Should You Invest in Gold Collectibles?
Getting started with collectibles and bullion coins made of gold or silver tends to be a natural progression from bullion investing. After all, most bullion has been around for a quite a while versus being a fresh production, and as people gain exposure they start looking at dates and learning about different productions. Eventually, everyone is going to come across collectible bullion and then ask themselves the question, so what’s so special about a collectible versus regular bullion? Here are the details below.
Bullion in General
Bullion coins and forms are simply measured amounts of a precious metal, whether that be gold, silver or some other desired metal like palladium for example. The worth is generally driven by exactly how much of the precious metal is needed to create the form. The easiest forms to find are coins or bars. However, there are other forms as well, depending on whom and how they are created. Without any other aspect, bullion units are worth just what the market is willing to pay for that particular weight and content. So, for example, the market will price a 24 karat gold coin much higher than a 14 karat coin because the first one has a higher quality content of gold.
Unlike bars, most bullion coins are generated by country governments. These coins, referenced as a sovereigns because they are created by a sovereign country, are frequently pursued for bullion alone because they don’t need testing for quality or content; they are literally stamped and certified by the government mint that issued them. That makes sovereigns easy to work. Bars and rounds, on the other hand, are not typically produced by mints in large production runs. More often than not, they can be secured from private issuers although there are occasional government mint versions. Interestingly, because they have less availability, rounds and bars can become collectibles because of their rarity.
We can also provide you modern gold market movement information with our resources as well. For example, MyGold provides privately-issued bullion bars in a variety of sizes matching any budget.
Understanding Collectibles and Numismatics
People often assume numismatics is a reference for collecting coins. That’s not true. Instead, it is the overall science of studying forms of currency. That can be all types of money including paper, coins, stones, wood, tokens and anything else that humans have used for a proxy value in an economy, not including paper gold and gold futures or mutual funds and exchange-traded funds on the stock market. The terms also applies to the study of rare coins as a subset of numismatics.
Collectibles are a world of their own, even bullion collectibles. And anyone going into collectibles simply for the sake of pure investment will oftentimes end up disappointed. That’s because where bullion follows a well-known standard of measurement and value, collectibles are an extremely fluid market that is dictated far more by supply and demand for the rarity of a particular coin and how much people think it’s worth. And that may have little or nothing to do with the actual bullion content involved. No surprise, the risk of problems in collectibles tends to be far greater because there is more room for ambiguity and mis-pricing. Fortunately, there are some ways to limit this risk as well.
First off, a buyer’ education is essential in numismatics. There is no program that instantly teaches the ins and outs of bullion collecting in 30 minutes, online or anywhere else. The collectibles market has hundreds of niche areas, each of which have their own drivers for worth, collectability, value and demand. For example, American-issued silver dollars in general don’t get a lot of chatter, but U.S. silver Morgan dollars are the opposite and very much sought after for specific dates and quality. In short, many markets are driven by however much someone is willing to pay for a coin in real-time deals which may have no relation whatsoever to bullion price and collector’s guides. Our staff can help explain a lot of how the historical elements play out in today’s markets as well, so call or email us for questions. Online guides can help as well.
Where Exactly are Commemoratives in the Collection World?
A grey area of numismatics tends to be commemoratives. These are special coins issued to celebrate a given event or figure and have an extremely short production run. They are made of both cheaper bullion-plating methods as well as in full bullion format. However, because commemoratives are often sold in the same inventory as regular bullion coins and other collectibles, it’s easy to assume they are just as valuable and collectible. Most, however, are not minted by a government agency and instead get sold by a private company. Some are truly collectible; people really want them. Others are just “chatter” and moved into the market to sell off of people’s gullibility and aren’t worth much of anything at all.
Commemoratives often pitch with a lot of confusing marketing as well. They will borrow grading terms like “uncirculated” and “brilliant” to appear official but have no such qualification at all. That said, it doesn’t mean commemoratives are worthless. Lots of folks like them because they either went to the event or collect anything to do with that genre, such as sports or history.
