If you’re even a bit familiar with the world of precious metals and coin collecting, then you’ve likely already encountered the term "bullion." It isn’t a difficult or complicated concept to understand, but it is one that’s important to learn if you want to thrive in the world of coin collecting and investing.
To help you become informed and educated on the subject, we’ve put together this complete introduction to bullion coins, including what they are, why they matter, and how you can buy, sell, and invest in them.
How Do You Measure a Coin’s Worth?
To understand what a bullion coin is, let's first begin with a basic understanding of what an "ordinary coin" is. These coins are the ones you use in your everyday life, and they are typically made from a variety of precious and non-precious metals. For example, despite their famous copper sheen, pennies aren’t made entirely out of copper. Instead, they’re made mostly out of zinc before being covered in a copper plating that gives them their distinctive color.
Because of this composition ratio, if you have a pile of everyday coins that you might go out to use at the store, they aren’t going to be worth very much in terms of intrinsic value. Intrinsic value refers to how much a coin is worth if it were melted down into its various metals and sold that way. In other words, if you wanted to melt down a penny, you would be left with zinc and a small amount of copper, and the respective worth of those two materials, rather than the face value of a penny. Depending on the coin, the metals it’s made of, and the current market value of those metals, the intrinsic value of the coin may be more or less than its face value.
Face value is different from intrinsic value. Face value is the value your coin has if you take it and spend it at the store. A penny is worth one cent, a nickel is worth five cents, and so on. This face value is likely different from the intrinsic value of a coin.
In addition to their intrinsic and face values, a coin also might have value based on its rarity, as is the case with most of the coins circulated through collecting circles. These coins may or may not have much intrinsic value, but they may be valuable because they are so rare. These three concepts (intrinsic value, face value, and collector's value) are three different ways of determining a coin’s value, each with its own independent scale.
What Is a Bullion Coin?
Whereas we may judge ordinary coins in terms of their intrinsic, face, or collection values, the worth of bullion coins is determined almost exclusively by their intrinsic value. These coins are typically constructed completely of precious metals, or very close to this. A bullion coin may be anywhere from 90% to 100% pure, which is far more than most ordinary circulating coins. Additionally, these coins are made of precious metals such as gold and silver, rather than the non-precious metals commonly used in everyday coinage.
Bullion coins are not intended for circulation. Rather, the government — or occasionally private institutions — will issue these coins for purchase by those wishing to invest in precious metal. These purchasers will not spend the coins the way they would an ordinary coin. The coin represents a monetary asset in the same way stocks, savings bonds, or money in the bank does. If the owner of the bullion coins desires to cash in on this wealth, they will sell the bullion to someone else.
Despite what the name suggests, bullion coins are so dissimilar to ordinary circulatory coinage that the only reason they share the common term “coin” is because of their similar appearance. They both look like what we picture a coin to look like in terms of composition, function, and origin. However, they are entirely different.
Numismatic Coins vs. Bullion Coins
A numismatic coin is a term you will likely often see in conjunction and comparison with bullion coins, but the two terms refer to very distinct categories of coins. Bullion coins are what we have just described. Numismatic coins, on the other hand, are the types of coins that will interest a coin collector. These coins may or may not have great intrinsic value, but this is rarely their main appeal. Rather, these coins are valuable because of their rarity, age, or unique nature. Since a numismatist is someone who collects coins, and numismatics is the field of coin collecting, we use the term numismatic coins to refer to those coins that are of interest in this area.
What Are Gold and Silver Bullion Coins?
Don’t let the slightly different terminology fool you. The definition of a bullion coin is the same no matter what type of metal it consists of. The only difference is that a gold bullion coin will be made of gold and a silver bullion coin will be made of silver. In this way, the name describes what metal the coin is made of. Even if a coin listing doesn’t bear a label with the type of metal it’s made from, this doesn’t change anything about its composition.
What Is the Difference Between Gold and Bullion?
By itself, the term “bullion” does not exclusively refer to coins. Bullion simply refers to a solid or nearly solid piece of a precious metal that represents a monetary investment. The owner will eventually either sell this investment or pass it on to a child or heir. But while bullion coins are the subject we’re discussing today, bullion doesn’t have to take the form of coins. It might also take the form of bars or ingots. When we use the term “bullion coin,” however, we denote that the bullion is in the form of a coin as opposed to an ingot or another alternative.
The term gold, of course, refers to the precious metal itself. Out of context, this might refer to gold in virtually any form. In terms of a person investing in gold, however, they’re likely using the term to refer to an investment in bullion of some type. It is inaccurate to use the two terms interchangeably, however, since bullion isn’t necessarily gold. Silver bullion exists as well and is just as important as a form of investment.
Where Do Bullion Coins Come From?
