What are the four main types of precious metal coins? What is each type of coin best suited for? Which is the best type for long-term investors who want to preserve their wealth by shielding their investment portfolio from the negative forces of the market such as inflation? Welcome to today’s article in which I will share with you the information about precious metal coins, that you need to know as you start venturing into this industry. Read on to discover which coins are best-suited for you.
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Precious metal coins available today fall into 4 main categories which are:
These coins differ in the way they’re valued, and they also possess unique advantages and limitations over each other, from an investment standpoint. It is crucial to note that numismatic coins aren’t permitted for use in gold IRAs, and anyone who would try to use them would only get into trouble with the IRS. The numismatic coins are, however, still used by many investors who are out to profit through investing their money outside retirement accounts.
All bullion coins have a distinct weight and fineness which is usually stamped on them. Contrary to what most people think, bullion does not only come in the form of large precious metal bricks and bars. Bullion coins are, however, made from the same precious metals year in year out, which makes it easier for investors from all walks to own them. Coins are much smaller and are less expensive, hence even those who have a low investment budget can still purchase them and profit from holding them for a long-term horizon.
Proof coins are of higher quality than bullion coins and are usually produced in relatively lower quantities each year. These coins have a more reflective appearance, commonly referred to as a cameo appearance.
If you are looking for the finest coins produced by the US Mint, then proof coins are your go-to option. As a matter of fact, the term “proof” refers to the coin’s finish. Investors can also purchase proof blanks, which are specially treated, and hand-polished to produce very high-quality strikes.
All proof coins are usually struck using unique dies, then struck a couple of times using significant pressure. This is why you will notice that the details on proof coins often stand out more than standard coins and that they often feel smoother.
Beyond that, these coins are usually encapsulated to ensure that their quality is maintained and that they do not rust. They are also always accompanied by a certificate of authenticity which you should always look out for if you are purchasing proof coins for investment purposes. It is also advisable to purchase the coins that are presented in special packaging.
Good examples of proof coins include Gold American Eagle proof coins, Silver American Eagle proof coins, and platinum American Eagle proof coins.
3. Numismatic coins
Numismatic coins are generally older coins that are a favorite amongst collectors. They’re usually valued for the following elements:
- Their precious metal content
- Artistic/collector’s value.
These coins must be independently certified by a third party at the time of purchase. The third-party service provider should grade the numismatic coins, and offer information pertaining to their purity and value. Common examples of numismatic coins include:
- $5 liberty gold coins
- $10 liberty gold coins
- $20 liberty gold coins
4. Semi-numismatics coins
These coins have the characteristics of bullion and numismatic coins. They are, however, newer than the bullion coins, and generally have a limited mintage (the number of semi-numismatic coins produced is fixed). These coins are attractive to investors and collectors, owing to the fact that they possess the traits of bullion and numismatic coins. The Royal Canadian Mint is popular for producing semi-numismatic coins under their animal series of precious metal coins.
There are speculations that with time, the value of semi-numismatic coins could end up rising above that of bullion coins, due to their scarcity. That said, however, one should aim to have a well-diversified portfolio of precious metal coins, which includes the above 4 types of coins.
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Which is the best option for you?
Generally, bullion coins tend to follow the spot prices of their respective precious metals closely. So far, there’s no evidence of the value of bullion coins appreciating beyond the spot price of the precious metals. Despite having this type of correlation with the spot price, these coins are perceived to be a suitable option for those who want to make an entry into the physical precious metals investment market.
If you decide to purchase bullion coins today, then you are exclusively investing in the underlying precious metal. This means that factors such as intrinsic factors that result from lower mintage will not affect your investment.
Proof coins, on the other hand, tend to command higher prices, owing to their characteristics and limited annual production. They may not be the very best option for those who are making their entry into the precious metal investment market but can be purchased as an investor familiarizes themselves with this industry.
Numismatic coins are viewed as collectible coins and are not produced today. The fact that they are limited in supply makes them rare, and are, as such worth more than their precious metal content. Like numismatics, semi-numismatic are also scarce, which makes them a favorite option for investors and collectors alike. Numismatic and semi-numismatic coins are best suited for the diversification of investors’ precious metal coin portfolios. Remember that numismatics and other collectible coins are not allowed for use in gold IRA investments. Only bullion, proof, and semi-numismatic coins are approved by the IRS for use in precious metal IRAs.
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That will be all for this article in which we have answered the question “what are the four main types of precious metal coins?”. I hope you are now well-informed about this topic, and that you can now proceed to invest in your preferred option more confidently. Let me know if you have any questions with regards to how you can get started with gold and silver investments. Drop them in the comments section – I will get back to you ASAP.
I wish you well,
Eric, Investor and Team Member at Gold Retired!
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