Investing: Going for Gold Physical Bullion

The first area of bullion to consider investing in is the ancient metal of kings: gold. With its beauty, reputation, and long history as a store of value and safe haven investment, holding some in your hands is a great experience. Fortunately, there are plenty of ways to do it, starting right here in the United States.

One of the first things you learn about is karats (also known as carats but definitely not known as carrots). The karat is a measure of fineness. A karat in gold is equal to 1/24 part of pure gold (in an alloy). Here’s a rundown of how many karats you need to be aware of:

• 24-karat gold: Equals pure gold (100 percent gold).
• 22-karat gold: Equals 11/12 gold and 1/12 other (such as copper). A bullion coin or bar that is 22-karat gold is roughly 92 percent pure gold.
• 18-karat gold: Equals 18/24 gold (the other 6/24 is copper or other metal). Basically, 75 percent of the item is pure gold.
• 14-karat gold: Means that 14/24 of the item is gold. In other words, 58.3 percent of it is pure gold.

One hundred percent pure gold is too malleable (soft) for regular use, and it needs to be hardened by alloying it (mixing or combining it) with another metal, such as copper or silver (or other metal). Twenty-four-karat jewelry, for example, needs to be handled with much greater care than 22-karat (or lower) jewelry. This is why I try to get my wife to buy 0-karat jewelry because, you know, it’s a heck of a lot more durable — really. But I haven’t succeeded in presenting my case. Oh well.

American Eagle Gold Bullion Coins

For gold investors, this coin is the first bullion vehicle to look into. In 1986, the U.S. Mint first starting minting the Eagle coin series (22 karats). The gold eagle caught on very fast, and it’s the top-selling gold eagle in the country today. They are beautiful coins. The coin’s design echoes the original design of the $20 gold eagle done by Augustus Saint-Gaudens as commissioned by then-President Teddy Roosevelt. Check it out in this figure.

The authenticity, content, weight, and metallic purity of gold eagles are guaranteed by the U.S. government, which makes them an acceptable investment, not only to American investors but also in international markets.

The advantages of gold eagles are numerous. Many financial advisors see them as a good way to diversify the typical portfolio. Gold is well known as an inflation hedge, and gold eagles are a convenient way to add this benefit to long-term investment strategies. Gold eagles are very popular and the market for them is very large, so buying and selling them isn’t a problem. Buying or selling them is usually private and nonreportable when done in small quantities.

Gold eagles are typically sold as 1-ounce bullion coins. However, you can also get them in 1/2-ounce, 1/4-ounce, and 1/10-ounce denominations. This makes gold affordable for just about any portfolio.

Sites such as the US Mint’s page provide more details.

The American Buffalo Gold Bullion Coin

As gold rose in value in recent years, the interest in gold bullion picked up. Because the gold eagle was hitting record sales levels, why not other gold coins? It was at that point that the newest gold bullion kid on the block showed up: the 24-karat American Buffalo Gold Bullion Coin.

The face value of the coin is $50, and for the first time ever, investors can get 1 troy ounce of pure gold in bullion coin form. These coins were manufactured by the U.S. Mint at West Point, and they come in special protective holders. (Remember that pure gold is soft.)

The Krugerrand

Issued in 1970 by South Africa, the Krugerrand (see the following figure) was the world’s first gold bullion coin. Since their issuance, nearly 55 million coins have been bought and sold across the globe. The 22-karat coins are available in 1-ounce, 1/2-ounce, 1/4-ounce, and 1/10-ounce denominations. Because they have a huge market and are highly liquid, buying and selling them are easy.

The Canadian Maple Leaf

Issued by the Royal Canadian Mint, the Maple Leaf is one of the world’s most popular gold bullion coins. Guaranteed by the Government of Canada for its authenticity and metallic content, the Maple Leaf has a purity extremely close to 24 karats: It’s 99.99 percent gold, making it the world’s purest gold coin. In addition to its reputation and quality, the Maple Leaf is also very liquid and accepted internationally.

Other gold bullion

Gold bars (see the following figure) are popular and safe choices for investors and have relatively lower premiums than minted coins. It’s a good idea to buy them from sources that get these bars manufactured by Pamp Suisse and Credit Suisse. The gold bullion bar available sizes are

• 400-ounce bullion bars
• 100-ounce bullion bars
• Kilo bullion bar (32.15 ounces)
• 10-ounce bullion bars