Investing in gold has been a popular form of wealth protection for centuries. Gold fascinates with its enduring value and physical beauty. When deciding to invest in gold, investors are often faced with the choice between gold bars and gold coins. Both forms have their own advantages and disadvantages, which must be weighed up depending on your investment strategy and goals. In this post, we'll take a look at the differences between gold bars and gold coins and help you make an informed decision. But we would like to start with a look into the past...
Which came first, the bar or the coin?
Gold was discovered by people in the so-called Chalcolithic Age around 5000 BC. discovered. Since it occurred naturally in nature and its shine was unique, people noticed this metal very quickly. Due to its high elasticity and because gold is generally a soft metal, crude objects were soon made from it. These were not very artistic because people only had stone tools and these were not suitable for delicate work.
The metal copper was also discovered during this era and people began their first attempts at smelting metals. It was discovered that gold has a lower melting point than copper and can even be alloyed with other metals. In addition, the gold did not corrode like the copper, which after a while showed the well-known “verdigris”. This began the human fascination with gold, which was considered to have great “value”.
Now people could melt metal and cast ingots from it. Further processing into “coins” was unthinkable at the time because the tools required for such delicate processing were missing. These new gold bars were soon used as a very valuable medium of exchange. Usually a bag was filled with a certain number of small bars or pieces and closed with a seal that “guaranteed” the contents. These bags were particularly used by larger traders in the Mediterranean who could easily pay for entire shiploads without needing a shipload of barter goods themselves. One must not forget that barter was common practice at the time; nothing had been “bought” in the modern sense. The bar was therefore the first form of “means of payment”.
Only much later, around 600 BC. The first gold coins were produced in Lydia. King Croesus, ruler of Lydia (modern-day Turkey), ordered coins to be made from “electrum”. The gold found in this area was often a mineral alloy of gold and silver called “electrum,” which was thought to be a metal in its own right. This electrum was slightly brighter than pure gold due to the silver it contained and became slightly darker over time as silver oxide could form on it due to the silver content. For the first time, bags were no longer filled, sealed and the contents “embossed” on the seal; instead, weighed pieces of gold were now directly embossed and given a picture and a value. This is how the first means of payment with an embossed metal value was created and by embossing a motif it became recognizable, uniform and therefore fit for circulation. The first currency was created, which was intended to serve as an everyday means of payment.
What was the historical difference between bars and coins in their use?
The ingot was easy to manufacture using the technology of the time and, thanks to its crude shape, was insensitive to damage. Since a single large bar had a high value, it was very practical when paying for large loads of goods, as it was no longer necessary to have an equally large amount of barter items available. Plus the time saved because you no longer had to meticulously negotiate the exact value of the various exchange goods.
The coins were more complex to produce because only the minting technology and tools had to be invented and other metals were required. On the other hand, the coins had a beautiful appearance and the embossed motif meant you immediately knew which empire the coin came from and what value it had. In contrast to bars, coins were intended and produced as everyday currency. Coins were smaller, lighter and made it easier to buy smaller things. The barter trade changed into the trade we know today, where people no longer exchanged, but bought or sold.
Nowadays, gold coins or bars are no longer used in our daily lives, but are used in the area of precious metal investments, because people still rely on gold to protect themselves from inflation or general fluctuations on the financial market.
What are the advantages and disadvantages of gold bars and coins as a form of investment?
gold bars
Advantages:
• Cost effectiveness: Gold bars typically have lower premiums over the spot price of gold than gold coins. This is because the manufacturing cost of ingots is lower. For investors who want to buy larger amounts of gold at the cheapest prices, bars are often the preferred choice.
• Variety of Sizes: Gold bars are available in a variety of sizes, from 1 gram to 1 kilogram and beyond. This diversity allows investors to scale their investments depending on their budget and investment strategy.
• Simplicity and Stackability: Gold bars have a simple design and are easily stackable, making them ideal for storage in vaults.
Disadvantages:
• Liquidity: While large gold bars may be more cost effective, they may not be as easy to sell as smaller units because the pool of buyers who can match the total value of a large bar is limited.
• Anti-counterfeiting: Gold bars are easier to counterfeit than coins because they are easier to produce. It is important to only buy bars from reputable manufacturers.
Gold coins
Advantages:
• Collectible value: Many gold coins have a collectible value in addition to their gold value. This can increase the value of the coin beyond the pure gold value, especially for rare or historically significant coins.
• Recognition: Gold coins are often recognized and valued worldwide, which can make them easier to sell and trade.
Disadvantages:
• Price: Gold coins often command a higher premium over the spot price of gold than bars, in part due to the higher manufacturing costs and potential collectible value.
• Availability: Certain gold coins can be difficult to find due to their popularity or rarity, which can make them difficult to purchase.
The decision between gold bars and gold coins ultimately depends on individual investment goals and preferences. Gold bullion offers a cost-effective way to invest in physical gold, but may be less liquid and more susceptible to counterfeiting. Gold coins offer potential collectible value in addition to the pure gold value, but are typically more expensive and may be limited in availability. Regardless of the form you choose, it is important to only buy gold from trusted dealers and to store it safely. Ultimately, a combination of bars and coins can also represent a balanced gold investment strategy that takes into account the desire for cost efficiency as well as versatility and collectible value.
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