Which coin can I buy now?
Coins as an investment in 2021: is it worth the investment?
Coins are a popular investment, especially in economically and politically uncertain times. Like cash, they can also be stored at home, but they are not devalued by inflation. However, there are a few things every investor needs to know.
Table of Contents
The most important thing about collecting coins in bullet points
- Gold coins are particularly attractive because of tax privileges
- Differentiate between investment coins and collector coins
- Note the gold-silver ratio
- Storage as a great challenge
- Check out ETFs and ETCs as alternatives
Buy coins step by step
Are Coins Even Right For Me? To do this, investors must first ask themselves whether they want to enjoy collecting and buy special coins or whether they want to invest their money in a crisis-proof manner.
Step 1: Buy investment coins or collector coins?
First of all, a distinction must be made between two types of coins, namely investment- and collector coins. The value of Collector coins lies only partially in their material. Instead, they are usually more in demand due to their rarity and at the same time their popularity, and thus have a high intangible value. The degree of conservation is also important when assessing the value. For example, a Chinese cash coin from the Tang Dynasty (617/18 to 907 AD) can be very valuable even though it was made from an inexpensive metal (for example copper).
This 5 shilling coin, minted in 1953 on the occasion of the coronation of Queen Elisabeth II, is made of copper and nickel, so it has practically no material value. It is a classic collector's coin, albeit of little value due to its frequency. But the example also shows why collecting coins can be interesting. In 1971, the United Kingdom was the last country in the world to say goodbye to the Carolingian coin system, which is divided into pounds, shillings and pence. Since then there have been no more shillings in Great Britain.
Classic investment coinshowever, do not have a high collector's value. They are minted in large editions so that the demand is not significantly higher than the supply. Instead, the price is based on that of the Metalfrom which it was made. Therefore, they are often referred to as bar or bullion coins (after English bullion for bars). As a result, how well preserved they are is also less relevant. All that matters is that Weight of the coins.
Collector coins are bought primarily for the fun of collecting. They give an insight into the (coin) history of a country. But if you just want to invest money, investment coins are the better choice.
Step 2: silver or gold coins? - Keep an eye on the gold-silver ratio
Investment coins are usually made of gold or silver Manufactured, old collector coins can, as mentioned, also be made of inexpensive metals such as iron, tin, lead or copper or alloys such as bronze.
The main advantages of gold coins are their small size and tax privileges. Even expensive gold coins are relatively small, so they are easy to store and hide. There is also no VAT for gold coins that are the official means of payment in their country of origin (more detailed information in the chapter on taxes).
Silver coins are not exempt from VAT. However, they are also given tax privileges through differential taxation the case is. In addition, the value of an investment coin made of silver or gold is easy to determine, unlike, for example, one Gemstone.
The purchase of silver coins can be for the purpose of, despite the higher taxes Risk diversificationbe useful. In addition, buyers should keep an eye on the gold-silver ratio. It indicates the factor by which gold is more expensive than silver. If it rises above 80, i.e. an ounce of gold is more than 80 times as expensive as an ounce of silver, long-term experience suggests that the price of silver will rise more sharply. There is of course no guarantee for this. The use of silver in industry, for example, can result in special demand. In addition, political crises in producing countries are a reason why the price of both metals can deviate from a factor of 80.
3rd step: Determine the correct value
The value of investment coins depends on the material. It depends on the fineness and weight. The fineness or carat indicates how high the proportion of gold is in the total weight and how many foreign substances are contained. The fineness of the Krugerrand corresponds to 916.7 per thousand, i.e. 91.67 percent or 22 carats. Other coins have a fineness of up to 999.9 per mille, which is then referred to as fine gold.
In the case of collector coins, however, there are additional factors, for example
- State of preservation
- Awareness and Demand
In the case of very rare coins, a single collector can influence the prices. Fashions also have an impact on prices. For example, if a coin from a particular region and time has achieved a high price, this can affect the prices of similar coins, even if they are far less rare. For example, misprints are often very expensive because there are only a small number of them in circulation.
Step 4: Find a seller
Banks mainly sell investor coins. Again and again there is thought to restrict the OTC sale (over the counter, i.e. directly at the counter) of precious metals. So far, investors have been able to buy gold up to a value of 10,000 euros without any problems. However, consideration is being given to lowering the limit to 2,000 euros. Of course, you have to check whether the bank has enough coins in stock.
In addition to gold, you can also buy silver at Goldpay.
