Hey everyone, I'm back in business. It's been a few months since I've written a new article for Gold Why.
However, slow and steady wins the race. I'm here to build Gold Why into a huge resource and am
going to be answering some new Gold Why Questions over
the coming weeks and months, as my main focus in 2012. Today, I'm thrilled to answer a question that I get
a lot. I have gotten this question multiple times, both via email and also on my
Gold Why YouTube Channel. It's an important
question, one that I've discussed on Gold Why in a few different articles. However, I have never dedicated
an entire article to the topic so I'm quite thrilled with today's article. Thanks so much for your support
and for reading.
©iStockphoto.com – adventtr
Question: I have a question about the "American Gold Eagle Coin". So my question pertains
to investing. I would think you would want to buy coins that are pure gold such as the Canadian Gold Coins that are
.9999. While the American Gold Eagle is only .9167 pure why bother?
Answer: Thanks so much for this question. I'm a huge fan of both 24 karat gold bullion
coins and 22 karat gold bullion coins. The coins you mention, the American Gold Eagle
and the Canadian Gold Coin are two
of my absolute favorites. I own both of them (here are Pictures of My 1 Oz Gold Eagle).
Let's jump into the answer, it may surprise you...
22 Karat and 24 Karat Gold Bullion Coins Have The Same Gold Content
The headline says it all. When you buy a 1 troy ounce 22 karat gold bullion coin, such as a South African
Krugerrand or Gold American Eagle, you get 1 full troy
ounce of gold bullion. When you buy a 1 troy ounce 24 karat gold bullion coin, such as a Canadian Gold Maple Leaf or
a Gold American Buffalo, you also get 1 full troy ounce
of gold bullion. It's as simple as that, the comparable 1 troy ounce 22 karat and 24 karat gold bullion coins have the exact
same gold bullion content. Let's say we're dealing with other
Fractional Gold Coins such as the
Tenth Ounce Gold Eagle (a 22 karat gold coin) versus a
Tenth Ounce Gold Panda (a 24 karat gold coin). Once again,
these two tenth ounce gold bullion coins have the exact same gold bullion content. In terms of raw gold bullion, comparable
22 karat and 24 karat gold coins (when you're comparing same sized coins) have the same gold bullion content.
22 Karat Gold Coins Have Alloy In Them (While 24 Karat Coins Do Not)
So how is this possible? When one coin is pure gold bullion and the other is not, how do they have the same gold bullion
content? Easy: 22 karat gold bullions coins have extra metals (called alloys) in addition to the gold bullion content.
Here's an easy way of visualizing it. Let's say we start with a pure gold bullion coin, a 24 karat gold bullion coin such
as the Canadian Maple Leaf. How do we turn this 1 troy oz 24 karat coin into a 22 karat one? First and foremost, we absolutely
do not remove any gold content. Instead, we add other alloy metals such as copper. Basically, we take the 24 karat coin, melt
it down, and then mix in alloys. Then, we let it dry and we've got a 22 karat gold bullion coin. The resulting coin is slightly
larger than the original one since it now has gold plus some other alloys. As you can see from this example, the 22 karat and
24 karat gold coins have the exact same gold content. It's just that the 22 karat coin has extra metals (alloys)
in addition to the gold bullion content. When it comes time to sell, investors do not care. The coins will sell for their gold
value, not their alloy value, and since both have the same gold content, they are worth the exact same amount!
22 Versus 24 Karat Gold - Pros of 22 Karat Coins and Cons of 24 Karat Coins
So, now that we've proven that comparable 22 karat and 24 karat gold coins have the exact same gold content, which one do you buy?
Personally, I believe in a well diversified gold bullion coin portfolio and blend both types of coins in my personal collection. Moreover,
I buy all of the different fractional sizes of each. Of course, I also buy coins from all the different mints too. However, let's say
you are just starting out. You're buying your first few coins and don't know where to start. The final few sections of this article will
help you decide. Long story short, however, there is not one right answer.
The first gold coin I purchased was a 22 Karat Gold Eagle. In fact, I went over to
Blanchard Online and ordered five
Gold Eagles. This was a big move for me, but was back when the Price of Gold
was in the $500 per ounce range. Why did I start with these 22 karat gold coins? First, 22 karat gold bullion is scratch and dent resistant.
By contrast, 24 karat gold can scratch and dent easily. Scratch and dent your gold coins and you'll literally erode their value. However,
22 karat gold coins put the investor at ease. As someone who was new to gold coins, I wanted to start out with the basics. I knew I wanted
to touch and examine my beautiful new gold coins. Going with 22 karat made this easily possible. Moreover, at the time, I had no idea where
I wanted to Store My Gold Coins. 22 Karat gold bullion
provided a ton of flexibility.
Another pro of 22 karat gold coins: They're really liquid. 22 Karat gold coins, such as Krugerrands and Gold Eagles, are very liquid. They
are among the most collected gold bullion coins in the world. When it comes time to sell (if it ever becomes time to sell), you will
have an easy time selling them. Honestly, 24 karat these days is just as liquid, but maybe not quite as much.
24 Versus 22 Karat Gold - Pros of 24 Karat Coins and Cons of 22 Karat Coins
While I started with 22 karat gold coins, I quickly added 24 karat coins to my collection. Why? They are absolutely beautiful. All
gold coins are beautiful, in my opinion. However, 24 karat gold coins are more beautiful. When you hold a 24 karat gold bullion coin in your
hand, there's nothing else like it. That amazing color of pure gold is hard to compare. This is the main pro of 24 karat gold versus 22 karat
gold. It looks better! You have to be super careful with it and handle it with extreme care, but it's worth it! Another pro of 24 karat gold:
Some collectors and investors are purists. Even though both coins have the same gold content, some collectors only want the pure coin. While
22 karat coins are generally more liquid, some buyers may only want 24 karat coins (if you run into a picky buyer). For that reason, I recommend
having both types of coins. More than anything, adding some 24 karat gold to your collection will add some real flash appeal, these coins are
simply unreal and it's hard to explain until you've held one in your own hand. Thanks for the great question and I'm looking forward to answering
Buy Gold Coins on eBay
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Why Diversify Within Your Gold Coin Portfolio?
Pictures of My 2005 1 Oz Gold American Eagle
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