The key factor in collectible valuation comes with grading. This is not in reference to taking an education program and getting a report card. Instead, grading is the process of a certified expert evaluating rare gold coins, bars or rounds and giving that sample a grade that represents its condition, quality and rarity. This is the closest one can come with a collectible to the same universal appreciation of a government-issued sovereign’s bullion value. Just about everyone accepts the graded value of a collectible once it is certified and sealed.
The sealing step is the key to retaining the university value. When a coin or bar is properly graded, assuming it is small enough, the item is then “slabbed” or sealed by the certified examiner in a case to preserve its condition and fend of any ability to create fraud. The case is sealed shut and cannot be opened again without damaging the certification seal on it. This then gives anyone looking at the graded item the assurance they are in fact examining an item of a given quality and condition.
Grading is not free, however. Certified examiners charge a sizable fee for grading. So, collectors generally pick only the few coins that really have strong potential to be graded versus their entire collection. More often than not, collectors choose to pursue already-graded coins instead to avoid paying the examination fee themselves.
The main examiners of note are ANACS which has been around since 1972 and stands for the American Numismatic Association Certification Service. Alternatively, the Professional Coin Grading Services or PCGS is also available as well as the Numismatic Guaranty Corporation or NGC. Whom is used also affects collectability value; ANACS coins tend to be valued lower than PCGS coins for example because ANACS’ evaluations do not scrutinize coin qualities as hard. A Certified Acceptance Corporation or CAC is a double-graded coin, which tends to be valued even higher than the above three. Dealers highly value graded coins over non-graded ones because the testing work is already completed.
The above said, graded coins are not the only collectibles available. Lots of very valuable coins are ungraded and exchange hands between collectors without any formal examination. That’s because the coin type and its condition are obvious and well-known, and there is a high demand for the coin or bar in any reasonable condition.
The general acceptance of grading criteria, whether professionally graded or not, tends to run in two categories. The first is a numerical value with 70 being the very best and 1 being the worst. This range has then been added to with further descriptive detail like terms ranging from Poor to Extremely Fine and additional conditions such as circulated, uncirculated and proof. Slabbed coins and small bars will have this code printed on their sealed case for reference. All of the above is then influenced by the age-old collectible factors of age (how long since the item was produced), rarity (typically how many known units are left from the production run), and mint (where exactly the item or coin was produced).
Which Pieces to Go After in 2020
Again, there are lots of coins and bars out there that many markets and trading niches find valuable. However, a lot of the same targets have nothing to do with bullion. For example, Mughal emperor coins from the 1500s are highly desired by collectors worldwide, but this collectible coin is only made of copper. Others have significant historical value, like the American Birch Cent, but again have no bullion in their content. These “red herrings” are not bad per se, if you like history and collecting in general and find an opportunity then it’s what makes coin collecting fun. But for true bullion collectibles to target in 2020 these “other” collectibles should be off the table.
From England the following physical gold coins and sovereign bullion are highly sought after:
- 1343, Edward III Florin – These coins were issued in the 1300s and actually rejected at the time by early vendors due to insufficient gold content. However, they do count as a collectible bullion, and now they are extremely rare. One sold in the mid-2000s for $680,000 because only three are known to still exist.
- 1937, Edward VIII Gold Proof – This coin was intended to be released in honour of the King at the time, but then he abdicated. Given the politics involved, the coin could not be put out to the public as-is, and it only ended up be distributed through other channels. The last one sold priced at £516,000.
- 1917, King George V Sovereign – A gold bullion coin with a short production run, this find was minted right after World War I. It was only run until 1932 and disappeared afterwards. Units today sell for well over £10,000 per coin.
- 2012, The London Olympics 50p Swimmers Coin – Made of silver, this recent issue had an adjustment as the water detail on the swimmer’s face was considered distracting. So, a second issue came out showing a clearer face. The earlier version is the rare bullion to find, selling for over £3,000 a unit.
