Posts Tagged ‘PCGS’
Which Gold Numismatic Coins are the Best to Invest In?
First read the getting started blog posted on July 2, 2010, and if you follow the steps your account rep should be able to help you decide what are going to be the best coins to acquire for your portfolio. The reason you want help with this process is because every coin will perform differently in your portfolio. So you want to make sure that you are applying the right tool for the right job.
For example, if your investment horizon is short-term that should rule out any form of numismatic coins. In that case you will want gold bullion, which is a pure asset inflation hedge. Gold bullion provides the most amount of liquidity, because it is real money and it is accepted anywhere in the world. Gold bullion is used more as a safety net than it is as a growth mechanism in any portfolio. It is first and foremost a hedge against fiat currencies.
If you are interested in a long-term play then you can begin to focus on numismatics. In my opinion the $20 Liberties and $20 Saint Gaudens are the best option in this arena. They are the most affordable, liquid, popular and readily available option at this point in the trend cycle. Some issues have tens of thousands known to exist in a particular grade and some have only a few known to exist. The rarer the issue the more expensive the coin, but it will also have the most opportunity for growth. This is where strategy comes into play. If you are looking for asset protection you will want to focus more on common issue coins and lower grades, if you are looking for more growth you will want to focus more on rarer issues in higher grades (generally speaking).
A general disclaimer, I typically will only acquire coins in the mint state range, and always graded by PCGS or NGC. Grading by these two companies will add a layer of confidence knowing that you have coins that are guaranteed for their authenticity and level of preservation. As far as acquiring mint state range coins is concerned, if you look at performance charts on PCGS.com you will find that the mint state range has performed the best over time. If you have never purchased rare gold coins before I would not try to do it on your own, you need someone you can trust to lead you down the right path. Good luck!
What are Certified Gold Coins?
Certified gold coins are coins that have been graded by a professional coin grading company. The two best known and respected grading companies are Professional Coin Grading Service (PCGS) and Numismatic Guarantee Corporation (NGC). In fact, most buyers of gold coins prefer to acquire coins from these two companies.
What coin grading companies do is authenticate, grade and guarantee coins. PCGS has been around since 1986 and have graded over 11 million coins. When a coin is sent to PCGS for example, it is graded by two separate graders. The first grader authenticates the coin and then assigns it a grade. The coin is then redistributed to another grader who goes through the same process. If the coin does not receive the same grade by both graders then it is given to a third grader to break the tie.
After the coin is graded it is sonically sealed in a tamper proof container and given to one last grader for inspection and quality control. The coin cannot leave the facility without at least two graders agreeing on the grade. Inside the case are the details on the coin. The label will give the date a coin was minted, the location of the mint, the quality score as well as a serial number.
All gold coins are graded on a scale from 1-70, with 70 being perfect condition. Gold coins that are graded can be very old up to modern issue bullion coins. Some collectors enjoy grading their modern issue bullion coins in hopes that one day they will be worth much more.
Back in the old days gold coins were kept in bags in vaults. If they never went into circulation they would receive a grade of mint state today. Typically the lower in the bag a coin was the more scratched and dinged it would be and vice versa. The bottom coins in a bag would get a score in the low 60’s and those on the top of the bag would receive scores more towards the middle to upper 60’s.
When diversifying a portfolio with certified coins it is important to understand that rarity as well as quality plays a roll in the value and strategy of each coin. The higher the grade, typically the more valuable the coin will be. The rarer the coin the more valuable it will be. Coins will vary in rarity within each grade. Choose each coin carefully for your goals and objectives.
Can I Profit from Owning Gold Coins?
It is first important to distinguish between bullion and rare gold coins, which you can read more about in this blog or click on the rare gold coins link. Owning gold coins for long-term appreciation has proved to be lucrative in the past. It fact PCGS, one of the top two grading companies in the world has documented rare gold coin performance since 1970. They claim in their mint state rare gold coin chart (which is an index of coins) that since 1970 a $1,000 initial investment would be worth roughly $115,000 today. When comparing this chart to the DJIA (Dow), mint state rare gold coins have outperformed the Dow close to 11 to 1. You can do this calculation yourself to check out this comparison.
Rare gold coins have been accumulated by investors and collectors alike for many centuries and some collections have been documented as performing very well. Check out these examples:
1. Harold Bareford reportedly bought a collection of American gold coins for $13,832 in the early 1950s which was resold at auction in 1978 for $1.2 million.
2. Louis Eliasberg, built a collection that cost approximately $300,000. In 1982, it sold for $12.4 million at auction.
You can see that rare gold coins have performed well in the past, and it should be noted that past performance is no guarantee of future performance. We are currently experiencing a bull market for gold. Gold has gone from $252.85 in August of 1999 to $1,113.20 where it is now, at the time of this writing. That is a 340% increase in ten years. Gold bull markets make all gold boats float higher, and as a result we have seen rare gold coins perform very well and I fully expect them to go even higher as we enter the final or third phase of the gold bull market.
The third phase is the speculative or panic phase. This is where everyone wants in and everyone is putting their money into the asset driving prices above its fundamental value and usually very rapidly. We have not seen this third phase yet in gold and I believe it is still a few years out before we will.
What are the Best Gold Coins to Buy?
If you have been doing research you probably know by now that there are a couple of different ways you can acquire physical gold. Now you are trying to determine which type to buy. This decision should depend on what you are trying to accomplish with the gold. So what are your goals? This should be the question you ask yourself. Only then can you approach the gold market for an answer.
There are two types of gold that you can acquire which will do different things for your portfolio. Bullion gold is used purely for speculation and as a hedge against inflation. 1 ounce of gold 100 years ago could buy roughly as many loaves of bread as 1 ounce of gold today. Therefore over the long-term gold keeps up with inflation. With gold now in the second phase of the bull market you can also speculate purely on the price of gold hoping that it will enter that third and final phase and explode in value.
You can also acquire rare gold coins, which by many standards is considered the best way to own gold. Rare gold coins from the U.S. were minted between 1795 and 1933. They are non-reportable, so the transactions are private and confidential. They are also considered to be non-confiscateable. Bullion has been confiscated in the past while numismatic or rare gold coins have been excluded. History has also shown that rare coins have outperformed bullion significantly in the past. This can be best measured over the last 38 years on PCGS’s index for mint state rare gold coins.
In my opinion the best gold coins to buy are $20 Liberties and $20 Saint Gaudens minted between 1877 and 1933. These coins are highly liquid and affordable to most portfolios and can add great privacy and protection for your assets. Liberties and Saints are easy to track and have a market in which coins are traded every day. These coins can be bought in very common dates like 1904 and 1924, or they can be bought in very rare dates like 1861 and 1933. Acquiring these coins in my opinion should be done between the grades of mint state 62 and mint state 66 as these are the most sought after, thus increasing the demand.