What’s the Difference Between Bullion and Numismatics?

soundMoney (ecoPen Ltd)

by Sound Money (ecoPen Ltd)

The term Bullion means precious metals in their commodity or bulk form, cast as ingots (or bars) in various sizes or minted into coins.

Bullion coins issued by countries, such as the South African Krugerrand, the Canadian Maple Leaf or the American Eagle, are nominally legal tender with a face value although their bullion value is much greater. Bullion value is determined by mass and purity.

The fact that bullion coins have a face value also has some significant tax implications in many jurisdictions (these are discussed separately).

Both bullion bars and bullion coins are commodity items and are valued for their very substance rather than grading, coinage year, collector appreciation or similar.

 

Numismatics refers to collectible coins, uncirculated or circulated in various conditions. These coins are collected for their rarity value; they may have bullion value but their price is based on numismatic value. Numismatic value is determined by coin scarcity and condition, the latter indicated by numerical grades ranging from 60 for a coin with scratches or a weak strike to 70 for a coin in perfect condition. The abbreviation “MS” preceeding the numerical grade stands for mint state. A numismatic coin in perfect condition would have a rating of MS-70.

While numismatic coins can have a significantly higher value per mass and, given the right circumstances, may offer a “more compressed” form of value, their price is largely determined by appreciation, taste or other subjective factors. These may vary, particularly in uncertain economic times when coin collecting may turn out to be the least of people’s problems and therefore rank low on the price scale. The nature of bullion as a pure commodity, on the other hand, addresses not just a hobby but basic economic needs of exchanging value, barter or even affecting outright payment and is a far better and more secure way of storing value reliably.