Gold bars represent a popular way for many investors to gain exposure to physical gold. While coins like the American Gold Eagle or Canadian Gold Maple Leaf may be more well known, gold bars have their own unique advantages. In particular, bars allow an investor to accumulate substantial amounts of gold at a lower premium versus government bullion coins.
However, gold bars also have some drawbacks to consider. In this in-depth guide, we will explore the key pros and cons of buying gold bars. Read on to learn whether gold bars should become part of your precious metals investment portfolio.
Premiums Are Lower for Gold Bars
One of the biggest advantages of gold bars is that they carry lower premiums over the underlying gold spot price. This allows an investor to accumulate more gold ounces for their dollar versus coins.
For example, one ounce gold coins from the major government mints like the American Gold Eagle currently sell for $100 or more over spot gold prices. In contrast, one ounce gold bars from reputable private mints like PAMP Suisse or Credit Suisse may sell for only $50 to $60 over spot.
An investor buying 10 ounces worth of gold could accumulate nearly a full extra ounce just from the premium savings alone when buying bars instead of coins. This difference can really start to add up for larger bullion purchases.
You Can Buy Larger Bars
While one ounce gold coins are the most popular size, another advantage of bars is the ability to buy larger sizes. Gold bars are readily available in sizes upwards of 10 ounces, 50 ounces, 100 ounces, or even 1 kilo (over 32 troy ounces).
For an investor looking to make a sizable allocation to physical gold, buying larger bars is far more efficient than trying to accumulate the same amount in one ounce increments. The larger bars will again carry lower premiums per ounce compared to many one ounce coins.
Larger gold bars also provide a sense of wealth that appeals to some investors. Getting to hold even briefly a 100 gram (over 3 ounce) gold bar like the famous PAMP Suisse Fortuna design can be quite satisfying. There is something special about seeing and feeling a substantial piece of pure .9999 fine gold in your own hands.
Storage and Transport Is Straightforward
Storing and transporting gold bars is relatively straightforward compared to coins. The bars do not require any special capsules or holders. Simply place them in a safe, security deposit box, or home safe. Their sturdy rectangular shape also generally makes gold bars easy to stack and organize.
Moreover, since gold bars do not have collectible value, an investor does not have to be excessively careful about handling causing nicks, scratches or dings. A few surface marks will not impact the value, since bars trade based on their gold content alone. This contrasts with damage potentially hurting premiums on collectible gold coins.
Gold bars can therefore be more casually handled and stored versus collector gold coins. Just avoid losing them – that’s always an expensive mistake no matter what form the gold!
What Are the Downsides to Buying Gold Bars?
Now that we have covered some of the benefits of purchasing gold bars, what are the potential disadvantages or considerations to keep in mind?
Resell Value Closely Follows Gold Spot Price
One downside of bars is that their resell value tends to closely track the gold spot price. When it comes time to sell, an investor can expect to receive close to the melt value. This contrasts with collectible coins that may command higher premiums at resale.
For example, limited mintage or rare date gold coins can potentially sell for double or more their original purchase price. Gold bars generally will not benefit from this same collectibility or scarcity premium. Their value is derived almost purely from the current gold melt value.
Have to Sell the Entire Bar at Once
Another consideration with gold bars is that they must be sold in their entirety. An investor cannot easily break off a small portion of a large bar to sell as needed. The choices are either to hold the full bar or sell it all.
This contrasts with coins that allow selling just a portion of a gold position if desired. For example, an investor with ten 1 oz gold coins could choose to sell just two coins, retaining the other eight ounces. This flexibility can be preferable for some rather than an all-or-nothing liquidation decision.
Questionable Brands Create Risk
There are dozens of government and private mints producing gold bars. However, gold investors should stick with only the most reputable brands. Buying obscure gold bars introduces risks that must be weighed carefully.
The possibility of counterfeit gold bars is real, costing buyers millions in losses annually. Stick to well known major brands like PAMP Suisse, Credit Suisse, Perth Mint, Johnson Matthey, Engelhard, and similar to avoid potential issues. Buying from local dealers that are Authorized Purchasers for major banks also helps reduce risks.
Bars from top tier brands will always find a ready secondary market. Obscure gold bar brands should be avoided unless the buyer independently verifies their authenticity.
Conclusion
Gold bars offer both benefits and drawbacks versus coins for investors. For large bullion purchases, gold bars provide excellent value given their lower premiums. Major brands like PAMP Suisse also carry substantial prestige and security.
However, gold bars should not completely replace coins in a portfolio. Fractional coins still provide useful liquidity and collectibility benefits. A balanced approach combining both bars and coins allows an investor to enjoy the best of both worlds.