Precious metal dealers and pawn shops also sell coins. For example, the MDM Münzhandelsgesellschaft mbH & Co. KG Deutsche Münze is known. The Deutsche Post AG philately service also sells selected coins in addition to postage stamps. In principle, collector coins can of course also be auctioned online. However, some knowledge of the value is important for this.
It is easier to buy a standard coin through an online gold dealer like the company Goldpay from Berlin. The company has the goods delivered to the customer insured, so nobody has to pick up the gold themselves in Berlin (but this is possible). The offer ranges from bars weighing 15 grams that cost less than 100 euros to bars that cost more than 50,000 euros. Goldpay also sells coins as well as silver. Larger deliveries are of course no longer sent by post, but by value courier.
Step 5: Store coins correctly and safely
The greatest disadvantage of coins for investment is the risk of break-in or theft, for example by craftsmen or cleaning staff.
Smaller sums can simply be hidden if necessary. However, this is also no guarantee against theft and you should also make sure to find the coin again.
A safe is a good choice for larger sums of money. Either one in-house or at the bank or the gold dealer. However, both cost money. Again and again in history there was also Gold bans, times in which the private possession of gold was forbidden. In Germany, for example, this was the case from 1923 to 1955. A vault at a gold dealer is then of course easily controllable. In the worst case, the gold must then be sold at a rate set by the state.
Another objection to a locker is more serious: it costs money. Smaller subjects are available from around 20 euros per year, larger ones, for which the content is also insured at the same time, sometimes cost 500 euros and more. This shows another advantage of gold coins: Because of their small size, gold worth several thousand euros can be deposited in a small locker.
A compromise between an ETC and physical delivery is the offer My gold deposit of the Austrian provider My treasury. Customers buy physical gold, which is not delivered, but stored centrally in the vault. There are no costs for storage, because the company is financed exclusively from the proceeds from the sale of the gold. Another advantage: if you need money, you can simply put the gold back on My treasury resell at the then current price.Now directly to my treasury
The most important information about investing in coins
Every investor should know our about coins.
What taxes are there?
Tax can already be incurred when purchasing coins. However, gold coins are exempt from VAT if they are legal tender in their country of origin. This applies not only to coins with an imprinted face value such as golden euro coins, but also to those without. The well-known Krugerrand from South Africa has no face value, but is broken down according to weight. The currently smallest coin weighs 1/50 ounces, the largest 50 ounces (around 1.7 kilograms). Nevertheless, it is recognized by law in South Africa as an official means of payment and is therefore VAT-free in Germany.
The conditions for exemption from VAT are:
- Minted after 1800
- The fineness is at least 900/1000
- The coin is (has been) legal tender in the country of origin
- The selling price that the coin can usually achieve does not exceed the open market value of the gold content by more than 80%.
Silver coins are not exempt from VAT and the reduced rate of 7.0 percent has also been lifted due to pressure from the European Union. However, when buying foreign silver coins, the tax rate for differential taxation is usually below 10.0 percent. The importer then only pays 7.0 percent import duty. In the case of resale, only the difference between the purchase price plus duty and the resale value is then taxed at 19.0 percent.
Special case of collector coins
With collector coins, things are a little more complicated. Gold coins are also taxed if the selling price is significantly higher than the metal value. Until 2014, collectibles were mostly taxed at just 7.0 percent, but as with silver, the EU forced a tax increase here too.
Here, too, differential taxation comes into play. A coin dealer who buys a coin for 1,000 euros and resells it for 1,500 euros only has to pay VAT on the 500 euros difference.
There is no VAT at all if the coin was bought by a private person or the dealer is subject to small business regulations. The dealer must disclose whether this is the case.
Taxes on Sales Profits
Profits from the sale of coins are generally tax-free if the speculation period of one year has not been exceeded. Otherwise, all income beyond the exemption of 600 euros will be charged with the personal tax rate. The regulation is therefore similar to the one that also applied to shares before the withholding tax was introduced.
What is fine gold and what does carat mean?
Different metals are always contained in bars or coins. A gold coin therefore not only contains gold, but also traces of silver, iron or copper. The proportion of the most valuable metal is described today by its fineness. In metallurgy one speaks of the ratio of grain (weight of the most valuable metal) to shot (total weight) or fine weight and rough weight. Outdated terms for the proportion of the precious metal are carat for gold and solder for other metals.
The fine weight of the Krugerrand is relatively low at 916 2/3, while Austrian coins like this gold ducat are mostly made of fine gold.
