Even the most casual observer of gold coin prices must have noticed how the price of gold coins for sale has increased rapidly in recent years. From a trough of around 400 US dollars per troy ounce at the turn of the twenty-first century, the price of gold rose to around the $1900 dollars mark by September 2011. From September to November 2011 the price of gold declined by approximately ten per cent. Since gold coin prices are closely linked to changes in the prices of gold on the international market, you do not have to be a mathematical genius to work out that someone who bought US gold coins in 2007 and sold these same US gold coins in September 2011, would have almost quadrupled the value of their initial investment in these collector coins. It is understandable how some have come to imagine that all they need to do to make a nice profit is to buy gold coins. This article explores the wisdom of buying US gold coins to make a quick return on the investment, and other reasons why US gold coins could be a good buy.
Are US gold coins the fulfillment of the get-rich quick dream?
The November 2011 fall in gold prices shows the risks an investor takes if they decide to buy gold coins to quickly resell them at a high profit. Suppose an investor bought $10,000 of gold bullion coins in September 2011 with the idea of selling them in November 2011 at a high profit. They would have discovered to their great disappointment that the bullion dealers would only be willing to pay them about $9,000 for these same gold bullion coins – a significant loss in value. Although this imaginary coin collector still has the option to wait for gold coin prices to rise again, they have no way of knowing how long they will have to wait for this increase in gold coin prices to happen.
The idea that a coin collector should be easily able to buy gold coins and soon afterwards put up these gold coins for sale at a high profit does not accord with market realities. Sometimes the coin collector is able to make a good profit by speculating on short-term changes in gold coin prices, but there is also the clear risk of losing money buying and selling gold bullion coins within a short period. Over the past three years the US Mint has recognized the highly changeable nature of the gold market by making regular adjustments in gold coin prices. For example, on November 23rd 2011 the US Mint reduced the prices of gold coins for sale by a few percentage points. This latest change is one of many made over a few years and it shows how risk it is to gamble on continually rising prices for gold bullion coins.
Why buy US gold coins?
Although the coin collector who decides to buy and sell gold bullion coins with the idea of making a quick profit is taking a big risk, the trends in gold coin prices over the past decade show that a long-term investment strategy in US gold coins does make sense. Based on the changes in the prices of gold coins over the past decade, the coin collector who wants to buy gold coins and keep them for at least four or five years seems to be following a sound investment strategy. Nevertheless, it is important to keep in mind that there are a number of other factors besides changes in the market gold price that affect the value of US gold coins, and make it worthwhile to invest in them. To understand why the coin collector remains keen to buy gold coins despite a recent fall in the price of gold, these other factors must be taken into account.
Error coins
Error coins do not even have to be gold and silver coins to have a very high coin value. An excellent example is the 1955 Doubled Die Lincoln cent. This zinc-plated coin had its legend doubled due to a striking error. It is reckoned that about 10,000 of these error coins exist today and a healthy coin collector demand has been continually pushing up their coin value.
Errors on US gold coins are that much rarer but they do exist, for example, the 1853 double-struck twenty dollars coin and the 1904 off-center twenty dollars coin. Owners of these error coins do not need to worry about changes in the price of gold reducing their value since gold content is not the major determinant of error gold coin prices.
Limited mintage collector coins
To buy gold coins with a limited mintage is another way for the coin collector to acquire collector coins that are likely to be continually increasing in value. Although contemporary US gold coins are minted in limited numbers they do not enter the category of rare currency. The prices of these modern US gold coins for sale are influenced to a great extent by the price of gold on the markets on the day of the sale. In contrast, if a coin collector is able to buy really rare US gold coins, for example if they are fortunate to acquire one of the seven known examples of the 1798 half eagle (with a small eagle design), it is the rarity of the coin that is going to set its price and not the regular ups and downs in international gold prices.
The artistic appeal of collector coins
Even the coin collector that cannot afford to buy very rare, or error US gold coins still has many good reasons why they would want to buy gold coins, apart from making a quick gain on a rise in gold value. The enjoyment of completing sets of collector coins with a certain design, or for a particular run of years, is sufficient motivation for a dedicated coin collector. Even the person who would not identify themselves as a coin collector might want to buy gold coins out of an artistic appreciation of the design; the US Mint’s decision to use the popular Augustus Saint-Gaudens Liberty figure for the obverse of its American Eagle gold coins shows that they recognize that the artistic appeal of collector coins is important.