From the U.S. the following are traditional targets people regularly look for in bullion collectibles:
- 1794, the Flowing Hair Dollar – Made of silver, these coins were issued in 1794 and the following year and were produced in silver. Their value beyond the bullion is the fact that they were the first new American government issue of a dollar coin right after the War of Independence. Auction prices in the past have hit well over $10 million for a single coin.
- 1933, The Gold Double Eagle – Issued during the Depression years, the Gold Double Eagle was almost impossible to buy since most people were bankrupt and struggling during this period. However, gold was extremely powerful when issued. This particular coin had a very short run, and the American government has bent over backwards to seize any available. Only one exists in private hands selling last for $7.6 million.
- 1907, The Rolled Edge Eagle – With only 42 minted in total, these gold bullion coins are extremely hard to find and last traded in an auction for a bit of $2 million.
- 1795, The Small Eagle Five Dollar – Being the first gold bullion coin issued by the U.S., this was a heavy issue and sold for almost $600,000 in 2008.
- 1787, Ephraim Brasher Coins – Privately issued, Ephraim Brasher was a famous metalsmith who pushed for the U.S. to create its first gold coin, by him of course. He didn’t succeed so Brasher then issued his own private coins, namely the Brasher Gold Half Doubloon. An original sits in the Smithsonian, but commemoratives in bullion have been issued by the same institution which are a nice affordable find ($2200 to $2500) for all collectors, even beginners.
- 1870, the American 1870-S Gold Dollar – A good entry point for collecting American gold bullion collectibles is possible with this series of coins. Only 3,000 units were minted in total, but this coin is often overlooked. Collectors can find units in prices ranging from a low of $4,000 to a high point of $7,500.
- 1878 -Silver Morgan Dollars – While there was no shortage of these bullion coins (2 million minted), it is the uncirculated units that are the ones to go after. They exist and they are affordable as well, adding a nice beginner silver bullion piece to a collection.
Elsewhere in the world:
- Any early year, South African Krugerrands – The standard of the international gold bullion coin, Krugerrands have been extremely popular back to the 1970s. While not a museum piece per se, every gold bullion collector considers an early Krugerrand a basic starting item to have in a serious collection, especially since the historic change in South African government since the 1970s.
- 1992, the Gold 2000 Yaun from China – A commemorative coin by nature, this particular issue was made in pure gold and only 10 were actually produced and distributed. They have all been professional graded at some point by NGC. Around 2011 one of them traded hands at a price tag of about $1.3 million.
- 1340-1393, France, Cornets from Orange – Orange was well known for creating “copies” of neighbouring government coins in their region. These Raymond IV gold bullion products were minted in enough number they are collectible today with an affordable entry point of 1,900 Euros or similar.
- 1495, the Brandenburg-Franconia, Frederick I. Gold “St. John” Gulden Coin from early Germany – This particular gold bullion choice was minted between 1486 and 1495 with enough of a production run that it makes an interesting find for beginning collectors but doesn’t break the bank like some of the extremely hard to find choices. Most units selling for about $500 to $600 weighing about 3.27 grams of solid gold.
We stock American, Canadian, South African, Chinese and Australian sovereigns for multiple years. If you’re looking for something in particular, let us know.
Risks Involved with Collecting
Again, just getting into collecting for the sake of pure speculation is a bad idea. A buyer is better of simply focusing on regular bullion options and pricing with the ups and downs of the gold or silver market for investment profit. The world of bullion collecting can be so disconnected from bullion pricing that it doesn’t make sense on a commodity-valuation level. Otherwise, how in the world does a silver coin from 1794 end up being worth almost 20 times more than a sizable gold bullion coin made a year later by the same country government, both noted above? This literally is the illogical sense of the collectible market.
The other big factor to watch out for tends to be markups. Everyone selling collectible bullion coins is doing so for a profit. Necessity liquidations are rare and almost always go to a professional dealer first versus buyers, even with the Internet. And a markup typically means anywhere from 10 to 50 percent profit charging on top of what the collectible market says a coin might be worth. This is pure fictional pricing for the convenience of buying from an available supplier. However, if the demand is high, markups can be successful. The buyer’s job is to research and window-shop a lot to avoid being ripped off.
