When it comes to precious metals, you’re faced with a ton of options which can potentially impact the way you manage your holdings. In our case, does it matter if you buy coins or bars? I mean, gold is gold. Silver is silver. Why would anyone care?
Surprisingly, it can matter!
Knowing when coins versus bars matters is key. Let’s get into it!
What’s your use case?
If you’ve seen our other posts, you’ll know we often stress having financial goals. It’s the most important part of investing and collecting precious metals since all your decisions will be influenced. Not having goals can lead to overpaying, being scammed, or worse. Take the time to explore those goals if you haven’t already. If you need help, start with the following questions.
- Are you a Collector? Or are you an Investor?
- Do you plan on selling? If so, long term? Short term?
- How much do you plan on buying?
- Are you buying Gold or Silver?
- How are you storing your precious metals?
Now, keep these questions in mind as we go through our comparison and hopefully it’ll help making decisions a little easier for you.
Liquidity
In this category, coins win. Coins are more liquid because they’re more popular than bars. They’re the most produced shape.
Knowing coins are more liquid, can be useful when deciding to sell your stack. Dealers must consider whether each asset can be turned around and sold in a timely manner. This means they might be less inclined to buy your bars.
That said, if you’re a collector and don’t necessarily care about selling right away, it might not matter. In this case, lack of liquidity may work in your favor as scarcity is king for collectors.
Obviously, each dealer will have different considerations, so it’s a good idea to get to know them and find out what they’re more willing to buy so that it can help you decide which option is best for you.
✅ Winner: Coins
Diversification
When it comes to diversification, coins are the clear winner. This is because coins offer a wider range of options than bars. Coins come in different denominations, metals, and designs, and that can help spread your risk. For example, you could invest in gold, silver, copper, palladium, and platinum coins, each with different designs and denominations, however it’ll be more difficult to find ones that aren’t gold and silver.
That’s not to say bars don’t have their place in a diversified portfolio. They have a clear advantage over coins that isn’t matched- bars can contain more metal.
The 1 Kilogram bar is far more popular than 1 Kilogram coin. This is because the higher the metal content, the better the bar form factor is to store…
✅ Winner: Coins
Storage
There’s a couple considerations when storing coins and bars. Coins are generally easier to store because they can be stacked into neat little tubes or boxes. This makes it easy to buy small amounts at a time- giving you the flexibility to time your trades with the whims of the market. It’s also easier to sell smaller denominations than larger ones. For that alone, Coins comes out ahead.
But like I insinuated in the Diversification section, Bars have an advantage when it comes to long term storage.
Bars are typically sold with higher metal content. Scrolling through the list of silver bars in any coin shop, you’ll typically find the bars are denominated in 1 Kg, 5 oz, 10 oz, and 100 oz. When it comes to gold, you’ll rarely find a coin larger than a 2 oz or 5 oz- silver bars are the most common.
Let’s look at an example: If you have the choice between 100 1 oz coins of silver versus a single 100 oz silver bar, it may make more sense to get the bar. The reason for this is that the the space the coins consume is higher than the bar. It’ll make storing easier. This is an important consideration when deciding how you store your wealth. If you don’t plan on selling your holdings any time soon, then higher metal content bars might be the right way to go!
✅ Winner: Bars & Coins… depending on the situation.
Premiums
Here are the general rules:
- The lower the metal content, the higher the premium.
- The higher the metal content, the lower the premium
Thus, 1 oz bars or coins will typically have higher premiums than the larger denominated bars or coins.
This has to do with the margins dealers set when buying and selling metals. A 10 oz bar might take longer to sell than a 1 oz bar/coin. The reason is that the market tends to favor those assets which have better liquidity. Dealers know this and can charge a higher premium on their already razor thin margins when selling. That’s why if you’re looking for a deal, it’s usually a good idea to buy in larger quantities. Silver bars (10 oz+) are a popular option for buying at a lower premium. Same with gold.
Since we know that bars are already slower to sell than coins but typically have a higher metal content, you might find that this might be the most ideal way to save on the premium for your investments which are longer term. It’s more metal for your buck!
✅ Winner: Bars
Collectibility
There’s a reason it’s called “Coin Collecting”.
Coins offer a far wider range of options than bars. Check your local or online dealer and you can confirm this. There are thousands of generic, collectible, “constitutional”, and legal tender coins out there. Not to mention the huge number of numismatic.
Mints and dealers can make a limited run of these coins and charge a higher premium for them because of their scarcity. And depending on the popularity and rarity of the collection, the collector might be able to turn around and sell at a later date and double or triple their original investment. While this does carry risk, collectors are usually selling coins, not bars. That’s not to say there aren’t any collectible bars- there are. They just aren’t as common.
✅ Winner: Coins
So… Coins versus Bars: Which is better?
Let’s recap:
Coins are the general winner for the flexibility of buying and selling smaller quantities, diversification, liquidity, storage, and collectibility despite their generally higher premiums.
Bars are the general winner of long term storage options and lower premiums.
If it seems coins are the clear winner here- you’re right! Coins go back thousands of years because of their shape and smaller metal content. They make it easy to trade and store and are generally accepted everywhere.
We also know that bars also have an important place and are the winner for their respective options. So while coins are a better general option, bars are by no means the lesser.
And at the end of the day, everyone has a unique situation. Knowing what works for your situation is the only thing that matters!
