Gold bullion, whether gold bullion coins or gold bullion bars, is the quintessential gold investment. Both sell for the value of their gold content plus small premiums because of the cost of fabrication and distribution. In the secondary market, coins and bars retain premiums as they are in demand because they are in easily-recognizable and convenient forms. However, there are two slight differences between gold bullion coins and gold bullion bars.
Gold bullion coins are round, the standard shape of coins, while gold bullion bars are usually rectangular. The other difference: gold bullion coins nearly always are minted by government mints, and they carry legal tender values. For example, 1-oz American Gold Eagles are US $50 legal tender coins, and 1-oz Canadian Maple Leaf coins carry a legal tender value of 50 Canadian dollars.
Decades ago, Engelhard produced a 1-oz Gold Prospector, which is round. However, Engelhard’s Gold Prospector was never referred to as a coin but was called a “gold round.” The word coin is generally reserved for government, legal tender issues. To further point out the distinction, the US Mint produced 1980-1984 the American Arts Gold Medallions, which honored American artists and writers. The medallions had no monetary face value and have never been called coins.
Gold bars usually, but not always, are produced by private mints and do not carry legal tender values. One noted private mint is PAMP (Produits Artistiques Métaux Précieux), which is headquartered in Switzerland. PAMP is best known for the Lady Fortuna design, which graces many PAMP gold bullion bars. However, the PAMP 100-gram (3.215 oz) gold bullion bars, which do not carry the Lady Fortuna design, are becoming widely accepted in the US because they sell at very low premiums.
There are two noted exceptions to this rule. The Perth Mint of Western Australia produces both legal tender gold bullion coins and gold bullion bars that are not legal tender. And, the Royal Canadian Mint produces legal tender Gold Maple Leafs and kilo gold bars, which are not legal tender.
Modern gold bullion coins encompass the gold bullion coins presently being minted and marketed by several government mints. The most popular in the US are the US Mint’s American Eagle Gold Bullion Coins and the South African Mint’s Krugerrands.
Basically, modern gold bullion coins are those that came into production since the 1960s, when price inflation caused investors to become interested in gold, and a couple of governments moved to meet that demand by producing bullion coins. The Krugerrand and the Gold Maple Leaf, for example, were introduced in 1967 and 1979, respectively. Other modern gold bullion coins include Austrian Philharmonics, Perth Mint Kangaroos and Pandas from China.
Old gold bullion coins are those that were minted decades ago, back in the days when it was a common practice for government mints to issue gold coins. The best-known old gold bullion coins are the Mexican 50 Pesos (Centenarios) and the Austrian 100 Coronas, both of which usually carry the lowest premiums of all bullion coins.
Another common gold bullion coin is the British Sovereign, a fact that may come as a surprise to investors new to gold bullion investing. Many telemarketers tout British Sovereigns as collectible coins because some of them are more than one hundred years old; however, the truth is the British Sovereigns are basic old gold bullion coins, which can be bought at about the same premiums that modern one-ounce gold bullion coins carry.
Other old European gold bullion coins that telemarketers often promote as numismatic and/or collectible are the French 20-Franc Angels, Napoleons and Roosters, and German Marks.
Another feature common to old gold bullion coins: they are almost always 900 fine, which means 90% gold. The remaining part of the alloy usually is copper. There are no modern gold bullion coins that are 900 fine. Modern gold bullion coins are either 91.67% pure or 999 fine or 9999 fine.
(It’s interesting that 24-karat gold is produced for the jewelry industry, and 24-karat gold is said to be “100% or pure gold”. Yet no refinery claims to turn out 100% pure gold. Since 1983, the Royal Canadian Mint has stamped 9999 on its Gold Maple Leafs. Before 1983, Gold Maple Leafs were stamped 999. Gold Maple Leafs before 1983 commonly are called “three nines” coins, and those dated 1983 and later are called “four nines” coins.)
American Eagle Gold Bullion Coins, commonly called Gold Eagles or American Gold Eagles, are the US Mint’s official gold bullion coins. Gold Eagles set the standard by which the other gold bullion coins are measured. For example, Krugerrands are often said to be selling at a discount to Gold Eagles. During periods of scarcity of all gold bullion coins, such as during the Global Financial Crisis of 2009, Krugerrands “sold at parity with Gold Eagles.”
Gold Eagles are 91.67% pure; the remaining alloy is copper. Because 1-oz Gold Eagles are 91.67% pure but contain one ounce of gold, they weigh 1.0909 troy ounce. In grams, a 1-oz Gold Eagle’s weight is 33.93. One ounce of gold weighs 31.103 grams. [Often Gold Eagles are said to be 22-karat (91.67% pure). But, “karat” is a term used to describe the purity of jewelry gold. The terminology for the purity of gold bullion is “fineness.” For example, old US gold coins are said to be “900 fine,” which is 90% pure. Still, in the coin world, there is some crossover between jewelry terminology and bullion industry terms.]
The 1-oz Gold Eagles come from the Mint twenty coins to a tube, twenty-five tubes in a 500-coin Mint box. The Gold Eagles’ packaging make them the easiest of all gold bullion coins to handle and store.