You will also have maintenance costs. A coin’s quality doesn’t stay the same on its own. So just finding the coin and then putting in a drawer could end up damaging it. Environmental conditions often trigger the most damage, such as humidity. And even bullion coins can tarnish and corrode if uncared for. The ideal approach involves sealing the coins in protective cases which is a cost. You may also need to insure your collection in case of disaster so you don’t suffer a complete loss. Home fires tend to be the number one destructive force wiping out coin collections that took years to build. Larceny and burglary tends to be the second reason.
Handling can also trigger costs. The more you examine, hold, expose the coin or move it around, the more wear and tear happens to it, even microscopically. These changes can be identified by a qualified collection examination, and they will reduce the value of the coin, at least in terms of evaluation.
Taxes can really take a bite out of your collecting enthusiasm. Under most modern tax codes, profits made from exchanging bullion and collectibles in a sale can be charged under capital tax. The profit component is considered income and represents the difference between what you paid for the coin and what it sold for if there was a gain. The tax share payment is required, and not doing so could get a person in trouble with a charge of tax evasion. Many hobbyists will argue they have additional costs that negate any tax, which is allowable to an extent; the hobbyist usually can only claim related collecting costs to the limit of the profit made (i.e. you can’t take a loss on your tax reporting for coin collecting as a hobby). And those costs need to be fully documented versus opinions or verbal memory. So save your maintenance and grading receipts if necessary.
What are the Best Ways to Find Bullion Collectibles?
Your own family can be a big source of bullion collectibles, typically during estate management. People sock away all sorts of things in boxes, furniture, cabinets and albums. Sure enough, more than one family has found collections of coins and bullion stuffed in tobacco boxes or clothing that have stayed hidden for years before someone passed away. Obviously, people were just as aware that bullion has a habit of growing legs and disappearing, so many folks in earlier years would stuff valuable in odd places like wall alcoves, mattresses and the attic. Anyone managing an estate as an executor or family member inheriting the same should perform a thorough check of everything before letting changes happen. Heirlooms and hidden tuckaways can produce some significant surprises for folks if they know what to look for.
Window-shopping is absolutely essential in the collecting world to not lose your shirt right away. When you find a reasonable opportunity for a gold bar or coin, compare dealers against each other to see who has what and for what price. Let the different dealers know as well that you are interested but what you are seeing with their competition. Do not, ever, buy on impulse if you don’t want to pay premium and well over. Instead, you will find with patience that gold price points may adjust or additional opportunities could appear, saving you some money on the margin while still achieving your target.
Avoid any collectible that absolutely is rare and in short supply due to high demand unless the seller is willing to provide a buy-back guarantee due to you being unsatisfied. If there is such a demand, the seller will have no problem backing up their offer because it can be sold again quickly. On the other hand, if the seller balks, then walk away.
Research, research, and then research some more. The extent that you understand the market and niche you are collecting bullion in, the better off you will be and the more successful your collection will grow. There are lots of guides and free advice on the Internet, and then there are some very good print guides on coin and bar collecting as well. Use your Internet searching to narrow down the most reputable guides and then pick up or two of these to start out. The tips included like those at this collector’s guide link will be a tremendous help, and you will find your learning enhances your collecting experience over time.
We can help with identifying collectibles in the New Zealand market and nearby. Let us keep you updated with our notices and newsletters.
Summing It All Up
Bullion collecting should be for multiple reasons versus just plain speculation and investing. Buy regular bullion for investing and focus on collecting for personal enjoyment and the thrill of the collecting hunt. Do it for history, for education and even for building an amazing gift to your family and beneficiaries you pass your collection down to afterwards. After all, the real value of collecting will be fundamentally in your mind, not in your bank account. But it helps not to overspend unnecessarily as well.
Check out our range of collectibles that we offer. We’re always introducing new rare pieces and inventory changes monthly, so your collection options can grow quickly just keeping an eye on what new items we showcase on our website!