US Gold Coins: Perspectives of Investors and Collectors

According to an article in the Times Herald, the gold market is witnessing its eleventh year of bullish trends. In late 2007, gold was valued at around $740 an ounce. It was in March 2008 when the yellow metal breached the $1,000 mark. In 2009, gold prices skyrocketed to above $1,000 and rose to $1,200 in 2010. With gold prices touching $1,900 per ounce in September 2011, there were less sellers than buyers of gold.

The selling, of course, has been propelled by the record high gold prices. The demand for the yellow metal has been boosted by economic uncertainty, since people tend to diversify away from equities and currencies during such times. The article quoted Richard Gotterer, managing director of Florida for Wescott Financial Advisory Group, as saying, “There is the belief that gold is a wonderful store of value. Gold makes people feel comfortable during economic uncertainty. The price is going up because investors are flocking to gold as a safe haven. US gold coins also witnessed a surge in demand during 2011."

Investors and Collectors of US Gold Coins

People buy US gold coins either for investment purposes or because they are collectors of such coins. It is the intent that also determines the kind of coin that one would purchase. To understand this better let us take the example of the American Eagle Bullion Coins.

Augustus Saint-Gaudens designed the American Eagle Gold Coins. It was the double eagle (or the $20 coin) that first depicted this particular design on its obverse in 1907 and the design remained unchanged until 1933. Investors would typically opt for the American Eagle Bullion Coins, which provided them a convenient way of diversifying their investment portfolio. Collectors, on the other hand, would purchase American Eagle Proof and Uncirculated Coins. These versions are produced by the United States Mint for the purpose of collection. These coins undergo a unique minting process (called "proof"). These coins come with a Certificate of Authenticity, which guarantees the gold content, purity and weight of the coin. They are minted in limited supply and are highly sought after by collectors.

Some collectors greatly value the Presidential $1 Coins. The US Mint issues merely four of these coins every year to honor the country’s Presidents. The images of the Presidents can be seen on the coins (in the order that they served in office). The four Presidents whose images appeared on the gold coins in 2011 were Presidents Johnson, Grant, Hayes and Garfield. The reverse design remains unchanged as the Statue of Liberty.

Similarly, there are American Buffalo Gold Bullion Coins that are minted for investors. These are .9999 fine 24-karat gold coins and are guaranteed by the US government. On the other hand, American Buffalo Gold Proof Coins are meant for collectors. These too undergo a specialized process for their production and have a Certificate of Authenticity.

While the US gold coins that are meant for investment purposes would sell at prices close to the market price of the yellow metal, this may not be the case with proofs. As the proof versions become older and their historical significance increases, they become dearer to collectors. This boosts the price of such coins.

The articles in the Times Herald mentioned that the main drivers of gold prices in 2011 were concerns over the US debt situation, the financial crisis in Europe, the possibility of a double-dip recession and a shaky stock market. Gold prices are up nearly 40 percent in the past 12 months.