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Primary Differences Between Investing in Bullion Coins and Collector Coins

Bullion Coins

Bullion Coins and Collector Coins By Mark Ferguson for CoinWeek – MFRareCoins.com

Before going over Bullion Coins and Collector Coins, let’s begin by looking at what money really is, using the settling of the United States by the European colonists as an example.  When European settlers came to America during the 1600s, they traded useful goods with the Native Americans who had lived here first.  The settlers traded for furs and commodities, such as lumber that could be exported back to Britain.  Barter was the original method of exchange, but trade soon evolved into using common goods as mediums of exchange, such as wampum, which were strings of beads made from mussel shells, beaver skins and tobacco.  These items became money – measures of value, representing goods and services or labor.

In fact, there was little use by the original settlers for coined money.  Later, when useful goods arrived from Europe, coins were usually demanded for payment.  The colonists began using French, English, German, Dutch and Spanish gold and silver coins.  Many years later, after independence was won by the colonists and the United States government was formed, the country established the United States Mint in Philadelphia during 1792 and began striking our own coinage.  In addition to facilitating commerce, our nation’s coinage helped give us an identity.

These early United States coins were established by law and were required to contain specific amounts of gold, silver or copper…metals that had been accepted for centuries, even millennia, as measures of value – money.  Coins represent exact measures of these metals, and their designs and lettered or reeded edges, which are familiar to us today, ensure that the gold, silver or copper contained in the coins can’t be shaved off by filing or cutting.

During the mid-1800s people began collecting these early U.S. coins as hobbyists.  Various types of these coins were collected by their designs, metal type and denomination.  Many years later coin collecting evolved into collecting by dates of issue, which are displayed on the coins, and then during even later years, by mintmarks.  At some point, after collector premiums over face value rose, coin grading, which describes the condition of coins, eventually became commonplace in coin collecting.

As popularity grew, collectors began paying increasingly higher prices over face value for the coins they wanted, right up to the present time in which we’ve now had three rare United States coins sell for more than $7 million each!  Obviously, those coins are very rare.  Basically, collector coins are valued by their rarity and condition – that is, the amount of circulation wear or contact marks on them from use in commerce.

Some of the most famous collector coins are issues like the 1909-S VDB Lincoln cent.  1909 was the first year of issue for the Lincoln cent, in commemoration of the year of Abraham Lincoln’s birth.  All these initials represent: (1) the San Francisco Mint, where this particular issue was struck.  (They were also struck at the Philadelphia Mint.)  And (2), the “VDB” represents Victor D. Brenner, the coin’s designer.  The 1913 Liberty design nickel, of which there were only 5 coins struck, is another of the most famous American collector coins, although it’s priced out of the reach of the average collector.  It is so rare that even people who can afford one will have a difficult time being able to own one of the five because it is a rare occasion when one of them comes on the market for sale.  The 1804 silver dollar, known as “The King of American Coins,” in which there are just 15 examples known, is, without a doubt, the most written about coin issue in all of U.S. coinage.

While the later two are extremely rare coins, they give an example of collector coins, valued for their rarity, not just their metal content.  The 1913 Liberty nickel and the 1804 silver dollar each are worth at least $3 to $4 million at this time.  The 1909-S VDB Lincoln cent can be purchased from less than $1,000 to somewhere between $10,000 and $20,000, depending on condition.  There were originally 484,000 1909-S VDB Lincoln cents minted.  This total compares to contemporary issues of Lincoln cents in which mintage totals range from about 3 to 8 billion coins per year of issue!  Needless to say, those coins don’t have much collector value, if any.

Similarly, today’s bullion coins are very common coin issues – so common, that they do not command premium prices by collectors in the marketplace.  There are just too many of them.  Here in the United States the American Eagle bullion coin program was begun by the U.S. Mint in 1986 for the express purpose of enabling Americans to invest in precious metals.  This program was largely in answer to America’s banning of the importation of the once popular South African Krugerrand bullion coins, because of South Africa’s apartheid laws.

Prior to 1986 the United States Mint struck gold bullion coins, known as the American Arts Gold Medallion series, and then during later years, introduced the one ounce American Buffalo gold coins, the First Spouse$10 gold bullion coins, the Augustus Saint-Gaudens designed Ultra High Relief gold coin, as well as many commemorative series coins, which contain gold, silver or platinum.

