Investors buy silver coins, silver bullion coins, and coin silver for one of three purposes: as an investment, as an inflation hedge, or for survival purposes. Investors who buy for investment purposes look for price increases because of silver's supply/demand fundamentals. For example, in 1998 Warren Buffett purchased 129.7 million ounces of silver for Berkshire Hathaway, a holding company that Buffet heads. 1
Gold coins and silver dollars, especially pre-1933 gold coins minted in the U.S. and Europe and U.S. Morgan and Peace silver dollars, are rapidly becoming assets of choice among investors worldwide. Every day more media outlets are touting the value of buying gold coins and silver dollars as a way to offset risk, combat inflation, and realize portfolio returns. 2
Investors who want protection against inflation buy silver and gold as inflation hedges. During the 1970s, silver and gold prices skyrocketed in response to price inflation that reached 13%. During the '70s, popular silver and gold investments included any form of silver bullion, from 1-oz silver rounds and pre-1965 U.S. 90% silver coins to 100-oz silver bars and 1-oz Krugerrand gold coins. When the Federal Reserve brought inflation under control in the 1980s, much of the silver bullion and the gold coins purchased in the 1970s were sold and the proceeds put back in paper investments. 3
The most frequently used technique to promote high-priced coins is to raise the issue of confiscation. Many telemarketers tell investors that old U.S. gold coins are not "subject to confiscation," leaving the impression that modern gold bullion coins are. Consequently, many investors buy old U.S. gold coins at prices significantly higher than the value of their gold content. The idea of buying "non-confiscateable'' gold sounds like a powerful argument but wilts under scrutiny. 4
So what does this all have to do with gold ownership today? There are also large national gold companies today which believe larger gold bullion coins will be confiscated. These firms therefore recommend smaller, earlier gold bullion coins in brilliant uncirculated condition. Coins like the gold British Sovereign, the gold French 20 Franc, and the gold Swiss 20 Franc. These coins trade like bullion, don’t require a large premium, and most were struck before 1933. Their reasoning follows that these gold coins are not be subject confiscation because of their collectable nature. If you are one who has some anxiety about confiscation consider what many national dealers recommend. California Numismatic Investments posts daily Buy and Sell prices on these high quality, small gold coins. 5
Those are the kinds of situations that investors who buy coin silver and small gold coins for survival purposes want to protect against. In doing so, these investors buy silver and gold in forms that can be used for money or to barter for goods and services. 6
Like the South African Krugerrand, all American Eagle gold bullion coins are 22 karat (or .9167 fine) gold, containing an alloy of silver and copper to help increase the stability and scratch-resistance of the coins. Each coin is guaranteed to contain an exact quantity of gold, mined exclusively in the United States, and to meet the rigid quality standards of the U.S. Mint. 7
If the time ever comes that silver coins and gold coins were again used as money, coins would be worth only their metal content. Numismatic (collector) premiums would disappear. Anyone using gold or silver coins to buy goods or services would not be asked, "What's the mint mark on your coin?" Nor will they be asked, "When was it minted?" The question would be, "What's the gold content?" Hand someone a St. Gaudens and tell him it contains .9675 ounce of gold, and it will be difficult--if not impossible--to convince him to accept it at more than .9675 times the price of gold. 8
It is widely believed that all the gold coins surrendered under Roosevelt's prohibition were refined into .999 fine bullion bars. This is not true. It was to the government's advantage to pay foreign debt holders with (22 karat) gold coins versus (24 karat) bullion bars. With the official price of gold at $35 an ounce, a foreign bank redeeming $70 million paper dollars received 2,000,000 ounces of gold (if the Treasury delivered gold bullion bars of 24 karat). 9
American Buffalo Gold Bullion Coins are available at many coin and precious metals dealers as well as many brokerage houses and participating banks. Pricing for precious metal investment coins typically depends on the market price of the metal. Click here to locate a dealer. 10
Second, the coins should have their gold or silver contents stamped on them; except for the modern bullion coins, most do not. In an emergency, having the gold content stamped on a coin could go a long way toward causing someone to accept it. 11
Because the supply of classic European and World gold coins is limited to what was minted long ago, these coins tend to increase in value faster than bullion in a rising gold market. In addition, collector demand can maintain or even increase value when the gold price is flat or falling. 12
Numismatic—or collectible—gold coins are not priced based on their weight in gold. Rather, their selling prices are based primarily on their rarity, age and condition. ldquo;Numismatic coins are cherished for their beauty, historical significance, and their potential investment value. Hence, numismatic coins sell at a significant premium over their intrinsic gold content,” according to AmeriGold. 13
One alternative to a direct investment in gold bullion is to invest in one of the gold-based exchange-traded funds (ETFs). Each share of these specialized instruments represents a fixed amount of gold, such as one-tenth of an ounce. These funds may be purchased or sold in any brokerage or IRA account just like stocks. This method is therefore easier and more cost effective than owning bars or coins directly, especially for small investors, as the minimum investment is only the price of a single share of the ETF. 14
Pre-1933 U.S. Gold Coins have broad appeal from both established, old-time Rare Coin collectors and new Gold investors. This double-sided demand creates a powerful synergy that keeps consistent pressure on the market. 15
