How to Buy Rare Gold Coins to Improve the Profit Potential

According to information from the Mineral Wells Index, the International Coin Collectors Association (ICCA) arranged an auction in Mineral Wells for antique gold in the last week of February 2011. The association uncovers some rare gold coins in its auctions that were held at different places throughout the country. A 1894-S Barber dime was sold at such an event for $1.9 million. Another gold coin collection, comprising of some historical coins from a small town in North Carolina, was sold for $1.2 million. At one show in Georgia, held earlier this year, a penny was sold for about $300.

According to professional advice published in the Wall Street Journal and CNBC’s Money Magazine, at least 25% of one’s investment portfolio should be allocated to rare coins and precious metals. In light of the recent instability in the stock and property markets, such advice is heeded by many. According to experts, holding gold in one’s portfolio offers a number of benefits, such as:

  • A hedge against currency devaluation
  • Protection against inflation
  • Capital appreciation
  • Asset with no geographical boundaries

Numismatic issues, particularly the pre-1933 US gold coins, are in limited supply and are highly sought after by judicious collectors. Their demand depends more for their rarity factor than their pure gold content. The Saint-Gaudens, the Liberty Series and the Indian Head US gold coins are the most readily available issues and are known worldwide for their historical significance, physical appeal and scarcity.

How to Acquire Shrewdly in Rare Gold Coins

In order to build a successful and diversified portfolio, market experts have identified certain forces that influence the US rare coin market:

  • A statement is given in ‘The Gold Report’ by Dow Jones that rare coins can go up as well as down in price during different market cycles. Being optimistic, the low price cycle can be used advantageously to build a successful rare coin portfolio. To capitalize on their profits, many collectors prefer to get hold of those coins that are currently undervalued. They buy such coins and wait until investors move inside the bull market and bid up coin prices. At the right time, they sell these coins and earn substantial profits.
  • Market experts recommend acquiring those rare US coins that have a broad base of buyers. The more affluent and enthusiastic the base of buyers in a particular coinage, the more successful one’s portfolio can be expected to be in the long run.
  • It is also beneficial to review the price history of any rare coin you plan to buy. While the successful history does not guarantee future profits, you get a basic idea of the real worth of a coin. Rare gold coins with an exciting history of 200-300% price increases during the latest bull markets can be considered as a good pointer to its potential in the next market.
  • Gold experts also advise individuals to put their money into coins that are genuinely rare. There are two rarity factors of a coin – condition rarity and absolute rarity. Condition rarity means that a coin is rare only in the highest grades, such as MS 63 and MS 65. These coins are common in their worn-out and circulated versions. Absolute rarity means that a coin is rare in all grades. American Double Eagles, Eagles and Indian Head coins can be included in both of these categories.

The greater risk factor associated with the value of paper money as compared to gold is pushing gold demand from an investment perspective. "The gold story has been around for millennia, but is now attracting investment for thoroughly modern reasons. Gold is moving from the shadows, where economists and politicians had consigned it, to center stage," said Don Coxe, founder of Coxe Advisors.