As we mentioned briefly, bullion coins typically come from the government, although they may also come from private institutions in some cases. These institutions issue limited runs of coins in which every coin minted is theoretically identical both in appearance and in composition. These coins bear a stamp with the seal or image of the institution from which they come and a label with the ratio of precious metals they contain. This way, even if you’re buying a bullion coin second-hand, you can be sure where it originated and what it’s made of simply by looking at it.
What Are Some Examples of Bullion Coins?
The U.S. Government has minted many different runs of bullion coins over the years, some of them well-known and others less so. Private institutions have created plenty of these coins as well. What are some examples of classic American bullion coins that many people may have heard of?
See if you recognize any of these popular bullion coins:
Some bullion coins you may have heard of from around the world include:
- Canada: Gold and Silver Maple Leaves
- Australia: Perth Mint Kangaroos
- South Africa: South African Krugerrands
Buying Bullion Coins
There are two primary reasons a person might choose to purchase bullion coins — to begin building returns for the future and to protect against market forces. Because of these two reasons, most people purchase bullion coins with the intention of holding them for the long-term rather than for engaging in short-term trading options. This long-term holding allows the bullion to ride out the various price and market fluctuations to retain its value over time.
When learning how to buy bullion coins, the best place to start is with government mints. These are coins you can be sure are authentic, due to their trusted source. The downside here is that supplies tend to be very limited, meaning you may not always get what you’re looking for. Licensed and well-established dealers are another excellent choice. If you want to find out if a dealer fits this description, a quick internet search should be helpful. Bullion coins may also be available from auctions and private sellers, but you’ll always want to make sure these sellers are reputable before you decide to deal with them.
If you choose to invest in bullion coins, the important thing to remember is that they’re like any investments in that there are no hard guarantees. The market is constantly rising and falling, and the value of your bullion will rise and fall along with the rest of the market. Because of this, there always remains the possibility that your investment may not lead to the return you’re hoping. However, in most cases, if the market takes a dip, you can simply wait this period out until it begins climbing again. To successfully invest in bullion coins, you’ll need to stay vigilant and keep a close eye on the markets.
Selling Bullion Coins
After you’ve held onto your bullion coins for a fair number of years, you’ll reach a point when selling them becomes a very attractive option. Whether you choose to save them until you want an extra bit of income or you simply wait until they’ve appreciated enough to be worth it, this can be an excellent way to add some extra money in your budget.
The trick to selling bullion coins is to make sure you’re getting a fair price for them. While it can sometimes be tempting to accept any price, you’ll want to wait for the fair price to ensure you’ve truly made the investment worth it. The first key to achieving this fair price is to carefully watch the current market prices of gold to determine the best time to sell. The second key is to only sell to reputable and trusted buyers. You may choose to sell to private sources, but you’ll want to be sure the buyer is reputable before you agree to the sale.
Bullion Coins Throughout History
While the idea of bullion coins might be a new concept for you if you’re unfamiliar with the world of coin collecting and investing, the truth is that it is actually a very old concept. Throughout history, gold, silver, and other precious metals have been used for decoration and ornamentation, but they’ve also always represented wealth. Because there weren’t always institutions like banks to back up the value of a dollar or a coin whose monetary and intrinsic value didn’t match, people valued gold for the wealth it represented.
Because gold was worth money in and of itself, people throughout history and around the world have consistently stored up bricks, ingots, and coins made of solid or mostly solid gold. They relied on these pieces of gold knowing that they could sell them and that the value of their gold would be recognized no matter where they took it.
While much of our bullion coin discussion here has centered around gold bullion, this is far from the only variety in use. Depending on the country and the historical period in question, bullion coins have been and continue to be available in a wide range of different precious metals. From what we might view as the traditional options of gold and silver to other metals like palladium and platinum, there is a wide world of bullion coins to explore and discover. When you choose to invest in bullion coins yourself, you become a part of this long-standing tradition.
Shop Our Coins Today
There’s a lot more to the world of rare and precious coins than just bullion coins. Here at American Mint, we stock an incredible range of coins — from the rare to the commemorative and gold to silver to platinum. Whether you’re a beginner who’s just beginning to build a collection or a practiced hand who’s looking for that one specific coin that’s eluded you for years, we think there’s something to pique everyone’s interest in our catalog. You may even find a few gold and silver bullion coins.
At American Mint, we hold our customers’ satisfaction in the highest regard. If for any reason you’re unsatisfied with your purchase, we offer a money-back guarantee within 20 days of receipt. And so you can be sure you’re getting exactly what’s advertised, we also provide a certificate of authenticity with every purchase.
Are you ready to get started shopping for your coins? Start by browsing online today, and don’t forget to note that most of our products are currently discounted online.
Sources:
1.https://www.usmint.gov/learn/coin-and-medal-programs/coin-specifications
