The Krugerrand, Maple Leaf and American Gold Eagle all contain one ounce of gold but have different prices.
Why does this happen? This phenomenon can be explained with coin premiums. Additionally, other factors may influence its final price such as demand, rarity and historical significance.
Bullion Coins
One oz gold bullion coins represent one of the most sought-after types of modern investment-grade coins. Sold with low premiums over spot price, these liquid and accessible coins provide wealth protection by protecting against devaluation of the US Dollar.
These coins are most frequently sold as Business Uncirculated (BU), with legal tender face values of $50 each and meeting the minimum purity standard of.999 fine gold. BU coins are considered investment grade and eligible to be held within Individual Retirement Accounts; many precious metal dealers also sell proof or collectible American Eagle coins; however these do not fall within IRS guidelines and are therefore ineligible.
Second market 1 oz gold coins from previous years tend to command lower premiums than newer coins, even those showing signs of handling and surface flaws. This is likely because these coins were previously purchased by investors before being returned back to dealers as returns.
Proof Coins
1 oz gold coins offer reasonable premiums over their spot prices, providing investors with an affordable and liquid way to take an ownership stake in this long-term asset. Minted at leading global mints and tested for authenticity to guarantee purity of.9999 fine gold purity, these coins provide investors with tangible ownership stakes in gold.
One oz weight classes are highly sought after for investment purposes, as they provide access to substantial quantities of gold in an easily manageable package. Furthermore, many coins in this weight category come equipped with legal tender face values and feature various designs on them.
Proof coins are produced in much lower numbers than their bullion counterparts, which reduces their costs and impacts their prices. They’re then graded by third-party grading services like PCGS according to Sheldon coin grading scale of 1 through 70; all this adds up to higher prices of proof coins and tend to come packaged with premium packaging designed to increase collector appeal.
Semi-Numismatic Coins
Modern coins like the Krugerrand, Maple Leaf and 50oz American Eagle all contain equal amounts of gold (one troy ounce), yet their prices differ drastically. Why is that?
Answering that question lies with premiums – fees added to the spot price of metal to cover minting costs, distribution expenses and other expenses that vary based on demand, market timing and other variables that change daily. These premiums vary in accordance with demand, market timing and other variables that could change at any time during their journey from mintage to distribution.
Bullion dealers often criticize semi-numismatic coins because of this perceived gap, stating that investors could purchase more ounces of gold with bullion coins for the same cost. But this argument misses the mark; unlike bullion which is solely valued based on metal content and purity, rare numismatic coins can often fetch much higher premiums from collectors or investors than their $50 face value due to intangible attributes that are hard to measure such as design, rarity, history/storytelling capabilities as well as technology or physical texture that collectors/investors pay in order to own them.
Rounds
Have you ever held a gold bullion coin in your hand? You will quickly recognize their variance in size and weight; for example, the 1 oz American Eagle measures in diameter approximately equal to that of a nickel while its thickness exceeds that of a penny; on the other hand, both 1/10 oz Krugerrand and Maple Leaf coins tend to be wider but thinner than dimes, closer in size to nickels than American Eagles.
Such variations in pricing can have an impactful effect on gold coins that appear similar – an ounce of precious metal should have similar prices regardless of its form. But premiums play an integral part in pricing structures, creating price disparity.
Bullion coins provide investors with an affordable means of diversifying their portfolio with physical metal, without incurring the additional costs associated with rare numismatic coins. Furthermore, as these coins do not have face values and cannot be used as currency they make an ideal option for holding in self-directed Individual Retirement Accounts (IRAs).