When investing in bullion coins, all you want is the metal they contain.  By buying them in coin, or even bar form, you get an exact weight and fineness, or quality of metal, such as .999 or .9999 fine gold.  There is absolutely no need to buy bullion coins that have been graded and are in grading service holders.  Bullion coins are not meant to be scarce or rare collector coins!  However such coins are sold by some coin dealers and are collected, but they’re really very, very common.  It is only the bullion content you should be after, when investing in precious metals.

In fact, if you are making an investment in precious metals through your self-directed IRA or 401k, collector coins that have been graded by a coin grading service are not allowed to be included in these plans per Federal law.  Again, what you are investing in, when buying precious metals, is the metal content only.  The only reason this metal has been fashioned into coin or bar form is to provide a convenient method to be able to distribute and exchange specific weights and qualities of precious metals such as gold, silver or platinum.

Currently, here in the U.S., the American Eagle gold, silver and platinum coins are one of the most popular ways to own these precious metals.  There are about ten wholesale distributors who are “Authorized Purchasers” by the Mint, and they distribute through dealers like me who sell them to retail investors.  Because the U.S. Mint charges a price premium over their metal content to cover the costs of manufacturing and marketing these bullion coins, they trade for more than the values of their precious metals content.

Currently, a less expensive way to go is to invest in Canadian Maple Leaf coins, manufactured by the Royal Canadian Mint (RCM).  However, these coins also command a small premium over the values of their precious metal content, but this premium is normally smaller than for the American Eagle bullion coins.  The RCM also manufactures bars, whereas the U.S. Mint does not.

South African Krugerrand coins, once the most popular bullion coins on earth, now come in at a distant third place in popularity here in the U.S. market.  However, they can often be purchased for a much smaller premium than the U.S. or Canadian bullion coins.  But, of course, when they are resold back into the market they may trade for a slight discount to the value of their metal content, whereas the other two can most often be sold back into the market for their full “melt” values, or even slightly more in large quantities.  Additionally, there is absolutely no need to buy exotic foreign gold coins, which are typically promoted by large firms in mass quantities, in hopes that these very common coins will magically become collector pieces and increase in value – they most likely won’t!  They usually sell for huge premiums over the values of their gold content, requiring the market value of gold to soar to unprecedented levels just to break even!

Another way to invest in silver or gold coins is by buying dimes, quarters and half dollars minted during 1964 and earlier years.  These coins are comprised of 90% silver and are traded on the exchanges in $1,000 face value “bags,” which contain 715 ounces of silver.  They can also be purchased from most coin dealers in smaller quantities, and their premiums over their “melt” values are low.  Many investors feel comfortable owning silver in this way, because these are familiar coins that carry a denomination.  They may be useful during a catastrophic financial meltdown, the subject of which is too complex to address in this article.

Vintage U.S. gold coins, such as $2.5, $5, $10 and $20 gold coins struck by the U.S. Mint prior to 1934 are also a similar way to invest in gold.  As the market price of gold bullion has risen during the past few years, collector premiums over the metal content of these gold coins has dropped to virtually nil.  Again, the subject of why these are preferred by some investors is too complex to cover here, but there is a historical precedent in the U.S. during 1933 in which our Federal government confiscated gold to prohibit its hoarding in the wake of a banking crisis, by replacing gold with currency, but a “collection” of these gold coins was exempt.

This precedent is an exception to buying gold, silver and platinum coins only for their metal content.  If you have concerns about such a scenario, or want to discuss other aspects of investing in precious metals, feel free to call or email me anytime.

Mark Ferguson is a specialist in precious metals investments and deals in all bullion products currently traded in the market.  If any products or services mentioned in this article are of interest to you, Mark can be reached at 920-233-6777 or [email protected].  Mark Ferguson has been dealing in rare coins and precious metals nationally since 1969.  He has written feature articles and regular columns for Coin World, Coin Values magazine, The Coin Dealer Newsletter, Numismatic News, The Numismatist, ANA Journal, and the British publication, Coin News, and currently writes a weekly column for CoinWeek.  His website is www.MFRareCoins.com, where additional research information about precious metals is available.

