As you become more knowledgeable about the advantages of investing in metals like gold and silver, you are bound to notice that there are three different types of bullion offered by most precious metal dealers: bars, rounds and coins.
Bars are easy to distinguish because they have a distinct rectangular shape, and if they are from the same mint they can be stacked together.
But it can be harder to differentiate between rounds and coins. Both are small, thin circular disks, usually made of gold or silver, and featuring images stamped onto their obverse and reverse faces. However, it is crucial to understand the differences between rounds and coins.
Here’s how you tell a round from a coin, as well as the pros and cons of each to help you figure out which type of silver or gold bullion you want in your collection or investment portfolio.
Gold & Silver Rounds
Investors mix up rounds and coins all the time, and the confusion is understandable. Rounds are generally the same size, shape, and weight of bullion coins, but there is one important distinction between the two: rounds do not carry a status as legal tender, meaning they cannot be used as currency.
When a private or government mint produces a round, they stamp the weight and purity of the metal content on the round (usually .999 pure gold or silver) to help investors and collectors determine exactly how much metal it contains. Rounds from the same mint can also be stacked like bars, which make them transportable and easy to store. Most of the TV ads and infomercials you see for commemorative “coins” are actually rounds.
A round’s value is determined by its precious metal content. Because of their wide availability, rounds carry a very low premium over the spot price per ounce. For this reason, collectors who are only interested in owning gold or silver for the purposes of investment ought to consider rounds instead of coins. If the value of the metal contained in a round should rise, investors can experience a profitable return.
Advantages
- Easily stored and transported, as rounds from the same mint can be stacked
- The lowest premium over spot gold and silver per ounce
Disadvantages
- Generic rounds typically don’t offer anything in terms of “collectability” or historic significance
Gold & Silver Coins
Bullion coins, unlike rounds, carry the status of “legal tender,” and typically hold some historic or collectability value as well. Gold and silver coins are exclusively produced by government-run mints, and their designs typically change each year—giving certain years an element of uniqueness and rarity.
On their obverse side, most coins have their year and an elaborate design. Their designated or “face” value, purity, weight, and another design are featured on the reverse, or rear side.
Because bullion coins have qualities that make them more valuable than regular rounds—such as their collectability, relative rarity, and status as legal tender—they almost always sell slightly higher than the spot price of the precious metal contained in them.
Furthermore, gold and silver coins can also come in the form of proofs, which are uncirculated coins with special designs and finishes that set them apart from normal bullion coins, and junk silver coins, which describe any coin that is in fair condition and contains some percentage of silver.
Advantages
- A collectability factor that rounds and bars don’t have
- Considered legal tender (although they are worth much more for their metal content)
- Junk coins allow investors to buy silver bullion at under spot price
Disadvantages
- Uncirculated coins have a slightly higher premium over spot price compared to bars and rounds
Now that you know the difference between rounds and coins, you can buy with confidence and grow your coin collection or investment portfolio.