Gold Bars vs. Coins : Considering Premiums

Gold Bars vs. Coins: Considering Premiums

Premium refers to the extra cost added to the gold spot price, covering manufacturing expenses, handling, packaging, insurance, and delivery. Reputable bullion dealers charge investors minimal percentage-based premiums to remain competitive. However, premiums are unavoidable as bullion dealers themselves purchase gold above the spot price.

To keep premiums as low as possible, buying gold bars or silver bars for silver bullion is the most effective approach. Gold bars attract lower premiums compared to bullion coins due to their larger unit size, resulting in lower manufacturing costs. For example, purchasing a 1-kilogram gold bar is more cost-effective than buying ten 100-gram gold bars, even though both contain the same amount of gold. This can lead to savings of approximately 1%, which can be significant for larger investments. If your intention is to hold onto your gold for an extended period without the need to sell a portion of your investment, larger gold bars are ideal. However, it's important to note that this small saving may limit flexibility.

The premium is a crucial factor to consider when choosing between gold bars and coins. For smaller investments, particularly those under 50 grams, premiums tend to even out, and coins can sometimes be cheaper due to higher production numbers. However, for larger bars, such as those weighing 100 grams or more, premiums per gram are generally lower compared to coins.