Are you among the many of people who don’t understand how the price of gold per ounce is calculated? It is something that confuses a lot of potential investors, and things are made even worse when the price of gold per ounce is different among seemingly similar assets.
For example, the price of gold per ounce for a gold Krugerrand can appear to be higher than that of a Canadian Maple Leaf. This sort of difference in the price of gold per ounce really confuses investors, but is actually a relatively simple issue to clear up. The reasoning behind differences in the price of gold per ounce for relatively similar assets is that they may have fees that are built into the cost.
For example, the gold American Buffaloes are usually one of the higher priced coins because they are actually considered among the rarer coins. They use the highest quality gold as well (24-karat gold) and this level of purity along with a bit of scarcity is going to make them a bit more costly and valuable. You also have to consider that the coins have fees associated with the minting and distribution processes that a vendor cannot absorb.
So, the simple fact of the matter is that the slight differences in pricing between various gold assets (particularly concerning coins) have entirely to do with the quality of the metal and the fees due to the minting and distribution processes. Does this mean that you should simply opt for an investment in the “cheapest” versions? Not really. What the pricing differences show is that you will want to select the gold coins for investment based on your particular goals.
For example, let’s say that you have decided that the bulk majority of your investment will be of the “long term” type. This means that you intend to hold on to the coins for years and that you have to then consider the quality of the goods. Thus, someone considering their gold coins over the long term is going to want to buy the highest quality gold and even consider if the coins are no longer being minted (which means that they will become rare or scarce) too.
If, on the other hand, the investment is of the short-term variety, it means that the investor is going to be able to select coins that are widely available and which may not use the “ultimate” in terms of purity because they will be sold after a few months or a year’s time.