Premiums for generic gold coins – like MS-62 Saints and Libs – drop

By Steve Roach – First published in the Feb.14, 2011, issue of Coin World

January was a hard month for gold. It opened on Jan. 4 at $1,405.50 (London AM fix spot price) and has gradually fallen since, hitting $1,325.60 during trading Jan. 25. It rebounded slightly before falling to a low of $1,315.80 on Jan. 27 as economic concerns both in the United States and globally continue.

Oil hit a seven-week low and the U.S. dollar index hit a two-month low on Jan. 24. Seeing rising U.S. interest rates, Goldman Sachs changed its prediction on gold — suggesting that the gold market could top out in 2011 instead of its earlier forecast for 2012.

This recent decline in gold prices means that gold coins are less expensive in an absolute sense.

Generic Mint State pre-1933 U.S. gold coins are being promoted as good values with gold $20 double eagles advertised as having a strong upside since their premiums have fallen significantly in the past several years.

Looking at the melt price of double eagles compared with the price of MS-62 Coronet double eagles and Saint-Gaudens double eagles shows that the rumors ring true — premiums have fallen dramatically in the past two years.

In January 2009, with a gold spot price of $1,200 an ounce, MS-62 Coronet double eagles were at a wholesale bid of $1,800 while MS-62 Saint-Gaudens double eagles were at $1,650.

A $20 double eagle has .9675 ounce of gold in it. So, at $1,200 spot, its melt value is $1,161. Thus, in January 2009, an MS-62 Coronet double eagle was trading at a premium of $640 while an MS-62 Saint-Gaudens $20 coin was trading at a premium of $435.

In January 2010, MS-62 Coronet double eagles had a wholesale bid of $1,410 and MS-62 Saint-Gaudens $20 coins bid at $1,325. Spot was $1,095.20 an ounce, so they were trading at $350 and $265 premiums, respectively, to their gold content.

In June 2010, MS-62 Coronet double eagles were at were at $1,450 and the MS-62 Saint-Gaudens coins were $1,400 while spot was $1,239.90 an ounce. Premiums over melt value had fallen to $250 and $200.

On Jan. 25, with gold at $1,334, Coronet double eagles were at $1,505 and the Saint-Gaudens coins were at $1,470, so the premiums for MS-62 coins over melt were $215 and $150 — a far cry from two years ago.

How much lower can they drop? Also, how many more are out there, waiting to be certified?

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