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Precious Metals 101: Coins, bars or rounds?
Sovereign Coins
In this article, we will breakdown the differences between coins, bars, and rounds. Whether your new or a seasoned veteran in commodity trading and investing here’s some valuable insight into the different bullion choices and why each option differs slightly.
Coins, also referred to as ‘sovereign coins’ or ‘bullion coins’ are defined as a legal tender vessel backed by a monetary value set by a government, used in trade transactions. These coins are minted either directly from Government mints OR the manufacturing is contracted out to a private mint. The coins value is not wholly dependent on the monetary value of the coin itself but also derived from the ‘melt value’ of its Precious Metal contents. The contents have a wide range that spans from .400 to .999+ purity, sometimes measured in karats.
Generally speaking, Gold coins are the only type of bullion coin manufactured in modern times with an alloy mixture. Two very common examples of this are the Gold Krugerrand and American Gold Eagle coins. The original reason for the alloy mixture (two or more metals) was to strengthen the coin for circulation. As you may know, Gold is extremely malleable (soft and easily bends, scratches or dents) so to protect coins and give them long term viability for circulation, other metals are added to the planchet.
Gold Purity Standards
You might notice in the side by side comparison below that the two middle coins have different tints to their color than the two coins on either side. The coin (left middle) that almost looks slightly reddish is a South African Gold Krugerrand and the metal composition is 91.67% (22-karat) Gold and 8.33% Copper. The second example is the American Gold Eagle by the United States Mint with a lighter reddish hue and is comprised of 91.67% Gold (Au), 3% Silver (Ag) and 5.33% Copper (Cu). It’s important to note that the advertised weight (1 troy ounce) on the coin itself annotates the ACTUAL Gold content by weight. In other words, a troy ounce equals 31.10 which is the actual weight of the Gold contained in the coin, but the actual weight of these coins is 34 grams despite the advertised weight annotated on the coin being 1 troy ounce.
Small 1/10 troy ounce Gold Coins. From left to right, Mexican Gold Libertad (.999+), South African Gold Krugerrand (.916 / 22-Karat), United States American Gold Eagle (.916 / 22-Karat), Austrian Gold Philharmonic (.999+).
30%, 40% and 90% Silver
Silver coins use to be made of an alloy but for a few different reasons than their Gold counterparts. Silver (unlike Gold) is susceptible to tarnishing when its subject to wet and humid environments. Even simply handling pure Silver with bare hands can cause damage due to naturally occurring oils from your skin. Milking or Milk spots on your fine Silver coin is also possible, this is due to improper annealing (or normalizing) from the Mint. Toning can also occur when exposed to direct sunlight or prolonged exposure to Oxygen and Sulfur Sulfates. Despite this reason for alloy mixtures to be used in circulating Silver coins, Silver has been taken out of circulation due to the rising price of Silver. The last circulating U.S. Silver coin was struck in 1964 making the pre-1965 U.S. coins sought after. Often called Constitutional Silver many stackers will ‘roll hunt,’ check their local coin star machines or opt for one of our very own Constitutional Crates!
2 examples of milking found on 3/4 oz War of 1812 commemorative coins minted by the Royal Canadian Mint circa 2012.
Numismatic Value
Gold, Silver, Platinum and Palladium coins are not only used as a vehicle for investing and hedging they also carry numismatic value based on rarity. Numismatic value annotates a coins rare or valuable quality beyond its Precious Metal content. There are several different factors that go into judging a currencies ‘rarity’ and perceived value beyond its face value or metal content. Some of the factors are mintage and surviving specimen numbers, mint errors or historic significance. Another factor is the grade of the specimen which can be (from best to worse);
- Mint State (MS-65 to 70) / Design remaining: 100% + full luster
- Mint State (MS-60 to 64 also know as Brilliant Uncirculated) / Design remaining: 100% + luster
- Extremely Fine (EF-40+ or XF-40+) / Design remaining: 90%
- Very Fine (VF-20+) / Design remaining: 75%
- Fine (F-12+) / Design remaining: 50%
- Very Good (VG-8+) / Design remaining: 25%
- Good (G-4+) / Design remaining: 10%
Coin collection and Coin Grading
The authorities on grading and judging coins are the Professional Coin Grading Services (PCGS), Numismatic Guaranty Corporation (NGC), Independent Coin Graders (ICG), and the American Numismatic Association (ANACS). Customers can send in coins to be graded and ‘slabbed.’ A ‘slab’ refers to the special protective plastic housing placed around a coin for protection and annotates the grade of the coin.
