Earlier today a regular and valued customer brought to our attention an article from another coin dealer who recommended that coin collectors and investors of gold and silver bullion invest in certain types of coins, bars and rounds. Most of the recommendations were less recognized and popular items, and didn’t make sense especially considering that premiums on most gold and silver coins have been dropping as of late. In fact, some premiums, such as those on American gold eagles, South African gold krugerrands and Canadian gold maple leaf coins are near their historical average. Rather than taking the advice of a coin dealer at face value, who may have ulterior motives, we recommend that you consider the following factors before investing in gold or silver coins and bullion.
It goes without saying that the price of coins and bullion should be one of the most important factors to consider before making a purchase. While prices change daily, based on the spot price of gold and silver, the premiums at which coins and bullion are sold tend to be more consistent. For example, the price of coins may be quoted as a percentage over spot or a flat dollar amount over the melt value of the coins. Determine if the premium being sought by your coin dealer is worth paying, both from a historical perspective as well as on a relative basis; especially when viewed in comparison to other gold and silver coin and bullion offerings.
While the price of an item is important, at the end of the day, it’s important that you purchase coins that are liquid. In other words, if there’s not a large and available market for the coins and bullion that you’re considering, it may be best to consider alternatives. While trends and personal preferences are subject to change over time, some of the most liquid gold coin offerings are American gold eagles, American gold buffaloes, South African gold krugerrands and Canadian gold maple leaf coins. Amongst the most liquid silver coin options are American silver eagles, 90% silver U.S. dimes, quarters and half dollars, Canadian silver maple leaf coins and Morgan and Peace silver dollars. Sticking with the above options, especially when the relative premium difference is nominal, is likely to result in a broader market when the time comes to sell your coins.
While liquidity and familiarity oftentimes go hand in hand, it’s important that the coins you purchase are recognized by a large enough segment of the population (at least the coin and bullion market) so that you’ll be able to sell the coins in the future. As such, we recommend that you always have a healthy supply of coins from your country of origin and residence on hand. Attempting to sell an obscure coin from another country may prove to be challenging, even if you happen to have a lower mintage or key date coin in your possession. Furthermore, if the dollar were to hypothetically collapse and bartering was necessary, having American silver eagles or 90% silver U.S. coins in your possession (assuming that you live in the United States) may prove to be valuable.
In summary, while coin dealers can help to provide some valuable information and recommendations as to which type of coins you should purchase, it’s important that you do your due diligence. Remember to always purchase fairly priced coins; from a historical and on a relative basis. Next, be sure that there is a broad and available marketplace for any coin that you may want to sell in the future. Lastly, consider purchasing coins from your country of origin or residency. These coins could prove to be quite valuable; especially in the unlikely event of a monetary collapse.