As any fighter will tell you, there is nothing like connecting with the old one-two.Rare Coins combine all the advantages of precious metals with the added benefit of the numismatic or collectible value they possess above and beyond that of their precious metal content.
Traditionally, when the bullion markets are hot many more people become interested in coins. During the recent boom in the gold market gold coins outperformed bullion! The demand for physical gold rose so dramatically supply could not begin to keep up. This caused the premiums these coins trade for above their actual gold value to soar.
Conversely, according to The Coin Dealer Newsletter, in the period between July 18, 1980 and April 19, 1985 the price of gold dropped 48% while a common date Liberty Head $20 Gold Piece in MS65 rose 134%. In the same period silver dropped 58% as the 1923 Peace Silver Dollar jumped 1338%! That is the double edge advantage of rare coins.
Furthermore, rare coins are protected from government confiscation. In 1933 Franklin Delano Roosevelt banned private ownership of gold. Americans were forced to turn in all gold coins. Today the President still has the power to ban the private ownership of gold bullion. However, by law, ownership of U.S. Gold Coins minted to 1933 cannot be prohibited.
Add to this the fact that rare coins are among the last remaining investments that can be privately accumulated. They are free of the extensive disclosure and reporting that other assets require, giving them an unequaled level of privacy.
How exactly is the value of a rare coin determined?
- Supply/Rarity: How many currently survive.
- Demand: The number of collector/investors seeking that coin.
- Precious Metal Content: How much pure gold, silver, etc. does it contain.
- Quality: The grade or state of preservation of the coin. Is it a worn down clunker or a gem that looks like it just rolled of the presses.
This last point brings up a pivotal issue. Prior to 1986, liquidity in the rare coin market faced a major obstacle. There was no uniformity to grading standards. This lead to a great deal of “back and forth” between buyer and seller.
With the emergence of guaranteed third party certification of rare coins sight-unseen trading became possible. This opened a whole new dimension to the industry. One in which collectors, dealers and investors could freely participate in the numismatic marketplace with a previously unknown level of confidence. This in turn provided for the participation of major brokerage firms which greatly expanded the market base.
The two internationally accepted firms that certify coins are the Professional Coin Grading Service (PCGS) and the Numismatic Guarantee Corporation (NGC). These companies have removed much of the uncertainty in determining a coins grade and they have helped establish a worldwide network of thousands of dealers where certified coins are freely traded and instantly liquid.