Though done out of pure enjoyment, the avid coin collector may well have created a built-in hedge for their cash reserves. Collectors and investors alike have started to benefit from the profits to be made in rare coins. Rare gold and silver coins come with their own worth or value that’s protected from changes in the economy. For these reasons, investors have been taking an interest in the rare coin market like never before.
Precious Metals
Along with platinum and palladium, gold and silver metals form what’s known as the precious metals market. In general, the precious metal market trades metals as commodities. In the case of rare –also known as ancient- gold and silver coins, each coin carries a higher value than the actual value listed on the coin. This characteristic gives them a numismatic value as opposed to the face values assigned to commodity metals. Of course, gold in any form holds a high value but ancient gold coins would hold an even higher value than say gold bars or bullion in terms of per pound value.
This ancient characteristic also increases the value of rare silver coins even though the value of silver is considerably less than gold. Ancient civilizations, such as those found in Rome and Greece used gold and silver as legal tender or currency. In effect the uniqueness and rarity of each piece –as well as their metal composition- is what gives these coins their value.
Ancient coins, while the most valuable only make up one sector of the rare gold and silver coins market. Other sectors of interest include twentieth century coins, nineteenth century coins and commemorative coins, according to Financial Web. Ultimately, a rare coin’s value lies in its scarcity or limited number, which is why ancient coins carry such a high price tag.
Rare Coin Grades
While a coin’s age, authenticity and metal type go a long way towards determining its market value, a coin’s grade can also have a considerable bearing on its overall worth. Different grades of rare coins will show varying degrees of wear and tear, marks or scratches and disfigurement. When coin collecting was mainly a hobby, dealers and enthusiasts used a basic scale for grading coins with each coin falling in one of three categories: Good, Fine and Uncirculated. An Uncirculated coin meant it was in mint condition with Fine showing some degree of wear and Good showing considerable wear with scratches and marks.
Within the investment arena, rare gold and silver coins are graded using the Sheldon Scale, according to Financial Web. The Sheldon Scale uses a value scale of 1 to 70 with 70 being the highest value. Oftentimes, a coin will have its value rating listed right on it so dealers, collectors and investors alike can quickly identify a coin’s grade.
The Sheldon Scale grading system incorporates letters and numbers so coin grades will appear as F12 (Fine), VF30 (very fine) and M60 or M70 (Mint condition). Something to keep in mind when shopping for rare coins is the source of the grade listing placed on each coin. Some dealers take it upon themselves to do their own grading, which may or may not be accurate. Be sure to only purchase coins graded by authorized agencies, such as the Professional Coin Grading Service (PCGS) and the Numismatic Guaranty Corporation (NGC).
Coin Value Basis
The rare gold and silver coin market places considerable emphasis on three general aspects when considering a coin’s real value: rarity, condition and demand. While all three areas have an impact on a coin’s overall value, rarity and demand tend to carry the most weight.
The more rare or scarce a coin, the higher its value tends to be. In the case of ancient coins, if only 10 of a particular coin are in existence the coin’s value in terms of rarity may even supersede its overall condition simply because there are so few of them in existence. In general, a coin is considered rare when only 75 or less are in existence. This guideline is based on the Sheldon Rarity Scale.
On the other hand, the condition of a coin can also influence its “rarity” rating. Rare coins in mint condition may carry a high price tag based on their Condition rarity. In other words, the coin derives its real value more so from its condition than its history.
As supply and demand drives all areas of the marketplace, the demand for a particular type of rare coin also affects its value in terms of its selling price. Dealers, collectors and investors dictate the supply and demand trends in the rare coin market much like buyers and sellers drive the stock market. In this sense, even the rarest of rare coins in mint condition may not proffer the value it holds unless there’s an interested buyer in the market.
Appreciation Potential
Rare silver and gold coins have acquired a solid record of appreciating in value when compared to other types of investment options. According to CoinLink Coin Collecting News, rare silver, and gold coins in particular tend to ride the same value-increase trends as gold commodities. Over the past two decades, increases in the gold market were followed by increases in the rare coin market with rare coins showing considerable increases afterwards.
Based on these trends, rare coin investors have started to view increases in gold values as an early warning sign that rare coin values are poised to enter a bull market phase. Corporations like Fidelity Investments and Kidder Peabody and Company have seen profit returns of over 100 percent from rare coin investments. Independent reports from industry analysts, such as Consumer’s Digest, The Wall Street Journal and GE Private Asset Management have all confirmed the high rates of appreciation rare coin investments could bring.
Investment Returns
Rare gold and silver coins work best as long term investment options for people looking to see a high return on their collections. Real appreciation results typically occur after a minimum of three to five years according to Financial Web. During this time, rare coins are protected from the usual tax payments due on other investment vehicles.
Rare coins are subject to capital gains tax payments, which are only paid at the time a rare piece is sold. For the duration a coin is held, no taxes are due. In cases where a particular piece appreciates considerably, these profit gains remain intact. During periods of slowed or stalled economies, these gains become all the more solid as the value of the dollar declines.
When it comes to strengthening an investment portfolio, the favorable tax treatments rare coins carry and their potential for growth become a cornerstone feature of a productive portfolio. The key lies in viewing rare coins as a long-term investment vehicle.
Investment Risks
Unfortunately, risk is the name of the game when it comes to investment opportunities and rare coin investing is no different. The risks involved have more to do with finding authentic and valuable pieces than it does losing out on expected returns. In actuality, over half of the rare coins in existence are over-graded according to Financial Web. This means an investor who purchases an over-graded coin pays more than the piece is worth on the market.
The rare coin market is still coming into its own as far as its investment potential goes. Up until the 1950’s, coin collecting as hobby was the main venue for rare coins. The market was mostly unregulated and highly speculative with few if any standard guidelines in place. Many of these characteristics remain intact in today’s rare coin market, which accounts for much of the risk for investors. Ensuring the accuracy of a coin’s market value and grading can go a long way towards avoiding investment losses in the future.
Marketplace Benefits
While other investments, such as IRAs, 401ks and stocks each carry different types of benefits, the benefits found in rare gold and silver coin investments have more to do with their inherent and unique value as ancient metals than their relation to other marketplace products. This feature makes rare coins less susceptible to market ups and downs, which is the trademark of a solid investment vehicle.
According to the Forex Empire news site, record numbers of investors entered the rare coin market in 2008 as a means to protect their cash reserves during the U. S. economic recession. Unlike the dramatic losses felt in the stock market, rare coin investments held their value and are expected to increase in value for the duration of the recession period.
Monaco Rare Coins
Working with an experienced, reputable industry leader is the first and best step an investor can take when considering rare coin investing. Monaco Rare Coins has established itself as a national and international dealer within the rare coins market. Investors have access to a vast network of auction houses, wholesalers and dealers. Monaco houses a huge inventory of investment grade coins as well as access to rare and ancient pieces through their network of dealers. As a seller and a buyer of rare gold and silver coins, Monaco investors can pay the lowest prices while reaping the best payouts in the market.
Sources –
http://www.finweb.com/investing/numismatics-is-it-for-you.html
http://www.oag.state.ny.us/sites/default/files/pdfs/bureaus/investor_protection/Insert D – investoralert – coins.pdf
http://www.finweb.com/investing/rarity-and-the-establishment-of-rare-coin-value.html
http://investorinsight.net/2011/07/investing-in-ancient-or-rare-coins/
http://www.finweb.com/investing/rare-coin-values-grading.html
http://www.finweb.com/investing/6-advantages-of-rare-collectible-coin-investments.html