Nadia Damon in Sofia -

Gold has traditionally been a safe haven in times of trouble, so it's little wonder that over the last couple of years private investors and institutions alike have moved to shore up their portfolios with this most tangible of assets. But enhanced access to gold has also led to a wider group of smaller investors dipping a toe in this market - via small gold bars or gold bullion coins.

Not to be confused with numismatic coins (collectibles which are sought for their rare and historic value), gold bullion coins are officially minted coins for investment purposes, which qualify as legal tender and are guaranteed in terms of quality by the issuing country's mint. As with bars, their cost is determined by a fluctuating premium over the spot price of gold.

The most commonly traded gold bullion coin is the pure 1-ounce (oz) Krugerrand, which was mass-produced by the South African government in the 1960s. According to Mike Temple, a director at UK-based bullion dealer Gold Investments, its popularity with investors stems from the fact that it is the least expensive (typically it has a lower premium over the spot price of gold) and also most widely available. Other favoured coins include the British Sovereign, Canada's Maple Leaf and the US-minted American Eagle - and France's 19th-century Napoleon coin, which is classed as bullion rather than as a numismatic item. Most coins are available in 1oz, ½oz, ¼oz, 1/10oz versions, although some have been produced as 2oz, 10oz and 1kg.

While they may be a more versatile option than gold bars - certainly in terms of their divisibility - the higher manufacturing and sellers' premiums associated with coins and smaller bars tend to make them less attractive to larger investors and institutions. According to Neil Neader, research director at London-based precious metals consultancy GFMS, gold bullion coins have become increasingly popular with retail investors who lack resources or contacts - or are not in a position to go for other types of investments such as paper products, commodities exchanges or futures options. At present, he outlines that German-speaking Europe is the dominant market for coins, with many international investors adding to their portfolios via Switzerland.

Mark O'Byrne, director at GoldCore, agrees there has been increased interest in the gold bullion coin market during the crisis, but claims it falls short of a mass mania. "It's definitely beginning to permeate into the mainstream," he says. "But at present, I would say that we are only in the intermediate phase of this market."

Research the alternatives

When it comes to choosing coins, research is key. For example, it's worth noting that for British investors, the legal tender status of Britannia and Sovereign gold coins minted from 1837 onwards means they are not subject to Capital Gains Tax, which may make them a better proposition than lower premium coins such as Krugerrands, which would obviously incur this form of taxation as a foreign currency. European investors also profit from the form of the EU directive of 2000, which stipulates that this type of gold bullion purchase for investment is not subject to VAT.

And while many investors associate gold bullion coins with their accompanying premiums, Sandra Conway, managing director of ATS Bullion, claims that small gold bars can actually work out more expensive. "For example, the 1oz Krugerrand trades at a premium of about 7%, which is approximately 2% lower than the equivalent 1oz bar," she states. "Something like a 10g bar will trade at a premium of about 20%. Bars are available in all sizes right down to a 1g bar, but the smaller bars trade at very high premiums because the manufacturing costs are much higher and people tend to buy them as gifts rather than for investment."

The steady decline of the price of gold in recent months has led some analysts to claim that the time for buying gold has passed. Not so, according to Conway. "Obviously, we had an amazingly busy time in October 2008-February 2009 when the UK was in the middle of a banking crisis and it isn't at the same level," she concedes, "but business has remained steady and there are no shortage of investors in gold."

She says that considering it is the summer and many people are away, her firm is still exceptionally busy. "There is still an underlying current of anticipation in the market and most of our clients feel that there is a great deal of potential for both gold and silver to rise. Having said that, many are buying with the idea of having physical gold as a safeguard against any future financial meltdown."

This was amply demonstrated in the first two weeks of August, when the price of gold rose back above $1,220/oz, after sliding $106, or 8.4%, from late June to late July. It's now nearing its all-time high of $1,263/oz. It would appear that investors - both large and small - are not willing to hand in their comfort blankets just yet.