Why Acquire Rare Gold Coins

On May 23, 2011, the price of gold climbed to its highest level in nearly two weeks, following a series of unsettling news on the indebted eurozone nations, Greece and Italy, that dented investor confidence. Spot gold rose to a session high of $1,517.50 an ounce, its highest since May 11. Gold priced in euros hit a record high of 1,080.04 euros an ounce. Even as most of the commodities tumbled under pressure from the dollar, the value of gold has

strengthened against the euro.

According to Bart Melek, head of Commodity Strategy with TD Bank Financial Group, “Gold is doing relatively well. This whole sovereign debt crisis will continue to be with us for quite some time and I’d suspect people will want the exposure to gold as a hedge against any sovereign defaults.” Although there are several avenues for investing funds, many investors are buying gold because of its strength in the world market.

While some investors opt for gold trading, others acquire rare gold coins with an aim to increase their wealth over time.

What are Rare Gold Coins?

Rare gold coins are US minted gold coins from 1795 to 1933. The mint in Philadelphia first started minting gold to be used as currency in 1795 and stopped in 1933. These gold coins have a “rarity” value because of two main factors:

  1. Confiscation of gold on three occasions by the federal government.
  2. Loss of coins over time.

Top Reasons for Acquiring Rare Gold Coins

A group of coin collectors met in Rock Hill in the third week of May 2011 for the International Coin Collectors Association show. Among other things, a gold coin collection caught the attention of many investors. The collection, from a small town in North Carolina, was sold for $120,000.

Investors and collectors acquire rare gold coins due to a number of reasons, including their scarcity or intrinsic value, their privacy value (as they are not reported) and their previous immunity from gold confiscation. One of the main reasons for acquiring rare gold coins is their long-term performance.

The long-term performance of rare gold coins has been outstanding in the past 40 years. Let’s say that in 1970, person A invested $1,000 into the DJIA, while person B invested the same amount into rare gold coins. If both were to convert their investments into cash in May 2010, person A would receive a little less than $16,000. Isn’t that fantastic? Maybe… but not when you compare it to the performance of rare gold coins. Person B would get more than $110,000! This is because the US Mint State Numismatic Rare Gold Coins have outperformed the DJIA over the four decades in the ratio of 8:1. In fact, if person C was to invest $1,000 in gold bullion in 1970, he would receive around $40,000 in May 2010. This means that the US Mint State Numismatic Rare Gold Coins have outperformed gold bullion in the ratio of almost 3:1.

When purchasing rare gold coins, it is very important to exercise utmost caution. You should opt for a reliable broker, who has a good track record. This is because there have been many instances of fake coins being sold for thousands of dollars.