the only game in town. After the suspension of the gold standard and the breakup of the Bretton Woods System, South Africa – with its racial apartheid – was on the outside of the world monetary system. It wasn’t loyal to the Soviets, and it wasn’t in league with the liberal West. Communist countries, of course, had no use for gold, and with the drift of the West towards socialism, gold had been rejected – and made illegal in many countries – by liberal governments. Thus, if you wanted to hold gold, you held Krugerrands, and as a result, these coins have become widely known and accepted.
American gold eagles are made in 1/10-ounce, 1/4-ounce, 1/2-ounce, and 1-ounce denominations. They are legal tender in the U.S., but only a fool would try to spend them – the 1oz coins bare a face value of $50, but they sell for nearly $1,900!
Liquidity is the name of the game here, and that’s why American coins occupy the top four spots on this list. The 1oz coin is the most immediately recognized and accepted, but with an exchange value of nearly $2,000, it is not as liquid as its smaller counterparts. The 1/10-ounce coin is the most liquid, but a lot of your investment dollars are ate up in coinage costs with such a small-denomination coin. This makes the 1/4-ounce and 1/2-ounce coins the most attractive.
Half-ounce gold eagles sell for $942, while quarter-ounce varieties sell for around $475. With gold currently at $1,720, this means the 1/2- and 1/4-ounce coins have spot values of $860 and $430, respectively. Thus, you’ll be paying an $82 mark-up on the half-ounce coin, and a $45 mark-up on the quarter-ouncer. While on a per-ounce basis, this makes the half-ounce coin the better value, the savings aren’t enough to counter the increased liquidity enjoyed by the quarter-ounce coins. Thus, while a diversified approach – mixing a variety of coin-making countries and denomination sizes – is wisest, the #1 coin you can buy to begin your investment in gold is the 1/4-ounce Gold American Eagle.