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Numismatics There are several areas of numismatics that are outside the scope of the gold and silver market and we'll leave those areas out of this discussion. For now I'll cover the area of numismatics that involves collecting graded coins. I'm sure you've noticed how many time slots on the television these days are filled with shows selling coins? There are several different types of graded coins that can be collected and given the current economic conditions there is one area of numismatics that has the most potential for appreciation should things continue in the direction they have been going. Given the recommendations of my mentors and experts, at this time, the other two should be avoided. Let's discuss three classes of such coins:
- Older, rare coins.
- Commemorative coins
- Modern issue graded coins
- Non-graded bullion coins
Before we get into discussions about each let's talk for a minute about how the price of a numismatic coin is calculated.
Numismatic coins have 3 layers of cost built into their price:
- The metal content
- The numismatic premium
- The dealer profit
Of the three layers it is best to minimize #2 and completely eliminate #3. If you know how and where to buy at wholesale you can do that...more on this later.
The metal content - When purchasing numismatic coins with the hope of having an asset that increases in value it is safest to only deal in coins that are pure silver or gold. I didn't understand this when I first began my collection and collected many coins that were a mix of various metals and while many of these coins were quite nostalgic they are of little value when measured for their silver or gold content. Stick with silver or gold coins that are pure.
The numismatic premium – This is the premium placed on the coin for it's rarity, age and grade. The key to minimizing this premium while still acquiring an asset that can have significant appreciation based on the metal content is to avoid rare, aged coins.
Grading Services - To establish the value of a numismatic coin, coins are graded by grading services. The top four grading services are: ICG, ANACS, PCGS and NGC. Each service follows the standards of the Sheldon scale of grading where each coin is rated based on specific characteristics for the given coin. A perfect MS70 grade can sometimes be subjective however when a coin is graded that receives this designation it can achieve a significant numismatic premium based on rarity and age.
Dealer profits – This is premium the dealer must place on the coin to cover their overhead and create an income. Profits on numismatic coins can typically range from 15% to over 100%.
Older, Rare Coins These coins are the opposite of modern issue graded coins which we'll discuss shortly. These are coins that are typically 20 or more years old. As time goes on there are less and less coins that have been kept in perfect condition or have not been in circulation and so they become more rare and begin to gain quite a bit of numismatic premium. In tough economic times, many experts believe that these coins while beautiful and nostalgic, will not hold their value.
In good economic times some coins can be worth many, many times the value of the metal however, it is the opinion of many experts that these premiums will become less important and it will be more about the metal content as economic times change.
Commemorative Coins Be very careful here. Many of the commemorative coins that you see advertised on TV and in magazines are a complete waste of money. Some of these are flat out scams. Many of these coins are only plated with various grades of gold and silver and are far from pure. Almost 99% of all the counterfeit coins are counterfeit numismatics and commemoratives ... they are seldom bullion coins.
Plus...if you need to sell the coins...who the heck wants them and is willing to pay anything for them? When you need to sell some coins... you want coins that are instantly recognized as the real thing. The best way to meet this instant recognition is to purchase coins produced by the US Mint. My advice, forget about commemorative coins and invest your money in the "real thing".
No one likes to think about it but if things get really tough in our country as some experts and economist are now predicting, the dollar crashes, unemployment soars, many more banks fail and things go from bad to worse...and we are forced to use our gold and/or silver coins to buy, barter or trade with....what do you think will be the most important at that time: (A) The fact that you have a 1 ounce silver American Eagle that is pegged to be worth the current spot price of silver plus a small premium.... or (B) The fact that you have a 1 ounce Morgan silver dollar that is very rare and at one time carried a numismatic premium of a thousand dollars above the price of the metal itself?
Do you think at a time like that....when you really need the money...the person you are exchanging it with is really going to care about the rarity of the coin that much? Do you think the numismatic coin will maintain its same numismatic premium in bad times... as it maintained in good times? That's for you to answer.
Modern Issue Graded Coins Modern issue graded silver and gold coins are a rapidly growing class of numismatic coins. They currently represent the majority of coins being graded by the top grading services. These coins are typically less than ten years old with many millions of coins in circulation. The most in demand coins in this class are those receiving the designation MS70. Modern issue graded coins are a simple and safe way to participate in numismatics. Because of their age and abundant quantities, they typically carry a low numismatic premium, thus limiting your down side risk. These assets tend to appreciate over time and are valued by collectors. Modern issue graded coins are a great way to diversify your silver & gold holdings.
Should tough economic times be in our future, very little will have been invested in the numismatic premium of these coins which allows the asset to be considered as viable for those interested in investing in gold and silver... while enjoying the beauty and nostalgia of these coins.
Trends indicate that the most in-demand modern issue graded coin is the Silver American Eagle produced by the U.S. Mint. Stay with me and I will show you how you can create an income while collecting these assets and even get some of these for free.
Non-graded bullion coins These are coins that are similar to the numismatic coins mentioned above however they are not graded or collected for their nostalgia, rarity or age. They are coins that are collected for their metal content. They differ in that they do not have numismatic premium. Typically dealers will charge anywhere from 5% to over 40% over cost for these coins. In just a bit I will show you how you can buy them for 0% over cost. Stay tuned.
Confiscation Recently I was doing some research and called one of the major gold and silver dealers that you see advertising on TV practically 24/7. The "sales person...or rather I say pit bull" that I talked to was totally indignant towards me. He emphatically lectured me about the fact that they only sold numismatic and simi-numismatic coins because they were the ONLY coins that could not be confiscated by the government. I can't believe these guys are shoveling out this garbage. Don't be suckered in by this BS.
Let's get this one straight. Way back in 1933 President Roosevelt signed an executive order requiring US citizens to turn over their gold to the Federal Reserve in exchange for Federal Reserve notes (dollars). It's funny that less than 22 percent of the gold in circulation was ever turned in.
On December 31, 1974, President Gerald Ford repealed the executive order that Roosevelt signed and Congress restored Americans' right to own gold. Finally, in 1977 Congress removed the president's authority to regulate gold transactions.
Michael Maloney states that the United States is the only nation on the planet whose dollar would go to zero if they confiscated our metals and doesn’t believe that would ever happen.
He said it’s truly sad that this confiscation scare continues to be the root cause for either inaction or poor silver and gold investment decision making.
As the law stands today there are no limits on gold and silver ownership. If the government outlaws private gold ownership again, there is unfortunately nothing you or I will be able to do about it.
Our government makes the rules and they can change the rules at any time. They can do anything they darn well please...regardless of what Mr. Snotty metals salesman tells you. This confiscation concept is perpetuated by unscrupulous dealers trying to scare you to death so they can sell you what they want to sell you...their over-priced numismatic coins. If you fall for it, you are going to end up buying the wrong coins, at way inflated prices.
My advice, if any dealer even mentions "non-confiscatable," you should hang up the phone or run the other way. There is simply no such thing as something the government cannot confiscate. Lastly, if you decide to invest in gold and silver American Eagle coins like I suggest, they are extremely private because there is no reporting requirements when you buy and sell these coins. More on this shortly...
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