With the price of gold hitting record highs (almost on a daily basis!) it’s more important than ever to be a smart gold bullion shopper.
Arguably, the most popular gold bullion coin is the American Gold Eagle. The coin has its ownership advantages such as liquidity, worldwide recognition, and a U.S. Government guarantee, for example.
But is it the cheapest gold coin to buy now? Does it have the lowest premium over other popular gold bullion coins?
Read on and find out…
In a gold bull market, your ultimate goal is to own as many units as possible at the peak of the bull market.
In order to do so, you want to purchase the most gold for your money at any given time.
To achieve this goal, you will want to buy the gold coins with the lowest premium (cheapest!) at the time you are making your purchase.
With the large variety of gold bullion coins available for sale, how do you determine which is the cheapest one to buy?
Here’s how you calculate the premiums on gold coins:
- First you’ll need the current spot price of gold (the bid price). I like to use an online source such as Kitco. Most bullion dealers will also have the current spot price list on their website.
- Next, you’ll need to find out how much each gold coin is selling for over the spot price of gold. Most gold dealers will have this listed on the specific coin page. For example, my favorite bullion dealer is currently quoting a $97.99 over spot for a random date 1 oz American Gold Eagle
- Now, calculate the percentage each coin is selling for over spot using the following formula:
Amount Coin Is Selling For Over Spot / (Current Gold Spot Price + Amount Coin Is Selling For Over Spot)
Let’s use the 1 oz American Gold Eagle as an example:
$97.99 / ($1891.60 + $97.99) = 4.9% premium over spot!
The premiums will vary according to the amount of coins purchased and by individual dealers. Right now, the coin with the lowest premium is the South African Gold Krugerrand.
Calculating the formula for each coin on a daily or regular basis can be tedious. You can simplify this by setting up a basic spreadsheet with the formula, listing each coin of interest. Then, you will just need to change the spot price of gold and the individual coin pricing numbers as needed.
If you don’t want to calculate the gold coin premiums yourself but would still like to know what the cheapest gold coins are, on a regular basis, I’ve done the hard work for you!