Spot Price, Bars, Coins, and Numismatics

It is important to understand the differences between physical precious metal investment-grade products and the different attributes they offer. In this article we will explain the differences between generic bullion products and numismatic coins. Generic bullion products rely solely on the spot value of the precious metal and numismatic products offer additional premium value due to rarity or limited production.

The Current Bullion Spot Value

What determines the current spot value of precious metals? The spot value is the current market value of a commodity. The spot pricing of precious metals is determined by the buyers and sellers that trade contracts on the major exchanges throughout the world. For example, there are major commodity exchanges in Chicago, Tokyo, London, and New York. The Chicago Mercantile Exchange, Tokyo Commodity Exchange, and the London Metal Exchange. However, the largest commodities exchange is the, COMEX, at New York Mercantile Exchange.

The spot pricing of precious metals is determined by supply, demand, and the speculative trading executed through future contracts.

The future contracts are commitments to buy or sell precious metals that may or may not see a physical manifestation of exchange. They are mainly there to gauge buyer interest in the future. If the open interest in the future is in question, that directly impacts the metal’s spot pricing. In that sense, the pricing of precious metals depends on public sentiment.

Nevertheless, the fundamental quality of precious metals is that they are assets that can proxy as hard money with banks storing them as assets to offset debt instruments, and so, their prices generally rise with inflation. Currency values fall when inflation is present. Inflation generally causes the spot price of commodities to rise over time.

Generic Bullion Bars

Bullion bars are a tangible form of gold. Generally referred to as generic, gold bars are not designated as legal tender and are easier to counterfeit due to the absence of mint marks. Because gold bars can be easily counterfeited, an assay test is generally required at time of liquidation. This can add an additional step and expense at time of liquidation. Gold bars generally come in one ounce, ten ounce, and kilo sizes. Which makes gold bars more difficult to utilize in barter. In comparison to sovereign mint coins, generic bars are lower in demand and will likely bring less than gold spot value at liquidation. This is due to their lack of user-friendly attributes. Generic bullion bars are generally utilized as a short-term speculative investment and are more volatile in comparison to coins that are limited in production and generally utilized as a long-term hedge.

Sovereign Mint Coins

Sovereign mint produced gold coins can be mass produced or produced in limited supply. Sovereign mint produced gold coins are generally legal tender designated and carry mint marks that offer additional security and reduce the risk of counterfeit reproduction. Sovereign mint produced, legal tender coins are widely accepted in global barter and are in higher demand than bullion bars. This is due to their user-friendly attributes. When compared to generic bullion bars, sovereign mint produced coins will generally bring a higher value at liquidation.

Numismatic Coins

Numismatic gold coins offer additional value due to their limited production or limit in supply. Numismatic coins have intrinsic value and have rarity value as well. Numismatic coins offer additional upside potential over and above the intrinsic value of the precious metal. Numismatic coins are categorized as a private asset class. Investment grade numismatic coins can be certified and graded to confirm condition and additional value. Numismatic coins are generally a long-term investment and are less volatile than generic gold bars. Due to rarity value, numismatic coins can outperform its underlying commodities growth. In some cases, gold numismatic coins can double, triple, and quadruple the growth in comparison to the spot value of gold.

The Reason for Gold Coin Diversification

Gold tends to maintain its value throughout a long period. Financial analysts say that the gold price is not indicative of its worth, which implies that even if the gold price falls, the real value of gold remains unchanged. Furthermore, as inflation begins to take hold, gold’s value rises. As the values of currencies fall, the price of gold rises. This is why many investors consider gold to be the best combatant to offset inflation.

Diversifying in gold eagle coins can potentially stabilize your portfolio when geoeconomic uncertainty is present. Precious metal coins have an inverse relationship to stocks and other paper assets, which is why many investors own gold and silver coins. Precious metals IRA accounts are often utilized by investors to hedge and diversify tax-deferred holdings against the eroding effects of inflation.

The following article is created by Orion Metal Exchange for the benefit of our investors and perspective investors alike. We seek to provide relevant content concerning precious metals and the impact caused by economic and geopolitical trends that will most likely impact your financial future. If you are interested in learning about precious metal investing, call 1-800-559-0088, for a FREE investor kit.

Simple Answers to Common Questions: FAQ Spot