Mark Ferguson
Mark Fergusonhttps://www.mfrarecoins.com/
Mark Ferguson was a coin grader for PCGS, a market analyst for Coin Values, and has been a coin dealer for more than 40 years. He has written for Coin Dealer Newsletter, Coin World, Numismatic News, Coin Values, and The Numismatist.

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  1. Hi,
    Thanks for sharing us this very informative and well written blog post. I love every bit of it especially the points that you expressed. And I would love to come back in a regular basis so post more of the subject!!!


  2. There is a market for all sorts of coins. The numbers left of old coins are mostly known and now and then a rare one pops up somewhere at an auction and hits the news.

    Bullion coins are also struck in certain known numbers by US Mint but many are bought by coin dealers who keep them in stock for a while and wait for the right moment when there is a demand again after US Mint have stopped producing them.

    But the right investment for an indiviual is done when you buy coins minted in limited issues like for example with some issued chinese panda coins. Some coins went from from $25 to $890 in just 4 years. When demand is high and availability is low the price goes up and the right info and be on time is important when you want to make money with coins.

    If i would like to invest in coins to make money i would check out worldwide limited issues of coins and not only Bullion coins instead which are struck in higher numbers most of the time.

    • The focus of this article is on investments in physical precious metals only. Buying newly released coins in hopes that they will increase in value because of their numismatic scarcity and demand is to speculate in collector coins. When making an investment purely in precious metals there is no need to spend extra money buying coins that, by chance, will rise in value because of their scarcity and speculative demand. You’ll get more gold or silver bullion for your money by sticking with purely bullion coins.

      • Is not investing in purely bullion coins the exact same thing? You are speculating on the value going up, the same as one may choose to do with lets say a collector coin?
        I am only kidding, I understand what you are saying. But the objective should not be on what you buy, but simply to buy it as close to spot as possible.
        If scrap metal: you also need to take into consideration that someone will need to pay to have it refined to .999. That would also deduct the sellers final payout, but closest to spot should be the primary objective. Your profit begins with your purchase price.

  3. Good Article, however I believe the bullion coins do have a collectable aspect where I do buy them graded. If referring to all of the tokens or rounds being massed produced I do agree to an extent, but if writing about precious metal coins I disagree. People collect all sorts of items from matchbooks to thimbles to art. What determining factor makes an items collectable? All it takes is someone having the interest or desire to do so.
    The U.S. Mint makes Bullion Coins in Uncirculated, Burnished, and Proof versions. Mintage numbers are recorded and price guides exist, and there is a collector market for these items. Granted these coins were never meant for circulation and do not compare at all with the circulating coins that made our country great, and there are those who think of these as nothing but bullion and treat them as such with no regard to grade or care. For the people who do see these as U.S. Mint collectable coins, especially if buying second or third hand want the coin in “Mint” condition and therefore coin grading can give a little reassurance that the coin has not been manhandled. I buy only slabbed classic and bullion coins. I do also buy bullion bars for optimism of spot price values.
    Why the classic gold coins do not compare with modern bullion is that almost everything was melted and is sitting in Fort Knox as Bars, the mintage numbers on those mean nothing and are more rare than anything being produced today. So here again, high graded specimens would yield a higher price than poor examples so grading has favorable aspect with these as well.
    Grading companies are not consistent, I have seen perfect 70 graded coins with obvious flaws and lower grade coins that look perfect even under magnification. But never the less, a slab does offer a certain reassurance of most negativities.
    There is also a collectibility on rounds (tokens and medals, they are called exonumia in numismatics and have been made since before the nation was born. and I own some 1933 pieces of .999 bullion tokens (So-Called Dollars) from the Free Silver Movement and I have those slabbed as well.
    I do shy away from the high premium tokens being mass produced by private mints, but then again so do the grading companies, and the prices guides. I would love to see a price guide or catalog of all of these pieces, the Publisher could make a fortune. Though I do not buy them for the reason described, I can not deny that people collect them and that is why these companies make them and they sell a lot of them.
    It is all collectible, and nobody is buying the 2018-S Silver Eagle for the U.S. Mint price of $55.95 USD if it is only worth $14.80 USD (Spot Price at the time of this writing). That would be a 378% Loss.
    It was a good article though.

  4. I have a 2019 American memorial park coin and found it in a roll of quarters but the strang thing about it. It’s gold in color and turns various colors


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