5 Things to Consider When Buying Gold Coins

Gold’s liquidity and stability have made it an attractive option for investors in recent years.

There are many ways to invest in gold. Investopedia lists gold futures, investing in old companies, gold EFTs, gold mutual funds, gold bullion, gold jewelry, and, of course, gold coins.

The latter has a couple of advantages over its counterparts, according to the Hard Assets Alliance. Namely, they’re usually minted, meaning you won’t need to authenticate them. They’re more liquid than say gold bars, making them easier to trade. And they’re considered legal tender, so you can use them if the normal economy collapses.

Alert: US Dollar Expected to Devalue During Imminent 'Currency War'

But not all gold coins are created equal. Here are five things you should consider before you buy gold coins:

1. What do you know about the quality of the gold? — The quality of gold can be broken down in two categories: purity (or fineness) and weight.

Owlcation explains that gold fineness is measured in karats (K). The higher the karat, the more gold the metal contains.

In the U.S., you aren’t likely to find coins or jewelry under 10K, which is actually made up of 41.7 percent gold. Moving up to 14K, you’ll find the metal contains 58.5 percent gold, 18K contains 75 percent, 22K contains 91.6 percent, and the finest, 24K, contains 99.9 percent gold.

Owlcation adds that the higher the karat, the more yellow the gold will appear, but keep in mind that gold is a malleable metal and purer gold will also be weaker.

When it comes to weight, gold is measured in Troy ounces, which JM Billion explains is just less than three grams heavier than a normal ounce.

The measurement dates back to 1527 and keeping it has gone a long way in helping purity standards remain the same over time.

Be wary of sellers who list gold weight in normal ounces; it makes their gold look heavier when in reality it’s 10 percent lighter than the Troy ounce measurement.

Checking all of these details has been made a lot easier thanks to Hallmarking, a tradition that dates back to 1238 and dictates that gold is stamped with symbols that relate to information about the metal.

According to the Assay Office, these stamps will tell a buyer or seller when the gold was tested, where it was tested, the standard of fineness, and where it was made.

You can identify your gold by using Gold Traders UK’s nifty Hallmark Identification Wizard.

2. What do you know about the seller? — In an article with USA Gold, Michael J. Kosares, the author of "The ABCs of Gold Investing — How to Protect and Build Your Wealth with Gold," says it’s important that your gold come from a respected source.

Kosares recommends looking for traders with a long, reputable track record. You should also pay attention to how the sales person is treating you. Ideally, you’ll want to take your business to a trader who is willing to answer your questions and keep you informed.

Once you’ve narrowed your list of sellers down to a few, Kosares suggests running their names through the Better Business Bureau's profile list to check their business rating and past complaints. If you’re looking for a place to start, the United States Mint has a full list of coin dealers available on its website.

Just like you’re shopping around for traders, you can also shop around for price. The Spruce warns that gold coins are usually priced just above the spot price for normal gold thanks to its weight and fabrication.

That said, Bankrate suggests that you shouldn’t pay more than 5 percent over spot price. The site also warns readers against getting caught up in bidding wars on online auction sites.

Income Revolution: The Retirement Secret Becomes a Movement

3. Where are you going to store your coins? — While this may seem a trivial question, as with any investment, you want to be assured that your coins are safe.

As eBay points out, you want to keep the location and value of your gold confidential.

The site suggests dividing your coins between different locations in a secure safe. Another option is to store your coins in a safety deposit box at a bank or bullion depository company.

According to eBay, United States citizens also have the option of storing their gold with an IRA Custodian.

4. What kind of coins should you buy? — Bankrate is very clear with its advice: stick to North American coins.

That’s because they are easier to sell and, in the case of American Eagle gold bullion coins, the gold quality is guaranteed by the U.S. Mint, which also released the 24K American Buffalo coin in 2006.

Other popular coins, according to Gold Silver LLC, are the Austrian Philharmonic, Australian Kangaroo, and the South African Gold Krugerrand, but these aren’t traded as frequently as the American Eagle or the Canadian Maple Leaf.

Both The Spruce and Bankrate warn against buying rare or special edition collectors coins. These are usually difficult to grade and have a much smaller market than their regular counterparts.

5. How much could you resell the gold coins for? — As Gold Silver LLC points out, most investors want to be able to offload their investment in the future.

This is another reason why sticking to sovereign coins, or those backed by governments, is a wise move. These coins are easily recognizable, their quality is assured, and there will always be a market for them.

Special: You Won’t Become a Millionaire Until You Read This Book . . .