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Gold price and numismatic premiums?
cinque1543
Posts: 681 ✭✭✭✭
Please help build my understanding with this hypothetical.
Scenario A: Gold is $1500 per ounce. A particular one-ounce gold numismatic coin sells for $2300, reflecting the price of gold plus an $800 numismatic premium.
Scenario B: A couple years later gold is $2000 per ounce. The same one-ounce gold numismatic coin still sells for $2300, this time reflecting the higher price of gold but with a lower $300 numismatic premium.
Now, let's say I buy the coin and hold it for 10+ years. Ignoring the fact that the price of gold might have changed over that time frame, is there any reason that I would be better off having purchased the coin under scenario A or scenario B? If yes, what is the reason?
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In this day & age, spot and the numismatic premium seem to be tied to a sliding scale.
Demand may dictate the premium as well during scenario A & B, which can vary wildly over time.
Think Jackie Robinson Gold Commemorative.
A current Modern example of a high, sustained Numi premium over spot would be the 2021 HR Liberty. Wow...
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Didn’t realize that. Somehow I thought they were inversely related (ie, when gold rises, the numismatic premium falls). I guess it’s not that simple.
If gold continues to rise beyond collectors’ abilities to afford to put together sets or buy scarcer dates, the coin may never trade for a premium again. In that scenario, bullion (or common pre-33) is the better move.
On the other hand, many scarce date pre-33 coins may be melted down if gold remains high sustainably. At some point, those dates may regain numismatic premium, in which case it’d be better to hold better dates.
All of my double eagles are common date coins, although I don’t mind paying a little premium for OGH and CAC approved coins. I do like the idea of paying small premiums for scarcer date coins today, but I expect gold to keep rising.
Superb collections are built more by omission than by addition.
Edited to say: sorry. Misread the OP. $2300 is $2300
All comments reflect the opinion of the author, even when irrefutably accurate.
No, you misread. He paid $2300 both times. The correct answer is that it's always better to pay a lower premium.
Oops. As a bullion play, I agree. As a long term numismatic coin, the entry price is the same.
All comments reflect the opinion of the author, even when irrefutably accurate.
Welcome back!! 😀
Lol. Thanks. You caught some strays in my absence.
All comments reflect the opinion of the author, even when irrefutably accurate.
Not so much. If you were watching, I didn't really have a lot to say in your absence!
A few select people were taking shots. The usual suspects.
All comments reflect the opinion of the author, even when irrefutably accurate.
As gold advances so do gold coins. For pricing / auc bidding many monitor CDN CPG.
It’s a matter of CDN, CPG, BV.
No player is going to give away a nice gold coin for BV unless pressed from some other situation.
At one point time after the mkt crash way back I put my better coins away in bank box (fed up with low ballers) to go with Banknotes. Learned all about NBN, lg size,etc. They did bery well on the bourse too. Discovered the excitement of low pop NB notes. Did world gold too. Years ago. Many scarce issues in that arena. Got some world gold slabbed. Did well on that area.
This is my view too, but the other part of it is that as spot prices increase, (predominantly) hobbyist collectors would just rather buy something else, because common gold coins just aren't interesting enough as collectibles vs. other similarly priced coins. For (very) common LH DE or Saints, that 99%+ of all coins ever struck, subject to quality.
It's my assumption (not fact) that the vast majority of the most common US gold coinage isn't owned by hobbyist collectors or when it is, as a more interesting metal substitute vs. bullion coinage like AGE.
There are plenty of non-US gold coins scarcer vs. these which either sold or still sell now for low or minimal premiums.
Which dates do you have in mind? There isn't a single US gold coin that I can think of as actually scarce now which is likely to be intentionally melted.
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You have to also consider that the price of gold could go down. If, in the scenario, gold went back down to $1,500, the numismatic premium could increase again. This effectively cushions the owner somewhat from a drop in the gold price.
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There is bullion cost; manufacturing and fulfillment cost; and producer profit. Together these equal the selling price. A "numismatic premium" if any, is a secondary buyer's expense including the perceived secondary market demand. This does not influence the original selling price. Daily bullion prices might or might not affect a numismatic premium depending on owners financial pressure to sell.
