Difference Between Gold Coin And Gold Bar

In India, gold is a go-to investment. Gold is consumed in every form like jewellery, coins or biscuits, and every special occasion is marked with the purchase of gold. Moreover, the Government of India has set up the Bureau of Indian Standards (BIS) to ensure that sellers do not cheat people are while purchasing gold. 

What is a Gold Coin?

A gold coin is a precious metal made out of gold. Gold coins have been minted since 1800, which are 90-92% gold (22 karat). However, most of today’s gold coins are pure gold. Also, gold coins have an extra premium attached to them. This is because they can be used as legal tender. Furthermore, many people are sentimental about the historical value that a gold coin may hold or represent. 

In India, gold coins are manufactured and available from 0.5grams to 100grams in weight. For investors, buying gold coins can be easier when compared to jewellery. Also, there are different channels where investors can purchase gold from local jewellers, authentic online sellers, Stock Holding Corporation of India, MMTC, Muthoot Finance, and many more. Moreover, a gold coin purchased from one source should be sold to the same source, as sometimes it might fetch lower resale value depending on the market price. 

Advantages and Disadvantages of Buying a Gold Coin 

Advantages of Buying a Gold Coin

• Different Sizes: Gold coins come in various sizes, finishing, designs, price, grade and origin. Investors can purchase based on their budget and personal preference.

• Guarantee: Many gold coins are minted by the government, which guarantees the gold content, purity and design. 

• Liquidity: Gold coins also offer liquidity as they can easily be traded. Investors do have to wait for a buyer. They are universally recognised and easy to sell. 

• Easy Selling: Investors who purchase gold coins need not worry about inflation or pay capital gains tax until they sell. 

Disadvantages of Buying a Gold Coin

• Higher Price: The price of gold coins is a bit higher than other metals’ spot prices because of their collectibility, legal tender status and rarity. 

• Premium: There is a higher premium for gold coins because of the design and manufacturing costs to mint the coins.

What is a Gold Bar? 

Gold bars are precious refined gold that is made meeting the standard conditions of manufacturing and labelling by both government or private mints. Also, gold bars are also called gold bars or gold ingots. The large gold bars are made by pouring the molten gold into the moulds. However, the smaller bars are made by minting or stamping the rolled gold sheets. The central banks hold gold reserves in the form of gold bars. 

Gold bars are produced in 24 carats (999.9 pure gold) and come with a certificate that guarantees their weight, purity and Gold Standards. Moreover, investors with large budgets prefer gold coins because of their low premiums. This enables them to buy gold at the lowest price per gram. Hence, gold bars are one of the most cost-effective ways to invest in gold. 

Advantages and Disadvantages of Buying Gold Bars

Advantages of Buying Gold Bars

• Different sizes: Gold bars are available in various sizes from 1gram to 1kg. Therefore, they are suitable for any investor’s budget. 

• Standardised: A gold bar is a standard for gold investment. It is exchangeable worldwide to any bullion dealer. 

• Long Term Investment: It is ideal for long term investment if the investor has no intention to sell gold bars from your investment portfolio. 

• Lower Price: Gold bars are cheaper than gold coins because they are cheaper to manufacture. For instance, a larger gold bar will have a lower manufacturing cost than a smaller gold bar. 

Disadvantages of Buying Gold Bars

• Flexibility: Large gold bars lack flexibility as they become difficult to melt and reshape. Also, it might involve additional handling charges when a gold bullion minter tries to resell it. 

• Premium: Premium on gold is always increasing, and so its value also increases. The exact price of these gold bars depends on several market factors. 

Conclusion

Gold coins can be a more suitable option for first-time investors as it offers a great starting point to invest in physical gold. However, investors can choose to diversify their portfolios with a mixture of both coins and bars. As gold comes in different sizes and forms, investment can be broken into smaller pieces in the form of coins or bars. Moreover, having a lack of flexibility can affect the gold portfolio. For instance, if the investor purchases a large block of gold bar, it gets difficult to melt and reshape. Also, it bears additional handling charges. 

There is no right or wrong answer between buying gold coins or gold bars. It is about personal preference and the risk tolerance level of the investor. Based on the investment gold, investors can choose the type of physical gold they want to invest in. 

Also Read: Is Digital Gold Better Than Gold