Hi guys, So I thought I would do a bit of a comparison between a 10oz gold bar and 10x1oz bullion coins in terms of cost, sell back and overall performance. Basically I wanted to determine what premium the coins need to be sold at to equal the buy back price from the mint and I also wanted to look at what was in between. I started a little spreadsheet a couple of days ago (5/3/13) and therefore used the prices for that day. I thought I would compare a theoretical buy as follows: - 10oz bar purchased from the Mint direct - 10x 1oz coins purchased from Bullion Bourse Simply because these two would provide pretty much the best prices around. I did not include the Mint buy back price for the coins, nor did I consider purchase of coins from the Mint as realistically there are better options out there for the coins. Note that all this does not include freight charges, storage charges etc. From the table above, I look at each side of spot (spot + x% and spot - x%). In yellow are the buy price for the coins and bar as well as the mint buy back price for the bar. I basically calculate the sell-buy for each value on each side of spot, and compare them. I have colour coded similar values: for instance: selling 10x1oz coins @ 4.5% over spot will yield about the same result as selling the 10oz bar @ spot. I have recently seen on the forum some 1oz coins being sold at spot + 3.5%: if one had 10 coins to sell, that would yield the same result as selling a 10oz bar @ spot - 1%. One of the main reason put forward for the purchase of 1oz coins is their liquidity. There is no doubt they are more liquid than a 10oz bar! However I wonder what the liquidity of a 10oz bar is when sold under spot - say 1% or 1.5%? This also shows that if you manage to sell your coins only at spot + 2%, you are not doing better than selling the 10oz bar straight back to the mint! Of course this does not take into consideration the fact that one would need the capital upfront to purchase the 10oz bar in one go. This also does not take into consideration the SHTF scenarios where in some apocalyptic scenario we would find ourselves trading goods for gold coins. Keen to hear your thoughts on this guys! Cheers
For maximum liquidity to sell back into the market as a speculative investment, I suggest an ETF. They're good for traders. Most other gold-holding scenarios rule out an ETF, and also make short-term selling fairly redundant. I know that's not helpful.
imho, buying bigger size than 2oz gold size attracted a very cautious feeling from a buyer point of view. There are real cases where a large gold bar filled with other than gold (e.g. tungsten). I would rather pay slightly higher premium (in this case extra 2% premium) to have 1oz gold coin/bar for keeping my sanity
This is a valid point, however one could argue that a 10oz bar is very easy to test for fillings with an ultrasonic thickness gauge whereas a coin would require XRF testing. As we all know, 1oz coins are also counterfeited. One could also wonder whether someone trying to offload fake gold would have a greater chance to try and offload 1oz coins or one 10oz bar. IMO, 1oz would be more likely. Thanks for your thoughts Lunardragon
A better comparison would have been 10 x 1oz bars to a 10 oz bar. A minted coin has a premium based on design and legal tender status that is understood, accepted and built into the price and generally recoverable upon resale.
I like that Excel table... it's indeed smart to create such tables - even if only for personal financial records and calculations.
You know some dealers will buy "part" of a 10oz bar - say you needed to sell only 5oz, then you can get cash and 5oz in gold in return.
I only buy 1oz gold cast and 1kg silver 1oz gold cast are easy to hide on your or up your person in case of emergency
However imho the dealer may exploit the chance to make a few more bucks knowing you may be in a bind. Get 1 oz then you don't run the risk of being in that squeeze
Dogmatrix has the right idea, but I would go one step further, given the following considerations: You seem to be planning a sale before you even buy. Numi value does not seem to be a consideration. You assume a 1oz coin is more liquid than a 10oz bar (this disregards postage costs, which discourages most stackers to make a single 1oz coin purchase. If you are selling back to a dealer, then liquidity not an issue either way). The best option IMHO would be CFD's for traders. Besides almost eliminating any premiums and liquidity issues, it eliminates the need for large upfront capital outlays.
Thanks guys. I know the paper market has its advantages, but I am not interested in investing in paper as such and I am not looking at trading either. What I am really looking into are the options when/if selling - not that I plan to sell as such, but I think it is good to know one's options if wanting to sell. Pretty tiny difference, I hope I could get the idea across. Regarding liquidity, indeed i would tend to believe the 1oz coins are more liquid, simply because the number of buyers with the cash for a 10oz is much less than the number of buyers with the cash for a 1oz coin. But should the bar prove to be more liquid, then this only makes the case for the bar. You are right that the 1xoz are by definition easier to sell fractionally, however there is a price attached to this privilege that is lost if not sold for over a certain % above spot. Thanks all!
IMO, smaller amounts will always be more liquid as it means more buyers are able to buy the product. However if you only want to sell to one buyer, this is irrelevant. Rather than to suggest that a 10oz bar is more liquid, let's consider a few scenarios when it might be less liquid: 1) if gold prices double (for example), less buyers could afford it 2) if cash restrictions are legislated 3) if you only want to sell half, but GP is on holiday 4) if you want to post it (the difference being the risk of posting 1oz to 10 different people vs a 10oz bar to one person) It really depends on your investment strategy. Apart from numismatic premiums, you will get more gold for your $$ buy buying a bigger bar. In a scenario where the gold price doubles, the gold bar will double in price, but fractional gold may not, as there is no reason the premium should double aswell. Like you said: So again it comes down to your investment strategy. Why are you stacking? What do you care about most? Is a fiat return more important than liquidity? Is divisibility important? Who will you be trading to? When will you be trading, and why? Don't answer those on here, it's probably too much information, but these are things to consider. There's often a big difference of opinion between the Stuff Hits The Fan crowd vs. the Check Out My Trading Profits crowd, because they're stacking for completely different purposes.