Today the fine weight is mainly given in per thousand. A fine weight of 916.7 per mille means that 91.67 percent of the total weight is really accounted for by the specified precious metal, for example gold in a gold coin. The remaining 38.3 parts per thousand of the weight are accounted for by other metals.
|Surname||Gold content in ‰||Gold content in carats (obsolete)||annotation|
|Fine gold||999,9||24,0||Gold content of the Mapple Leaf|
|Crown gold||916,7||22,0||Gold content of the Krugerrand|
|Coin gold||900,0||21,6||Lower limit for VAT exemption for coins|
For the unit lot, the proportion is given in sixteenths, for carats in twenty-fourths. The carat of gold is not to be confused with the metric carat that is common with precious stones, which corresponds to around 0.2 grams.
A fineness of 916.7 per mille (exactly 916 2/3) therefore corresponds to 22 carats. From this fineness one speaks of Crown Gold in many countries. Coin gold, on the other hand, only has a fine fraction of 900.0 per mille, fine gold on the other hand of 999.9 per mille.
The most important investment coins in the world are probably the South African Krugerrand and the Maple Leaf from Canada. Here is a list of the most important coins:
- Krugerrand, actually Krugerrand - South Africa
- Maple Leaf - Canada
- Kangaroo Nugget - Australia
- Britannia and Sovereign - United Kingdom
- American Eagle - USA
- Vienna Philharmonic - Austria
- Panda - China
- Libertad - Mexico
- Golden euro coins - including Germany, e.g. B. German 100, - Euro coin
All of these coins are official currency in a country. Most of them, such as the German 100 euro coins, the Mapple Leaf or the Kangaroo Nugget, also have a face value. In theory, this can be an advantage if the gold price falls below face value, which is unlikely. Currently (as of 2019) a 100, - Euro gold coin costs over 800, - Euro.
It is more important that there is no VAT on purchase, not even with the Krugerrand, even if it is issued with no face value.
Commemorative coins, special editions and medals
Many commemorative coins and special editions are not suitable as investments. Even over years and decades, it is not to be expected that these will gain significantly in value that exceeds the nominal value. The reason for this, especially in the case of heavily advertised "collector's editions", is that these are minted in such large numbers that it is not uncommon. AsAs a result, they are not suitable for investments. The only value these coins have, besides the fact that they can often be used as official tender, is their lover's value.
This coin with the image of Pope Benedict XVI of the Republic of Somalia was minted exclusively for collectors in Europe. Because, as is well known, Somalia is a strictly Islamic country.
Investors have to be careful that these are coins and not medals. These are not an official means of payment and are often issued by private individuals or municipalities. Strictly speaking, the “commemorative coin” of a city for its 1,000th anniversary is not a coin, but a medal. The 100, - Euro coin with the motif of the Würzburg residence, on the other hand, was issued by the Federal Republic of Germany and not the city of Würzburg and is the official currency. With the exception of the Krugerrand, coins mostly have a face value imprinted on them.
The most valuable coins in the world
In 2017, on the occasion of the 50th anniversary of the Krugerrand, the Mint of the Republic of South Africa issued a special edition of only 50 pieces, each weighing 50 ounces, i.e. around 1.4 kilograms. A coin is currently (as of 2019) traded at a price of around 140,000 euros, which is, however, well above the pure gold value.
However, this is by no means the most valuable coin in the world, not even the heaviest. The "red kangaroo" published in 2011 weighs 1,000 kilograms and, in contrast to the Krugerrand, is made of fine gold, ie has a gold content of at least 999.9 per mille. The gold value alone is currently (2019) around 44 million euros.
The Liberty Dollar, minted in 1794, does not come close to such a high material value, but was still sold in 2013 for 7.8 million US dollars. In contrast to the other two coins, the collector's value is decisive here, after all, the coin is very old.
However, not as old as a coin that was minted by King Croesus in Lydia, in what is now Turkey, an estimated 2,600 years ago. Croesus or his father are considered to be the inventors of modern coins. At less than a million euros, the sales price was downright a bargain.
The most expensive German coin is the “Jakobslöser” from 1625 from Goslar / Zellerfeld. The value is estimated at just under a million euros.
Advantages and disadvantages of coins
A Investment in raw materials in the form of coins has advantages and disadvantages.The easiest way to assess this is in relation to other types of investment.
Coins vs. Gems: Coins clearly easier
"Diamonds are forever" is a well-known song sung by Shirley Bassey for the James Bond film of the same name. But in practice, gemstones are a very difficult investment. While two kilos of gold cost twice as much as one kilo, a ten-carat stone can cost many times what a similar 5-carat stone brings in.
