By Tony Davis
As a coin and bullion dealer, we regularly meet with
individuals who are interested in purchasing gold coins for the first time, and
as you would expect, for newcomers, the number of potential options can be
overwhelming. Inevitably, our prospective customers ask us which gold coins
they should purchase. Rather than recommend a specific coin, we discuss with
them a few factors that they should consider. Once we discuss the various
options, including the pros and cons of each, we’re in a much better position
to serve our customers. In today’s post, we’re going to walk through the same
steps that we discuss with our customers by addressing four factors that you
should consider before buying gold coins.
Sovereign vs. Private
You may have heard the term “sovereign” or “privately”
minted gold coins in the past and may be confused as to the difference between
the two. A sovereign minted gold coin is one minted or produced by a
government-owned mint. Examples of sovereign issued gold coins include American
gold eagles, South African gold krugerrands and Canadian gold maple leaf coins.
One benefit in purchasing sovereign-issued gold coins is that they’re
guaranteed by the issuing government to contain the exact purity and weight of
gold as highlighted in the specifications. Secondly, government-issued coins
are typically more recognizable than privately minted gold coins. However,
there are also some widely recognized and respected private mints, such as Pamp Suisse, Credit Suisse, Engelhard and Johnson Matthey. Typically, government
minted gold coins
sell at higher premiums than privately minted gold bars and rounds, so the
price difference should be taken into consideration before deciding on which
item to purchase.
Numismatic vs.
Bullion
Another factor to consider is numismatic versus bullion
coins. Numismatic coins are typically purchased by coin collectors and contain
collectible value over and above the coin’s bullion value. Factors that
contribute to the value of a numismatic coin include the coin’s age, mintage,
condition and number of coins still in existence. In fact, some coins, such as
the 1933
St. Gaudens Double Eagle, are so valuable, that the gold content is almost
inconsequential in determining the coin’s value. Some more reasonably priced
numismatic gold coins include proof American gold eagles and common date $20
Liberty Head and St. Gaudens gold coins. Bullion coins, on the other hand,
derive most of their value from the gold content of the coin. Some of the
previously mentioned gold coins, such as South African gold krugerrands and
Canadian gold maple leaf coins are frequently referred to as “bullion” coins. If
you’re interested in purchasing gold coins primarily as a collectible due to
their rarity and historical significance, then numismatic coins may be the best
choice for you. Alternatively, if your primary reason for purchasing gold coins
is as a hedge against inflation and as a way to maintain your purchasing power,
then you should consider bullion coins.
Certified vs. Raw
If you’ve made the decision to purchase sovereign-issued
gold coins, and in particular, those that contain numismatic value, the next
step is to determine whether to purchase a certified or raw coin. Certified
coins are those that are graded and encapsulated by third party grading
services. While there are a number of companies from which to choose,
you’re probably best off sticking with the three top grading services, which
include PCGS, NGC and ANACS. ICG is also a respectable second tier grading
service. Purchasing certified coins is a more secure way to invest in
numismatic coins but it is also more expensive. As we discussed in a previous
article, learning to accurately grade coins and submitting them yourself to
a third party grading service is a more cost effective approach and is a way to
earn an immediate profit on your investment. Just be sure that you’re able to
verify the authenticity of the coin and confirm that it hasn’t been cleaned or
altered prior to making your purchase.
Purity
Last but not least, we recommend that you consider the
purity of the gold coin that you’re considering prior to making a purchase. Our
suggestion is to stick with gold coins that have a purity of 90 percent or
higher. Most obsolete world gold coins, as well as $20 Liberty Head and St.
Gaudens gold coins, contain 90 percent gold content. It wasn’t until more
modern times that the purity increased from to 90 to 91.6 percent (22k) or
higher. The South African gold krugerrand was introduced in 1967 as the first
gold bullion coin with a purity of 91.6 percent and is the highest minted
modern gold coin in existence today. More
recently, sovereign mints began to issue 24k gold coins. Examples of gold coins
that contain .999 fine gold (or higher) include American gold buffaloes,
Chinese gold pandas and Austrian gold philharmonics.
Summary
In summary, on the surface, purchasing gold coins appears to
be a relatively simply process; however, there are a few factors that you
should consider before taking the plunge. Consider the price difference and
liquidity of sovereign issued versus privately issued gold coins. Assuming that
you’ve chosen to purchase sovereign issued gold coins, determine whether you’re
purchasing gold coins as a collectible or as a hedge against inflation. Certified
versus raw coins should also be a consideration. Until you feel comfortable
grading and authenticating gold coins yourself, it might be best to stick with
certified coins. Last but not least, the
purity of the gold coin should be considered. We recommend that you only
consider gold coins with a purity of 90 percent or higher.
Gold & Coin Buyers, a full service Atlanta based coin and
bullion dealer specializing in buying, selling and appraising coins and coin
collections of all types and sizes. Visit his website at www.atlantagoldandcoin.com for
additional information on the products, services and educational resources
offered by his company.