Whereas the American Gold Eagles are the world’s bestselling gold bullion coins, the Krugerrands are world’s best-known gold bullion coins. The Krugerrands’ popularity stems from their having been around for more than four decades and from them being the modern gold bullion in the 1970s when the United States (and the world) was suffering high rates of inflation, primarily as a result of President Lyndon Johnson’s guns and butter policies.
Perhaps more than twenty-five million Krugerrands are in the US, and thousands trade in the secondary market daily, which means a highly liquid market. In the secondary market, more Krugerrands trade than do Gold Eagles.
Most Krugerrands orders are filled with coins dated 1975 – 1984. However, during the Global Financial Crisis of 2009, new Krugerrands were imported, and it is not uncommon to see 2009 and 2010-dated Krugerrands show up in the secondary market.
Like Gold Eagles, Krugerrands are 91.67% pure gold and are the same dimensions as Gold Eagles. In reality, Gold Eagles are duplicates of Krugerrands. In 1985, the US banned the importation of Krugerrands as a slap on the wrist of white-ruled South Africa. The ban stood for ten years, until Nelson Mandela was elected the first black president of South Africa.
In 1986, the US Mint introduced its Gold Eagles to fill the void caused by the ban. Like Krugerrands, Gold Eagles are 91.67% fine, and they are the same dimensions as Krugerrands. Additionally, the Mint produces four sizes of Gold Eagles, 1-oz, 1/2-oz, 1/4-oz and 1/10-oz, the same four sizes of Krugerrands produced by the South African Mint. For more evidence that Gold Eagles were “knock-offs” of Krugerrands, Gold Eagles were the first 91.67% gold coins ever produced by the US Mint. Old US gold coins, such as Doubles Eagles, which includes the St. Gaudens and the $20 Libertys, were 90% gold.
Austrian 100 Coronas are 900 fine, and each coin contains .9802 oz of gold. In the bullion industry, an Austrian 100 Corona is said to have an Actual Gold Weight (AGW) of .9802. As noted above, Austrian 100 Coronas are low-premium gold bullion coins. A head profile of Franz Joseph, Emperor of the Austrian-Hungarian Empire 1848–1916, graces the front of Austrian 100 Coronas.
Hungarian 100 Koronas are identical to Austrian 100 Coronas in dimensions, alloy and gold content but carry a standing image of Franz Joseph. Sometimes orders for Austrian 100 Coronas will include Hungarian 100 Koronas. There are many more Austrian 100 Coronas in the US than there are Hungarian 100 Koronas.
Also known as Centenarios, Mexican 50 Pesos are generally called old gold bullion coins because most of the Mexican 50 Pesos coins available were minted decades ago. However, during the 2009 global meltdown, the Mexican mint produced some new 50 Pesos coins. Still, the new coins were dated 1947. The 1821 on the left side of the coin commemorates Mexico’s independence from Spain.
Mexican 50 Pesos gold bullion coins are largest of the old gold bullion coins. They are 900 fine and have an AGW of 1.2057 oz. The 37.5 gr. oro puro stamped on the obverse declares the coin’s gold content: 37.5 grams, which converts to 1.2057 oz. Oro puro is Spanish for pure gold.
Generally, Mexican 50 Pesos gold bullion coins carry the lowest premiums of the commonly available gold bullion coins. Other low premium gold bullion coins are the Austrian 100 Coronas.
British Sovereigns often are promoted by telemarketers, nearly always at markups well in excess of the real market for the coins. Despite all the telemarketers’ promotions, in the real market British Sovereigns sell at bullion coin prices.
Because British Sovereigns are small coins, they carry slightly higher premiums than the common, old one-ounce gold bullion coins. If it were not for the telemarketers’ promotions, British Sovereigns would sell closer to Mexican 50 Pesos’ and Austrian 100 Coronas’ premiums.
For more information on telemarketers’ promotions, read Myths, Misunderstandings and Outright Lies, which is basically a white paper on telemarketers’ techniques used to get unsuspecting investors to buy overpriced coins.
British Sovereigns are 900 fine, and each coin contains .2354 oz of gold (AGW of .2354 oz)
Which to buy, modern gold bullion coins or old gold bullion coins? There are a couple of factors to consider.
First, modern gold bullion coins are widely promoted, which makes them known to more people. To many investors, this makes modern gold bullion coins the choice over old gold bullion coins. But, there is the premium to consider with the modern coins. Gold Eagles, for example, can carry premiums of $40 an ounce higher than the premiums on Mexican 50 Pesos and Austrian 100 Coronas.
Still, to most investors, the higher premium drawback is more than offset by the wide acceptance of Gold Eagles and Krugerrands. But, here is a plus for old gold bullion coins: At times, all gold coins liquidate at the same price (relative to spot). Such instances generally occur after huge spikes in the price of gold, resulting in a rush of sellers that overwhelm the buyers. Usually, such conditions last only a few days, but it often takes weeks or months for the popular bullion coins to retain the premiums that they had prior to the price spike.
Another old gold bullion coins plus: most investors when liquidating their holdings do so by selling to gold dealers, not the general public. When selling to dealers, public acceptance has little impact on liquidity and holders of old gold bullion coins can easily convert to cash.
You can read more about what to consider before you buy gold on our main site CMI Gold & Silver.