What Are Bullion Coins?

What Are Bullion Coins?

Hearing the words “coin” and “bullion” together is a clear indicator that a discussion is about precious metals. A bullion coin is a legal-tender product that has been produced based on the weight and purity of its precious metals contents. The most common precious metals used to create bullion coins are gold and silver.

The U.S. government guarantees the weight and purity of bullion coins manufactured by the U.S. Mint. Unlike collectible coins that can’t be held in an IRA, bullion coins are primarily viewed as a way to hold precious metals like gold and silver as portfolio assets.

U.S. bullion coins, first introduced in 1986, are produced mainly at the U.S. Mint’s facility in West Point, New York. Bullion coins are also produced by government mints in Australia, Austria, Canada, China, and South Africa.

Can Bullion Coins Be Purchased From the U.S. Mint?

The U.S. Mint does not sell bullion coins directly to the public. Instead, the Mint distributes these coins through a network of official distributors known as “authorized purchasers.” Pricing for bullion coins from these distributors typically depends on the market price of the coins’ precious metals contents, plus a small premium to cover minting, distribution, and marketing costs.

Are Bullion Coins Different from Proof Coins?

Yes. While a bullion coin and its proof coin counterpart contain the same amount of a precious metal, proof coins are created using a more intricate process that results in frosty design and mirrored fields. Proof coins are also generally created in far fewer numbers than bullion coins. In addition to their precious metals content, proof coins are desired for their designs, condition, and relative scarcity, all of which may contribute to higher market prices. People often buy proof coins alongside bullion coins in the hopes of taking advantage of these additional benefits. To create the superior finish of proof coins, “proof blanks are specially treated, hand-polished, and cleaned to ensure high-quality strikes,” the U.S. Mint explains. “The blanks are then fed into presses fitted with specially polished dies and struck at least twice. The coins are then carefully packaged to showcase and preserve their exceptional finish.”

Why Should You Own Bullion Coins?

People decide to own bullion coins for many reasons. Owning bullion coins offers several advantages:

• They’re easily recognizable.
• They’re easy to trade.
• They typically sell at a higher premium than bars of the same precious metal weight.
• They are often recognized as a hedge against inflation.
• They hold intrinsic value based on their precious metals content.
• They can help diversify your portfolio.

What You May Want to Watch for When Buying Bullion Coins

While it’s almost always a good time to buy precious metals, some moments are better for buying bullion coins. When you’re ready to buy, watch for:

• Moments of market stress: Bullion coins are highly liquid assets and may be able to provide a practical means of wealth protection during periods of economic upheaval.
• When central banks are buying gold: Gold has long been a reserve asset for the world’s largest banks. When central banks buy more gold, they may be trying to increase their diversification away from paper-based assets such as the U.S. dollar—a strategy also employed by many consumers worried about the effects of inflation. Historically, gold has been negatively correlated with the U.S. dollar.
• When the U.S. dollar shows signs of weakness: Similarly, “when the dollar is weak, gold is cheaper to purchase in other currencies,” writes Philip N. Diehl, President of U.S. Money Reserve. A slumping dollar could signal an uptick in gold prices, including the price of gold bullion coins.

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