Being a public advocate for precious metals often leads people to ask me many questions about the industry. One of the most popular questions has to do with what the best values in precious metals are investing right now. While I have generally answered that question specifically around things such as premium versus price and full-ounce coins versus fractional, there are other types of coins that are not often discussed in the value conversation. That’s why I wanted to write this article about numismatics, which is almost never mentioned in connection with value investing in precious metals.
What is Value?
For instance, I might argue that American Eagles, while beautiful, don’t compare to the simple and elegant design of the Canadian Maple Leaf. But, we all have different opinions on how we value our gold and silver coins. For each of us, value is ultimately in the eye of the beholder.
But one area where value cannot be questioned is simply in the price paid versus the price we obtained when we sold it. After all, we are in this space to invest and not just because we love and appreciate the wonderful designs that coin and bar makers have come up with for us over the last few centuries.
But the historical and collectible value of the coins we buy is a really important factor as well. And while we may attribute value in terms of the beauty of the coin as well as how fair a price it fetched us as separate benefits, numismatic coins combine those benefits into one place. The result of adding these benefits together in one coin is that we have created a different market for gold and silver – the collectibles space.
And that’s what I am writing about today because honestly, the best money I ever invested in precious metals comes from my numismatic coin collection. I’ll explain more.
Value is Equal Parts Objective and Subjective
As a real estate investor, I often learned how to determine a property value not only on how many beds and baths a home had, but on other very important factors such as curb appeal, local school districts, neighborhood safety, taxes, and most importantly resale value history. In other words, not all homes, or neighborhoods, are created the same.
I learned this very early on as a real estate investor and used the knowledge to my advantage. I found two local cities near me, within the Dallas/Fort Worth Metroplex, that offered an outstanding bang for my buck value on my single-family home investments. And that extra value came from the characteristics I explained above.
What separated my real estate investments from my other buddy investor friends were characteristics that had nothing to do with size, shape, or wear and tear. It had to do with subjective characteristics of the property that I knew, based on experience and research, held more value to more buyers. And for that reason, I never had an issue with either renting the home at the best prices or selling them at the best prices either. And that is the type of value you get when you move beyond regular bullion and venture into the world of collectibles, or what is also known as numismatic, coins.
Defining the Term Collectible and Numismatic
I am going to make a distinction about numismatics. I only buy pre-1933 coins for a reason: their historical significance to American monetary history is unrivaled, and this market is much more robust and consistent within the collectible space. What is often called semi-numismatics, or recent-dated coins that are either proof or just uncirculated, do NOT hold the historical premium that the pre-1933 coins I am writing about do. If you are invested in recent-issue, semi-numismatic coins, know that this article will not apply to you. We may cover that part of the market in the future; but for the purposes of this article, I am sticking with the pre-1933 coin market.
My Numismatic Experience
Disclaimer: I am going to share with you two examples of coins I purchased in 2018 and the value they held then and now. I think when you see the results, it will spark an interest in this market you may not have had before. Of course, please read my free numismatic investment guide as well as do any appropriate research you need to get comfortable with this market before jumping into it. Numismatic coins are like artwork and baseball cards; the market is robust, but it does take some research ahead of time to know what part of the market may work best for you if any.
Two Examples in My Numi Portfolio
I will discuss two coins out of the collection I purchased in 2018 and how their values have appreciated. The first is an MS62-graded 1904 US Liberty Heads Double Eagle coin. The coin price chart, courtesy of PCGS (a coin grading firm) shows the gain.
The spot price of gold rose from just over $1300 in January of 2018 to $1658 today, for a gain of 27.5%. My MS62 coin rose from $1500 to $2500 for a gain of 67%. In other words, the numismatic performed over 2x better than the bullion coin.
Does this translate to all numismatic coins? Well not exactly. Since we are talking collectibles, the price is a function of supply and demand dependent on a lot of factors such as coin quality, grade, rarity, age, amount of issue still available, etc. In some cases, the gains are better on certain types of numismatic coins, and in some cases not quite so good. Let’s look at another example.
The second coin I will profile is an MS63 graded 1897-S Liberty Head Gold Double Eagle. Here is the price chart for that one. The price was $1635 in 2018 and has risen to $3200 today. That is a 96% gain in price while gold rose the same 27.5% as noted above.
Risks to Owning Numis
Why have the prices of numismatics risen so dramatically over that of regular gold bullion? Well, the collectibles market is a different one from the bullion. Whereas with bullion every American Eagle is effectively the same as the next, price differences are looked at with disdain by investors who simply want the cheapest price.
Pre-1933 collectibles, on the other hand, are never produced again. With gold ownership being made illegal for citizens as of 1933 through Executive Order 6102, the coins that were once produced by the US mint for the public were now the property of the US government. And most of what was turned in by Americans was remelted or used to address government debts. Therefore, there is a much more limited supply of these coins.
When the spot gold price goes down, often too due to the values in numismatics. After all, they are made of gold. It is just that the collectible value gains made often outweigh fluctuations in the spot price. Though not always!
Many bullion investors will tell you numismatics are a scam. The problem with this argument is that there is a robust secondary coin market where numismatics are bought, traded, and sold every day. And I have been to coin conferences where they are a popular choice by knowledgeable investors. And that is the rub to this market, if there is one, in that it takes some extra study to know what the value of the coins is and potentially will be.
Think of it like collecting art, antique cars, or baseball cards. It is not something you want to do without having a price guide handy, along with a healthy understanding of the history of a coin you may be interested in. The great news is that there are so many collectibles investors that finding information on them is not hard at all. The coin ratings companies have websites dedicated to price information along with the historical charts I included above, which are free information.
Another caveat is that buyers almost never want to pay full price, so there is some negotiation room on the price that may take a bit of extra work over simply selling your bullion to a local dealer. In my opinion, however, numismatics are worth the extra effort for a couple of reasons.
First, they are a great investment in our history! I love the fact they are not produced anymore and give me a reason to understand the times in which they were produced. Second, it is quite possible that these coins gradually rotate out of circulation as people put them in their long-term holdings, much like that Rembrandt painting that never sees the light of day after being stored in a private warehouse for decades. Supply-demand for the coins will always be changing, but their rarity will hold value long after that of a similar recent-dated, non-numismatic coin.
Final Thoughts
Investing in collectible coins is not for everyone. It does take an extra bit of work and effort over investing in regular bullion. But for someone like me that actively looks for contrarian investments that give better value in exchange for a bit of research, I happen to love the numismatic space.
Perhaps that is because I collected stamps, baseball cards, and music albums as a kid. I had so much fun doing it that it didn’t seem like a business. And this doesn’t either. The joy I get from this part of the market is a reward in and of itself. The money I make in the process is the icing on the cake.
However, this is not financial advice. It is for research and entertainment to help you on your precious metals journey. Before jumping into this end of the market, I fully recommend you really study it and go to a few local coin shows first to talk to the very knowledgeable traders you will find there. Once comfortable, try looking at a single coin that you have researched.
You may become the local expert on that coin and be invited to all sorts of events in which you can mingle and interact with other traders. It’s been a lot of fun for me, and I wanted to share that joy with you.
