While the global economy in 2013 continues to be blighted by the European debt crisis, weak US dollar, the US government's fiscal cliff, and a gloomy share and credit market, the latest Gold Demand Trends Q3 2012 report by World Gold Council unveiled a significant growth in investors' demand for bullion coins. The mind can't help but boggles: what is the appeal of bullion coin investment, and what are the things to note when buying bullion coins?

Bullion Coin Investment and Appreciation Value

"The investment value of bullion coin is derived from the fact that gold itself is a tool used to hedge against risks," explained Louis Wong, senior jewellery gold trade practitioner with years of experience in bullion coin investment. "Gold has been an internationally recognised commodity for trading since way back in history, and its value is measured by its weight. Currencies, in comparison, have exchange rates that can fluctuate due to the countries' and global economic situations – the currency of a country will drastically depreciate when the country goes bankrupt – not to mention the geographical constrains of currencies. Shares, meanwhile, are an even more volatile type of investment as their prices are constantly affected by market forces and company performance. Put another way, bullion coins are in a lot of ways a lower-risk option compared to currencies and shares."

It's important to note that bullion coins are long-term investment tool and therefore not suitable for investors looking for short-term returns. In case you are wondering about the long-term perspective of bullion coin investment, Louis has an answer. "The price of gold has increased by at least 50% over the past 10 years. In 2012 alone, gold price has risen 23% from 13,000 in February to 16,000 in December. That is why gold has not only become the top investment option for conservative private investors, but it has also been sought after by central banks the world over as a hedge and an asset protection tool," said Louis. "With demand being the main drive behind commodity price, the worldwide increase of gold demand means a robust backing for gold price."

Investment is by no means the only factor that defines the value of bullion coin, as bullion coin is a commodity of great appreciation and collection value like gold jewellery. "The appreciation value of bullion coin varies according to its different designs in different countries. With design themes inspired by the Chinese zodiac signs, for instance, bullion coins of China and Hong Kong are particularly interesting and appealing to buyers and collectors. Moreover, gold, with a three-dimensional appearance given by the die, doesn't tarnish like silver does, which explains why it can easily level its appreciation value with that of art pieces."

Tips on Bullion Coin Investment

"Buying bullion coins is comparatively simple, as bullion coins can be bought at banks and government-accredited gold dealers. Any bullion coins used for investment purpose have to be 999.999 finesse gold (gold with 100% purity simply doesn't exist), and investors may choose to buy gold with an affordable price measured against its weight. While bullion coins weigh anything between one ounce and 10 ounces, investors tend to buy bullion coins with a range between three and 10 ounces."

"Now, bullion coin has a certain degree of thickness. In the case of rolled gold, the colour of the surface and the inner layer of the coin will be different to reflect the finesse of the gold, which is why it is wise to buy bullion coins from trustworthy and reputable dealers. Be sure to read the certificate carefully and have the weight of the bullion coin examined before buying." Investment incurs risk and consulting your financial planning before making any investment decision is recommended.

Special Thanks:
Louis Wong, experienced bullion coin and jewellery practitioner

(This article is the personal opinion of the author, and does not necessarily reflect the views of Hong Kong Housing Society.)