There are many factors to consider when investing in precious metals. Coins are one of the most attractive forms of precious metal investments, and offer a wide variety of benefits and options for those interested in gold, silver or platinum. Before buying, it is important to fully understand your objectives and the risks associated with the many varieties of coins. A reputable coin dealer will be able to help discuss the various options available for buying coins, and will be able to offer choices of both US and foreign coins. Investors generally fall into two general categories: 1. Collectors / Hobbyists and 2. Bullion Investors. Both types can grow their investments, however, the objectives and reasoning behind their purchases are often very different. The one constant is to sell high and buy low.
Coin Collectors and Hobbyists
Collectors and hobbyists invest in coins with the desire to accumulate rare and historically important coins. They often pay a substantial premium above the value of the metal itself due to the coins rarity and condition. These coins are said to have a “numismatic” value. For these types of investors quality is of the upmost importance. A coin that is of a higher quality grading can fetch a ten to twenty times higher price as compared to the same coin of lesser quality. Dents, scratches and general ware are all factors that are considered. There are companies that get paid to professionally grade and certify coins, and these certifications generally increase the value of the coin due to the professional certification. Collectors and hobbyists also search out coins that contain an error in the minting process. These coins can have, “double strikes”, “double dies”, “mis-strikes” or were even struck on the improper material. Error coins are highly sought after and can garner a large premium. Because collectable coins are traded at a premium over the spot price of the precious metal, investors are usually coin enthusiasts and are banking on an increase in the rarity and collectors value of their investment. This segment of the market is more diversified in that their collections may not even focus on pieces that are made from precious metals.
Bullion Investors
Investors that buy gold, silver or platinum coins for the metal value are generally interested in obtaining the physical holdings as opposed to trading and investing in precious metals on the stock markets. With gold and silver having a long standing tradition of being used as money, bullion investors buy coins as a way to protect the purchasing power of their assets and hedge against the inflationary effect of governments and central banks printing new paper bills. Bullion investors buy and sell coins that are often different from the types of coins purchased by collectors and hobbyists. There are certain coins that are mass produced specifically for bullion investors. These investors pay a slight premium for a coin as opposed to buying precious metals in bars or ingots because the coins are often minted by countries that have long standing records for accurate weights and purity. There are also some bullion coins such as the American Eagle that are more sought after and heavily traded than other bullion coins. Buyers that accumulate gold and silver bullion may like to diversify their holdings by purchasing coins of different weights and purity. U.S. coins (Dollars, Half Dollars, Quarters and Dimes) that are minted prior to 1965 are 90% silver and are generally referred to as “junk silver”. These products are purchased by investors that like smaller denominated weights. The standard for bullion gold and silver is that the smaller the weight of a coin the higher the premium over the spot price of the metal. A 1/10 ounce American Eagle may carry a 10% premium over a 1 ounce Eagle. One reason behind this principle is that the smaller coins are more easily traded, sold and exchanged than a larger more expensive coin. More people can afford a silver dime or 1/10 ounce gold coin than can afford a 1 ounce of gold or silver. A large sector of bullion investors like to hold coins for a hedge against inflation and as a safety net for a paper currency crisis. Smaller weighted coins are like having $1 or $5 dollar bills as opposed to $100 or even $1,000 dollar bills, and for this reason are generally in higher demand.
Whether you are a coin enthusiast and enjoy the beauty and collectability of rare and historic coins, or are simply looking to accumulate physical gold, silver or platinum, always seek out a reputable and trusted Baton Rouge coin dealer to help facilitate your purchases or sale. Please keep in mind that we are not financial advisers and cannot provide tax advise related to investments.