Bullion Bars - COMEX
Quintessential to any good heist movie, Gold Bars and Silver Bars are hoarded in the investor world for their easy storage, low premiums and diverse range of shapes and sizes. Gold and Silver Bars can range from sizes of 1 gram and north of 1000 troy ounces. Like their Coin counterparts, some bars are actually minted by Governments, such as the Royal Canadian Mint, The Perth Mint, The Royal Mint and more recently the Rand Mint. Some vintage Silver Bars are collected similarly to rare and slabbed coins. In fact, there is a cult-like following of collectors and eBay resellers, who charge quite the premium for things like chunky A-marks, early Johnson Matthey pours and Engelhard Industry bars.
Refiners mass-produce bars for some of the larger investors and IRA portfolios as well as industrial use. These huge physical bars are known as COMEX deliverables and range from 930 tr. oz and up to about 1080 tr. ounces for Silver and 100 ounces and 400 ounce Gold Bars. COMEX is the “Commodity Exchange,” which is a division of the New York Mercantile Exchange that trades futures in precious and industrial metals as well as things like silk and rubber. Big investor types choose these huge COMEX Bars over coins for their relatively low (near market spot price) premiums. Some investors will also add multiple monster boxes (500 oz of Government Minted coins) to their secure depositories as well knowing that some retailers will pay the extra premium on the sales side down the road. As Precious Metal investing is a long-term endeavor often times a few low-mintage, special edition, monster boxes can yield quite the return.
Assortment of Silver Bars showing the different mints, designs, shapes and sizes.
Besides COMEX Bars
You don’t, however, need a million-dollar portfolio to get your hands on bullion bars, in fact, much of the Gold and Silver bars (regardless of size) come in secured assayer sleeves and unlike coins are usually individually serialized. This makes it a great choice to protect against counterfeit bullion and makes your inventory neat and trackable. Extremely popular sizes among our customer base are 5 oz, 10 oz, kilo and 100 oz sized bars, all of which can be found in our Big Bar Crates.
There is a popular miss conception to avoid bars and that ‘often times the criminal element will hollow out bars, filling them with lead.’ We are quite sure this has probably happened in the past but it is important to note that most reputable dealers go either directly through the various mints or 1 of only 3 major supplier/importers, ALL of which have impeccable bullion testing standards and security. We have been lucky enough to visit these facilities and you know they mean business when you are stripped of cameras, phones, and forced to wear silk, pocketless, jumpsuits! Each facility has an assembly line of testers for each batch of products that come in. These tester stations are equipped with visual, x-ray and chemical test kits.
Silver Rounds and Silver commemoratives
Many of the popular non-government mints and refiners produce rounds for collectors and investors alike. These companies oftentimes have their own flagship rounds similar to flagship coins from the Government entities, the difference being rounds do not carry any monetary value backed by a Government and are not considered a national currency only a global currency. Beyond that, they produce rounds that commemorate some landmarks event with historical significance, or they license these products to produce things like Disney, Marvel, even Garfield rounds. Similar to bars, they come with low premiums and certain older rounds are also sought after in the collector realm.
Assortment of Gold and Silver Rounds.
Another very popular option of rounds includes remakes of old U.S. coin designs, the most popular being the Buffalo Nickel design (circa 1913-1938). Silver Buffalo rounds (sometimes referred to as Indian Head Rounds) come in sizes like 1/10, ¼, ½, 1 oz, 2 oz, and 5 oz sizes and are extremely easy to find. In fact, the private mints that manufacture Buffalo rounds include the Highland Mint, Sunshine Mint, Golden State Mint, Silvertowne Mint, Monarch Precious Metals, Republic Metal Corporation, Asahi Refinery among many others. Buffalos along with some other awesome designs show up each month in the Generic Silver Crate as well as the Silver Starter Pack so make sure to take a look at those.
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This article is in no way intended to be investment advice. By purchasing the commodity or any investment, you should only do so under the direct guidance of a certified financial adviser and you should fully understand the liability and risks in doing so!
This is awesome! Thank you for the information.
The info on rounds was very enlightening.
I like to have a variety.
Thank-you for this analysis. I am an amateur in coin collecting and I need all the help I can get
The part on rounds was very enlightening.