Yesterday one of the local shops had an 1886-s $5 Liberty graded PCGS MS62, not a looker. They let it go for $1050 or less. And a $2 1/2 Indian graded MS61 by NGC they sold for $425. Too cheap imo but the owner has been working short hours and was looking to clear out the gold. I've been seeing a lot of $20 Libs. not fetch a lot on ebay. There is too much market uncertainty.
With all due respect, I am not sure how you can say this. "Perceived secondary market demand" in reality IS secondary market demand, and it absolutely DOES influence the original selling price.
It is precisely why around half of the fiasco that was the gold Liberty Bells did not sell, despite their micro mintages, and why we will likely never see anything like it be offered by the Mint in the future. It is why many of the upcoming diamond background Morgan and Peace Dollars will go unloved and unsold.
You are, of course, correct insofar as anyone can offer anything at any price, with "producer profit" constituting the difference between the cost of raw goods and manufacturing and the selling price. But saying that the selling price is not influenced by secondary market demand implies that anything can be sold in any quantity at any price, which we know is not true, or that the manufacturer is indifferent as to whether or not what they offer at the selling price actually sells, which is also not true.
I wrote in broad language concerning rubbish pumped out by mints: there is no "numismatist premium" (positive or negative) until there is a demand which is not satisfied by the total producer price. Multiple factors affect demand and can occasionally encourage the producer to reduce their price. (Several posters mentioned this.)
A similar, more specific approach can be applied to individual collector coins -- see logger7's anecdote.
As gold was shooting up a few years ago, I bought generic $20 Saint and $10 Indians (gold at $2100/oz)... since premiums all but evaporated for higher end coins (I opted for an MS65 Saint) and holders (I opted for an OGH for my $10 Indian). I was also looking for a $3 gold piece at the time too. Since there's relatively little gold compared to a $20 Saint... the numismatic premium lagged behind the rise in gold. I opted for a PCGS CAC AU piece about a year later and the numismatic hadn't kept pace... gold a little over $3k/oz...
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My first response was a chuckle, cinque1543.
All that matters is what the coins are able to command at a given time due to supply and demand. The first scenario, however, makes it much more frustrating when selling, knowing you paid such a high premium initially, and the reflexive impulse to believe you should get something close to that when selling.
But your question piqued my curiosity on my own coins' performance.
I had been investing in IAU, the gold ETF in 2021 and 2022 and began to have misgivings wondering if gold skyrocketed, could they be actually fulfill their obligations. I decided to sell my holdings in favor of purchasing a variety of gold coins instead, both PCGS graded and raw.
I keep a spreadsheet that adjusts my expected valuation based on the spot price of gold, and with your prompt, I priced out where these coins are actually selling today. A good number of them I wasn't able to locate recent actual sales prices, but I have several conclusions:
Gold has increased 97% since I purchased this group of coins, from $2059 to Friday's close of $4070 an ounce.
1) A couple PCGS graded MS-62 to 65+ Indian quarter and half eagles maintained their premiums, though some have underperformed moderately compared with gold's appreciation.
2) PCGS graded St. Gaudens underperformed, though a rarer MS66 that I purchased did better.
3) Modern gold commemoratives, which I've collected since they began issuing them again, continue to underperform as PCGS MS69s as they can be found at very small premiums to spot, though a couple of the more recent issues have performed in line with gold's price changes.
4) Worst performing were the then current (2021-2022) MS70 or PR70DCAM First Strike AGEs, which saw premiums collapse, maybe permanently. I suppose collectors always are just interested in adding the new issue.
3) Surprisingly, the graded Czar Nicholas Roubles I bought at small premiums have outperformed, though Britain's sovereigns from the same era underperformed.
2) The best performers in this group, by far, were the 2008-W $5 1/10th ounce gold buffalos, MS and Proof, and the 2008-W Jackson Liberty First Spouse. I think that the demand for lower cost, relatively limited mintage coins and their novelty all played in their favor.
Unfortunately, buying is much easier than selling, and that takes a chunk out of margins just about any way sellers might go about it. For me it doesn't make any sense selling online or walking into my local coin shop.
Comparatively, the IAU ETF has put in approximately 96% performance over that timeframe considerably better than if I sold the coins. It's ease of transacting and bid/offer liquidity are starkly better.
But I'm a collector first, and don't intend on selling now if ever, hoping to leave my kids and grandkids my collection. So my satisfaction level is much higher than merely looking at numbers in an account.