The continuing turmoil in worldwide financial markets has emphasized the role of precious metals as a safe haven in times of crisis. The U.S. government, through the Federal Reserve, has injected over $1 trillion into financial markets. Many other countries have similarly created liquidity, and additional government stimulus packages and spending are planned, which together amount to a debasement of paper currencies. By “printing money,” Central Banks have laid the foundation for inflation, which some predict can reach levels last seen after the Middle East oil embargo in the 1970s. Historically, when paper currencies are debased, investors and collectors often turn to precious metals as an alternative to traditional investments such as stocks and bonds. In recent months there has been strong demand for platinum, gold and silver coins and bars. Much of that demand has centered on U.S. and world gold coins.

Gold has been sought after and treasured since ancient times. Beginning with the Egyptians about 3000 BC, gold was used as a store of value and as a basis for commerce. Gold coins continued to serve as a currency for commerce for centuries and were minted and used by virtually every civilization. A high level of demand for gold coins is evident today, despite the metal’s lack of official status as a currency.

Gold coins can be categorized as bullion coins, generic coins or rare coins:

Bullion Gold Coins

Bullion gold coins derive their value from their gold content, or intrinsic value. The selling price of bullion gold coins is the intrinsic value plus a modest premium for minting and distribution, plus the selling dealer’s markup. The total premium for a bullion coin is typically in the range of 5-10% over the intrinsic value. New York State defines bullion gold coins as having a premium of less than 15%. Many countries mint legal tender gold bullion coins in convenient one, one half, one quarter and one tenth- ounce sizes. Major issuers include Australia, Austria, Canada, China, South Africa and the United States. In addition, older bullion gold coins such as British Sovereigns, Belgian, French and Swiss 20 Francs, German 20 Marks, and Netherlands 10 Guilders continue to be in demand. These coins can typically be bought and sold at major national coin dealerships as well as local coin shops. Although generally widely available, varying levels of supply and demand may cause temporary shortages and changes in the premiums for bullion gold coins.

U.S. Gold Bullion Eagle

Obverse (left) and reverse of a 2009 United States one ounce gold bullion eagle. Photos courtesy Mitchell Battino.

Generic U.S. Gold Coins

Generic gold coins are relatively common date United States gold coins minted from the mid-19th Century until 1933. These coins were issued for circulation, and are no longer being minted. Many American $5, $10, and $20 gold coins are examples of generic gold coins. Unlike currently issued bullion coins, these historic coins are in relatively limited supply since they are no longer being minted. Generic coins are sometimes also referred to as semi-numismatic coins; they are not particularly rare, but not generally available in as large a quantity as most bullion gold coins. As such, they are quite popular with collectors and investors. You will pay a higher premium for generic than for bullion gold coins because they are less available, but will receive a higher premium when you sell.

U.S. 1904

Obverse (left) and reverse of a “generic” 1904 United States $20 gold coin. Photos courtesy Mitchell Battino.

Rare U.S. Gold Coins

Gold coins may also be recognized for their rarity and historical value, and therefore trade at higher premiums above their gold content than do bullion coins and generic coins. Rare coins are also considered numismatic coins, and are sought by collectors for their rarity rather than their intrinsic value. Many dates are truly rare with only a few dozen or fewer known to have survived. You will pay the highest premium for rare gold coins, which may be priced from several thousand dollars to $1 million or more. The highest price realized for a rare gold coin was $7.6 million for a 1933 $20 sold at auction in July 2002.

U.S. 1799

Obverse (left) and reverse of a rare 1799 United States $10 gold coin. Photos courtesy Mitchell Battino.

Grading

The United States Mint first struck gold coins in Philadelphia in 1795. The first coins minted were Eagles and Half Eagles, or $10 and $5 gold pieces. Other denominations were added over the years, including Gold Dollars, Quarter Eagles ($2 ˝), Three Dollars, Four Dollars, Double Eagles ($20), and Fifty Dollars. U. S. gold coins were issued at their face value and placed into circulation by the United States Mint. Many coins were subject to heavy use and wear. Some gold coins never circulated, but were carefully stored for many years and preserved in Mint State, or uncirculated condition. Mint State coins may have marks or scratches, known as bagmarks, but may not have any evidence of wear. As listed in The American Numismatic Association’s Official A.N.A. Grading Standards for United States Coins, coins are graded on a scale of 1 to 70, with 1 being barely readable and 70 being a theoretical perfect new condition. MS 60 (Mint State 60) is the minimum uncirculated grade. MS 60-62 represents typical uncirculated coins, MS 63-64 coins are significantly better quality with considerable mint luster, eye appeal and fewer noticeable marks, and MS 65 or better coins are outstanding with superb striking details, luster, and eye appeal and barely visible marks.

Although there is a standardized system, grading is still somewhat of a subjective art as no two coins are exactly alike. Coins may trade in their natural or “raw” state, or may be encapsulated and certified by a third party grading service. The two most widely recognized services are Numismatic Guaranty Corporation , and Professional Coin Grading Service. Both services certify and encapsulate coins in tamper-resistant plastic holders labeled with the date, denomination, and grade of the coin, as well as a unique serial number. Coins in NGC and PCGS holders are widely traded, and offer easy liquidity. Many collectors and investors prefer coins graded by these services to those coins that have not been encapsulated.

Pricing

Modern bullion coins are not intended to circulate and should be in uncirculated or Mint State condition. Older world bullion coins such as Sovereigns or 20 Francs may be circulated (used or worn condition) or uncirculated (like new or no wear). Bullion coins are priced in relation to their gold content based on the spot price of gold, and larger trades are often confirmed based on the daily London afternoon (PM) gold fixing on the day you buy or sell. For example, if gold is $950, the price of a one-ounce gold coin will be $950 plus the markup added by the dealer.

The grade of a rare or generic U.S. gold coin, whether raw or certified, will be considered in determining its market value. Higher grade coins command higher prices.

Generic gold coins are further influenced by supply and demand, and premiums may move up or down independently of the gold price. In times of high demand, or low supply, the premiums can increase quickly and dramatically. When supply exceeds demand, the premiums tend to decrease at a somewhat slower rate, or remain relatively stable. Many coin dealers actively buy and sell generic gold coins and while pricing tends to be competitive, prices can and do vary from dealer to dealer.

Information about rare coins is readily available on the internet. Professional organizations are among the best sources of information for collectors and investors. The Professional Numismatics Guild , the American Numismatics Association, and the American Numismatics Society , each have excellent websites. Rare coins are offered directly to clients by many dealers, through advertisements, price lists, and listings on dealer websites. Rare coins are often sold at public auction or internet auction. Prices may vary, sometimes significantly, often depending on the interest from bidders at auction, or the individual dealers’ opinion as to their value. It is important to study the dates and characteristics of rare coins in order to develop the knowledge on which to base an informed opinion of value. While some collectors of rare coins may be novices, the most successful are more advanced collectors with many years of experience and a detailed knowledge of the coins they collect.

Bullion gold coins, generic gold coins, and rare gold coins are not mutually exclusive; many collectors and investors choose to purchase coins from one, two or all three categories of gold coins.