Bullion vs. Numismatic Coins Explained

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Bullion vs. Numismatic Coins Explained

Since the dawn of civilization gold and other precious metals like silver have held value and even have served as stamped coin currency. To this day physically possessing precious metals is seen by many, as a wise way to insulate wealth and possibly even as a means to ensure you have some liquidity, should another major economic crisis hit.

Numismatic coins are somewhat popular with many individuals who want to invest in physical gold and other precious metals. Yet it’s worth bearing in mind that they are different from regular bullion coins and bullion bars in a few distinct ways.

In terms of intrinsic value, it makes little difference how the coin is physically decorated. Depending on your preference you can an American Eagle coin, Canadian Maple Leaf coin or even a Philharmonic gold coin and the overall intrinsic value of the precious metal it is made from will still be the same. Yet when you invest in a rare coin the investment can also have numismatic value. In some cases, the amount can potentially be many times greater than the value of the precious metal it is made from!

Understanding Numismatic Value

On a very basic level, numismatics is the study or the act of collecting things like metallic coins, paper money, and even things like medals. In the case of numismatic coins, they are typically rare to some degree or they are valuable coins with a noted external value that exceeds above the basic value of the precious metal itself.

The driving force behind this additional value can vary. Some numismatic coins have exceptional value because they are related to something historical. This might be a one-of-a-kind historical even, or the coin may have special marks. In some cases, the rarity and value may be linked to an error made when the coins were minted, making a small number of them unique! There are other examples and factors that might influence a numismatic coin’s value. The main point to bear in mind is that they are valued for being rare and collectible.

Metal Grade And Rarity Can Greatly Affect A Coin’s Value

One prime example of a numismatic coin with exception value is the 1907 $20 St. Gaudens, High Relief Double Eagle gold coin. It was created at the Philadelphia Mint, and in today’s value, it can be worth as much as 500 times its spot price in gold. The Numismatic Guaranty Corporation, which is more commonly known as NGC, estimates the selling price for this state minted rare coin with a numerical grade of 69, is $685,000. This high mint state grade was only used for a small number of the reported 11,250 St. Gaudens, High Relief Double Eagle gold coins.

It’s also worth bearing in mind that the Numismatic Guaranty Corporation also classifies coins with a numerical grade between 60-70 as Mint State. As the ratings go up it can make a profound difference in the value of a coin. In the case of the St. Gaudens $20 gold coin, one with a grade of 62 is valued at a little more than $25,50. A grade 65 St. Gaudens is valued around $62,500, and a grade 67 St. Gaudens Mint State gold coin with a grade of 67 is valued in excess of $180,000!

To put this into context, if we look at the long-term historical value of precious metal prices, we see that prices generally tend to rebound higher after a substantial market correction. Yet the spot price of gold silver or other precious metals can have a significant impact on the related bullion coins. This value is essentially based on the metal’s their melt value.

Things like rare gold and silver coins have the potential to increase in value regardless of the swings in global precious metal markets. With these coins, the value depends more on the external factors such as demand from avid coin collectors, the general rarity of the coin, values influenced by recent auctions, as well as timing.

The Possible Benefits And Risks Of Collecting Numismatic Coins

Factoring in this additional value means numismatic coin collecting can become a relatively profitable strategy. However, it is still possible for this type of investment to lose value! Just like any investment strategy you need to keep in mind that there are no guarantees!

Before you consider investing, it’s wise to thoroughly research the rare coin market, as well as taking the additional time to learn as much as you can about gold or silver bullion coins. It’s important to understand that the rare coin market only has a fraction of the liquidity you find in the precious metals, bullion market. You also need to keep in mind that finding willing buyers or sellers for rare, high-valued numismatic coins can also take up a lot of time. Could that time be better spent doing something else more profitable?

Anytime you buy or sell a rare coin, you need to also factor in the coin value in the current market. At the same time, it would also be wise to consider how the rare coin market may change as time goes on. Sometimes a price guide or a knowledgeable coin collector can help you better gauge the basic value. This should include prominent rating services like the Numismatic Guaranty Corporation and the Professional Coin Grading Service, which can help you to help understand the value of different coins and even compare them. You should also take the time to find a reputable dealer in the rare coin market. Beware any situation that sounds “Too Good To Be True.”

Recouping Your Investment In Numismatic Coins

It’s important to be very selective when you consider buying gold or silver rare coins. Take into account the spot value of their metals, as well as their numismatic value. If possible, try to look for long-term trends that have shown a gradual increase in value in the past. With many numismatic coins, you will likely have to hold onto them for a decade or even longer before you can sell them for a significant profit.

Compare this to things like investing in metals as part of a brokerage account in a 401(K) or investing in precious metals when rebalancing your portfolio, or allocating a portion of your IRA to precious metals. Investing in numismatic coins can be profitable in the long-term and it can also be an enjoyable pastime. Just make sure to keep it in context with the rest of your precious metal investment strategy.

You may find over time, that you choose to also add gold and silver bullion coins to your collection. This can give you the long-term value of numismatic coins, while also helping you to ensure your wealth with easily liquidated cold and silver.

By |2019-01-21T09:56:34+00:00January 18th, 2019|investing|0 Comments

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