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
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
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.
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
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.
Tony Davis is the owner of Atlanta 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.