Coins To Avoid
Knowing what coins to avoid is one of the most important strategies to acquire when investing in coins. As a general rule, we recommend that you avoid buying any coin for investment that does not trade in a two-way market. Here are some of the more common mistakes that can be avoided when buying gold coins:
Avoid buying better gold coins that are not certified
When buying any better dated gold coin you should insist on certification by PCGS or NGC. Very often an investor may be offered better coins at what appears to be a below market price. But unless you are an expert in coin grading you should avoid buying any better non-certified coins. Raw and uncertified coins will very often have problems such as improper cleaning or mishandling that will disqualify them from being of investment quality. These coins will not trade in a two-way market. We advise all investors to insist when buying better coins that they are certified by one of the accredited grading services.
Buying merchandise from a TV Shopping Show has become very popular since the 1980’s. Here all manner of goods may be purchased and coins have become a popular and frequently displayed item. A few stations have even devoted an entire one hour show exclusively to Rare Coins. These shows are very successful due to their convenience and are known to sell a tremendous amount of coins to the general public. However the very nature of a Rare Coin is contrary to the concept of mass marketing. After all, you could not afford to broadcast a TV Show in prime time by offering $99 coins with only one or two available. These Shows must sell thousands of coins per hour in order to be profitable. They provide clients with a good product and great service. But the amounts being paid by buyers who call in are usually higher than the average prices being charged by national coin dealers. Our advice is that buying coins offered on TV Shopping Shows is not the best way to invest.
Many more modern gold coins are being produced today then in the recent past, due in part to the surging demand for gold ownership. Sometimes the mintages on modern issues can be very low, leading investors to believe that the coins are undervalued. Traders with online auctions such as eBay will initially bid these coins up to high prices that are well above their bullion value. Instead of trading as a typical bullion coin, a modern low mintage issue might be priced more like a scarce or even a rare coin. When this happens the coins may rise in value for a short time. But our experience has shown that any increase in modern coin prices is usually short lived and that after the coins are on the market for awhile they will usually fall back to a more traditional bullion price level.
Many better coins can have problems due to mishandling and cleaning, or problems related to improper storage. In the past these damaged coins have always been considered poor investments. Recently however a new trend has developed whereby problem coins are being encapsulated by PCGS as "genuine" or by NGC where the particular faults are noted on the holder along with a net grade. Several national coin companies have started to offer these problem coins at slight discounts below problem-free coins. The values for such coins are arbitrary and unpredictable. Unlike conventional rare coins, there is no standard pricing guide and therefore no consistency in pricing problem coins. They are not recommended as investments.
All gold coins sell at a premium above their intrinsic value. That premium can vary with the prevailing trends that occur in the marketplace. Gold Eagles and Gold Maple Leafs for example have traded at the low end of the premium range for over two decades and are looked upon as the industry standards for bullion coins. Very often a new issue such as a commemorative or anniversary coin will be offered to investors as a bullion coin, but with a higher premium above the gold spot price than typical Eagles or Maple Leafs. For collecting purposes this may be acceptable when acquiring a small quantity, but for quality investment purchases these high premium coins are a poor choice. Promoters will tout any small advancement in price as a sign of future demand, but these minor gains will usually disappear after the excitement starts to wane. They are not recommended as investment quality coins.
Owning a piece of history can be a very appealing opportunity. Many of the rare historical issues that make the headlines have often brought record prices when first offered for sale at auction. Some of the excitement can be attributed to the newness of the discovery and the story behind it. Unlike the more traditional rarities, collectors and investors are the first to receive offers to buy coins from any newly discovered shipwreck or new coin hoard that finds its way into the marketplace. Promoters who control the distribution of these coins will make certain that the prices remain high until the promotion is completely sold out. Afterwards the value of the coins can often drop to well below the initial buyer’s cost. Our advice is for investors to wait until the promotion is over and buy these coins once the excitement settles down.
There are many coins now being offered through coin brokers and on web sites like eBay, with accompanying certification from little known grading services. They may have similar sounding names and holders, but they are not attributed with the same degree of consistency as PCGS and NGC certified coins. And while their pricing may sound appealing when compared to coins certified by the top services, you may find that their liquidity is poor should you try to sell them. In almost all cases these 2nd and 3rd tier coins will not cross over to PCGS or NGC certification. They should be avoided.
Very often a coin promoter will obtain a license to re-issue a new modern version of some popular historical coin. These "official re-strikes" are very attractive and often embellished with impeccable packaging. But once the supply of these new coins is exhausted the interest among buyers can dry up, leaving the holders of these re-strikes with a product that nobody will buy unless the price is discounted. Our advice is for investors who may wish to own some of these re-strike coins to wait until the promotion is over and buy after prices have fallen.
All gold coins, including bullion, generic and rare issues, should trade in a two-way daily market in order to be investment worthy. "Two-way" means that there is a posted buy and sell price for the coin, or there is a listing in a recognized daily or weekly price guide. Modern Bullion coins and Generic Gold coins all have posted buy/sell spreads. Rare and Better Gold coins have posted bid/ask prices, as well as auction prices realized. Some examples of coins that do not trade in a two way market would be damaged or mishandled coins, any modern low mintage coins that trade at high premiums, any high priced error coins that are not listed in the Guide Book of US Coins, or just about any coin offered at a high premium that has no supporting price history.