The value of a stone depends not only on its weight, but also on its purity, color and cut. An 84 carat diamond was auctioned in 2010 for “only” 18 million francs, around 14.5 million euros. The 60-carat “Pink Star”, on the other hand, was sold in London in 2018 for around 67 million euros.
Trading diamonds requires a great deal of specialist knowledge. It is not attractive to most laypeople. In the picture the former diamond town of Kolmannskuppe in Namibia. The first X-ray machine in the southern hemisphere once stood here, today the place is a ghost town. Image by Nhelia from Pixabay
So if you want to invest money in gemstones, you have to be very knowledgeable. In addition, because of the large differences, there are no certificates for diamonds. For multimillionaires, an item of gemstones may make sense in terms of risk diversification, for Otto and Anna normal investors, gold and silver are usually the better choice.
Other metals: Few are attractive
Silver and gold have the great advantage that they are actively traded. This makes them less volatile than rarer raw materials. Of course, investors can also use germanium or Buy lithium, but that is more for speculation than hedging.
Especially since gold and silver can be stored well at home or in a safe deposit box because of their high value. In the case of industrial raw materials, on the other hand, almost only certificates come into question.
The only exception is platinum, which was even more valuable than gold. In 2017, on the occasion of the Krugerrand anniversary, the South African mint also issued a platinum coin for the first time. However, the coin is only available with a weight of one ounce, so according to the current status you have to invest at least 1,000 euros.
Coins vs. Bars: Approximately a tie
In addition to coins, investors can also buy bars. Because the production is less expensive than with coins, the production is very cheap. The standard bar, which still weighs 12.4 kilograms, is of course not suitable for normal investors. However, there are now much smaller bars, only mini-sizes of up to five grams are not advisable. They are often disproportionately expensive. Because bars are usually shrink-wrapped and sold with a certificate of authenticity (LBMA Good Delivery Status). This results in additional costs that are largely independent of the weight of the bar and are therefore more significant for small bars.
However, the difference between investment coins is not that great, which is why they are often called bullion coins (sometimes also bullion coins from the English word bullion for bars). After all, the coins are more beautiful, but the chance of an additional increase in value for coins beyond the material value is rather theoretical with common coins such as the Krugerrand. Unless you accidentally acquire a bad coin.
Whether coins or bars are therefore largely a matter of taste, provided the fineness is above 995 per thousand. Only then are they exempt from VAT. Coins, which are official means of payment, are already from a fineness of 900 per thousand.
Coins or ETCs? ETCs usually the better choice
Instead of physical gold, so-called paper gold can also be bought. These are securities that certify the right to a certain amount of gold or at least to its performance. This is how customers avoid the problem of storage. Because the topic is so important, we have dedicated an entire chapter to it, in which we explain the advantages and disadvantages in detail.
Gold 2.0: ETCs as paper gold
There are several ways to invest in gold without owning gold. For those who want to speculate with gold in the short term, contracts for difference, better known as CFDs, are the best choice. But he should know that around 80 percent of CFD accounts make losses on balance.
A classic possibility are options or futures. They can also be used for speculation, but also to hedge the deposit. However, there is always an issuer risk here. If the issuer of the option or the future becomes insolvent, the security can usually not be repaid in whole or in part. This is particularly unattractive for those customers who want to protect themselves against crises. Gold ETFs or ETCs are safer.
What are ETCs?
The abbreviation ETC stands for Exchange Traded Commodity. It is not just by chance that the term is reminiscent of the well-known abbreviation ETF for Exchange Traded Fund. The ETC acts as an ETF replacement in the European Union.
ETFs are funds that are traded on the stock exchange. There are also gold ETFs in Switzerland. You buy gold either directly or through futures. However, the European MIFID directive does not allow funds with a value that makes up more than 20 percent of the total value. That is why there must be no pure gold funds in the EU.
Strictly speaking, ETCs are not funds, but certificates. However, they are secured with stored values. They are therefore almost as safe as funds.
For whom ETCs are better than coins and bars
Whoever buys an ETC naturally only has “paper gold” in hand in the end. How secure this is depends on the circumstances, for example on whether the issuer uses physical gold for hedging or certificates, which in turn pose an issuer risk.
For those who feel better when they have a coin or an ingot in their house, the ETC is not for them. For most investors, however, it might be a better choice. You can simply buy it on the stock exchange and store the paper in the depot. The risk of theft is thus far lower than with storage at home and the costs are lower than those of a bank safe.
Buy ETC step by step
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