Investors who want to buy gold bullion may be faced with a choice to buy either sovereign or private bullion. Each have their own advantages and disadvantages regarding risk, price, and liquidity that can influence which is the “right” choice for certain types of investors. In this post, we’ll explain the differences between sovereign and private bullion – and why some investors may prefer one over the other.
For bullion products, the terms “sovereign” and “private” refer to the affiliation of the minting authority issuing the bullion. Sovereign bullion is issued by a government, usually via the country’s national mint. Unlike sovereign bullion, private bullion is minted by a private company and not backed by any government.
So in terms of precious metal content and intrinsic value, private and sovereign bullion are the same. However, there are key differences between the two – starting with the purchasing process. Sovereign bullion coins and bars are designated as legal tender that is guaranteed by the issuing government. This assurance improves liquidity, but carries an increased cost in the form of seigniorage fees. Plus, sovereign bullion features limited-run designs and serial numbers that add to the bullion’s collectability, which subsequently adds to its price via demand.
Private bullion does not carry these value-added costs, so it’s almost always cheaper to acquire. Some buyers prefer the security and peace of mind of buying bullion backed by a major government. Other’s – mindful of geopolitical risk and historical precedent (e.g. the Gold Reserve Act of 1934) – actually prefer the opposite.
Ultimately, each investor must decide whether sovereign or private bullion aligns with their investment philosophy and strategy best. Here at MGS, we sell both government-issued coins and private-issued bars from LBMA-verified mints, like Valcambi and PAMP Suisse. For help finding bullion products that match your investing preferences, contact us today!