Gold Stock vs. Gold Bullion

by Lee Grayson, studioD

Precious metals such as gold, silver and platinum have attracted investors throughout history, but the market for gold coins and bullion developed as nations adopted a gold standard to back currency. The world economic depression — beginning in the late 1920s — highlighted problems within the gold market, and New Deal changes in the 1930s banned U.S. citizens from holding gold coins or bullion to avoid speculation.

Gold Stock

Gold stock refers to corporate stock offerings as well as stocks offered by the U.S. Treasury beginning in 1975. Mining stocks represent shares in companies producing gold from mining operations. The worth of the stock rests in the current value of the gold produced by the business, but also on the firm's ability to produce gold at a profit regardless of the market value of the metal. The Treasury stock offerings operate the same as any investment in the commodity market and fluctuate with the world interest in metals and world events.

Stock Advantages and Disadvantages

A high market value for gold bullion doesn't guarantee a profitable stock investment, although mining stock has increased in value, making an average of 670 percent since the 1990s, according to CNBC. Mining corporations vary in their abilities to discover new mines, expand production and produce profits. The downside of gold stock ownership is the stockholder has no active involvement in the corporate operations and must rely on the ability of the mining firm or the whim of the commodity market to increase profit on the investment.

Gold Bullion Coins and Bars

Gold bullion has been sold to private investors as bars and as coinage since the passage of Public Law 93-373 in 1974. Coin investments include circulating and non-circulating, and the value depends on the weight of the gold coin, as well as the condition and number of coins minted. The purity of the gold coin or bullion also affects the product's market worth. Most investors look for a coin with a purity of 99.9 percent. Coins produced for investment purposes may be marked with a purity label and weight, but gold coins produced by mints do not provide that information on coins. The industry standard in 2011 for a 10-ounce bar of gold bullion was 0.995 fine purity. Gold refiners typically hallmark each bar with the weight and the purity imprinted on each bar.

Bullion and Coin Advantages and Disadvantages

The advantage of holding actual bullion includes the guarantee of a physical product for investment, or coins worth at least the face denomination, but holding the actual gold product also creates cost to the investor to secure the gold. Many metal investment firms offer holding services for investors. For a monthly fee, the company provides storage and insurance to protect against theft or damage. Many investors holding coins and bullion in bank safe deposit boxes take out private insurance policies to protect against loss.

About the Author

Lee Grayson has worked as a freelance writer since 2000. Her articles have appeared in publications for Oxford and Harvard University presses and research publishers, including Facts On File and ABC-CLIO. Grayson holds certificates from the University of California campuses at Irvine and San Diego.

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