Bullion Coins:

Gold Is Precious, Like Children, But Not Rare

This is the easiest area to explain. The value of bullion coins is based on the amount of gold, silver, or platinum contained in the coin. The coins are usually produced in weights of 1/10 ounce, 1/4 ounce, 1/2 ounce, and 1 ounce. The price is based on the "spot" price of gold, silver, or platinum, plus a premium for manufacturing by the issuing country, and a commission for the selling dealer. Dealer commissions are small, usually 2% to 6% of the selling price, depending on the type of coin and the quantity purchased. These coins are currently minted and are not used as currency although some coins display a denomination.

For example, the 1 ounce American Eagle shows a $50 denomination on the coin, yet the purchase price of the coin, at today's "spot price" of $567.70, would be about $587. There is no wisdom in spending this coin for its face value of $50. Bullion coins of the same size, but from different sources, vary in price due to the amount of actual precious metal in one coin. Some countries have more hardening metals in their coins, such as nickel or copper, than coins from other countries. The price movement of bullion coins follows the price of the metal's market. The coin form is simply a more convenient method of physically holding the asset.

Coins are only one form of bullion, with ingots (from 1/4 ounce to 100 ounce) and bars (1 kilogram and up) as other common forms. In addition, many bullion "coins" are privately minted and are not real money. Examples of private hallmarks are Johnson Matthey and Engelhard. All bullion coins are sold in the metals market using a bid-ask system that is quoted daily. In all cases, only US-MADE coins are legal tender money in this country so "buy American".