Do Rising Bullion Prices Pose a Threat to the Rare Coin Market?

The world of gold investing can be confusing, especially when prices are constantly changing. Some people believe that rising gold prices could be bad news for the rare coin market. In this article, we will explore the impact of increasing bullion prices on the market for rare coins, how they affect collectors, and what investors should consider when buying gold coins.

Gold Prices: A Historical Perspective

In 2012, a coin expert named David Hall made a bold prediction that gold prices would reach $5,000 or even $10,000 per ounce within five years. If that happened, it would have shattered the previous record price of $2,239.67 for gold, which was set in 1980. Unfortunately, for those who bought gold at that time, prices fell sharply by 1985, losing half their value. After many years of decline, gold prices began to rise again around 2001, influenced by factors such as increasing national debt, global tensions, and speculation by investors.

Today, investing in gold has become a popular trend. In America, there are two types of people regarding gold: those who collect and hoard it, and those who sell it for cash at numerous cash-for-gold businesses. With the growing interest in gold, sales pitches for gold coins can be found everywhere, even on the radio. These ads often promote gold coins as valuable collectibles, but are they really worth the hype?

Understanding Sales Pitches for Gold Coins

One common type of gold coin advertisement features a voice pretending to be a news anchor. This ad claims that a company has acquired beautiful, uncirculated, and rare U.S. gold coins from Europe, presenting it as an incredible opportunity for consumers. However, many collectors dislike these ads because they often mislead people about the true value of the coins.

The issue is that there are not enough serious buyers in the coin community to absorb all the coins being marketed. This situation raises concerns about whether gold prices have become too high for most collectors, especially if Hall’s predictions come true. If gold prices rise significantly, it may only be the rarest gold coins that maintain their collectible value.

The Funnel Concept in Coin Collecting

To understand how the coin market works, think of it as a funnel. At the top of the funnel, there are many common and inexpensive coins. These coins are often bought by beginners and are frequently recycled through the market. As you move down the funnel, the coins become rarer and more expensive.

  • Top of the Funnel: Common, low-cost coins suitable for beginners.
  • Middle of the Funnel: Better-quality coins, like certified pieces and semi-key dates.
  • Bottom of the Funnel: Rare and valuable coins, including high-grade gold coins.

Historically, collecting common gold coins has been possible for many collectors. However, with rising gold prices, even these coins are becoming less affordable for average collectors.

Price Trends of Common Date Gold Coins (1999 – 2012)

YearCommon Date Quarter Eagle ValueHalf Eagle ValueEagle and Double Eagle Value
1999$200$300$800
2005$250$290$950
2012$350$280$820

Common Gold Coin Investment Returns

Coin Type2000 Value2012 ValueNumismatic Value Change
Quarter Eagle$200$350+$150
Half Eagle$300$280-$20
Eagle$800$820+$20
Double Eagle$900$950+$50

Are Common Date Gold Coins Worth Collecting?

As prices rise, common date gold coins are increasingly seen as bullion assets rather than true collectibles. Investors should approach purchasing these coins as they would when buying gold bullion. For example, if someone is looking to buy a $20 Saint Gaudens coin, the coin’s condition (like MS-62 or MS-63) should matter less than its gold content.

Collectors often mistakenly pay more for coins based on their condition, thinking it will make them more desirable. However, this can lead to overspending, especially when there are more coins available than collectors willing to buy them.

The Importance of Knowing Market Trends

A smart way to invest in gold coins is to check price guides and understand market trends. For many common gold coins, their market value may only be slightly above the value of the gold they contain. A good rule of thumb is to look for coins priced at least double the melt value.

Cash-for-gold shops can be great places to find deals on gold coins. Since these shops want to sell quickly, they may not be focused on getting the highest price, making them more likely to sell coins at fairer prices.

Table 3: Current Market Prices for Common Gold Coins

Coin TypeMarket PriceMelt ValueSuggested Purchase Price
$5 Liberty$475$425$450
$10 Liberty$950$850$900
$20 Saint Gaudens$1,800$1,650$1,750

Conclusion

In summary, rising bullion prices present challenges for the rare coin market. While gold can be a good investment, collectors should be cautious when buying common date gold coins, as their value may not be as high as expected. Instead of viewing them as collectibles, it’s more practical to treat them as bullion.

Understanding the market, avoiding misleading sales pitches, and being smart about purchases can help collectors make better decisions. As gold prices continue to rise, it’s essential to approach investments with care and knowledge. Remember, while investing in gold can be beneficial, it’s crucial to stay informed and consider the changing landscape of the rare coin market.

FAQ’s

What are common date gold coins?

Common date gold coins are widely produced coins that are not considered rare. They are often more affordable for collectors.

How do gold prices affect the value of rare coins?

When gold prices rise, the value of rare coins can be impacted negatively, especially common date coins, which may lose their numismatic value.

Should I invest in gold coins now?

It depends on your budget and investment goals. Researching the market and understanding price trends can help you make informed decisions.

What’s the best way to buy gold coins?

Consider purchasing from reputable dealers and cash-for-gold shops to get fair prices. Always check the current market value before buying.

Are gold coins a good long-term investment?

Gold coins can be a good investment, but their value can fluctuate. It’s important to approach them as bullion and stay updated on market trends.

Leave a Comment