At what grade does bullion value cease to be part of a gold coin's grade?

nwcs

I've been curious about this as I've been looking and comparing prices of gold coins over the past couple of years. At what grade (or how rare) does a gold coin's price cease to really be impacted by the price of gold?

KlectorKid

Depends on the coin, gold dollars for example have very little gold in them so its never really an issue. Also it depends on the rarity, but if we were talking generic 20 saints I'd be inclined to say 66, 10's probably closer to 64 and steadily declining with denomination from then on.

Weiss

Grade or value? The composition of the coin shouldn't have anything to do with its grade.

Maybe I'm way off the mark here, but it seems that if you're trying to decide how much of a coin's value is metal over scarcity, then just shop some common gold coins. Subtract their melt value from their price, and you have essentially the value of the coin itself.

It is an interesting question, though.

For example: Gold is about $420 per ounce. A $5 liberty piece is just shy of a quarter ounce, so its melt value is about $100. Someone just dumped a ton of $5 liberty coins on ebay, most certified PCGS AU-MS, in the $150 to $190 range. There's one, an 1882s certified AU53 with a buy it now of $190. Mintage of 969,000. Subtract the gold value of maybe $100, and you've got a "coin value" of about $90. As support, the redbook lists the 1882 nickel, mintage 11 million, as having a value of about $60 in AU. Pretty close, huh?

Interestingly, the 1885 nickel, a mere 3 years later, has a mintage much closer (yet still vastly more numerous) compared to the above $5 coin (1,476,490 to 969,000). Yet the 1885 nickel is valued at over $1,000 in AU. Makes you wonder if maybe the average late 19th century gold is undervalued.

nwcs

No, I was thinking of where the value of a gold coin stops being influenced heavily by the spot price of gold. For example, common ms63 saints are very tied to the spot price. But as the grade goes higher the less the price is influenced by the spot. So I'm just trying to learn more about where that point is. For the record, I own no american gold coins.

my3cents

when you go from "run of the mill" au-ms, to "NOT run-of-the-mill" MS. That's where the bullion price stops being important.

An MS65 anything and higher will always command much more than bullion value.

just my 3 cents worth

DaveG

It's not a function of grade, it's a function of price (or rather, premium to melt).

"Common" Saints (or any other gold coin) don't sell at much of a premium to melt, so their price is closely tied to the price of gold.

On the other hand, a coin (of whatever grade) that sells for 5x melt isn't going to be affected by a small (say less than 200%) move in the price of gold.

Conder101

I would say at a minnimum, when the price of the coin exceeds the value of the bullion by a factor of three. Four is even better.

mhammerman

Seems like you can buy xf/au gold for less than 2x melt all day long and never run out of targets. I like to think of gold coin prices kind of like weiss in that I subtract the melt from the price of the coin first and then begin to look at what the coin is worth. A $250 $10 indian or liberty is a $50 coin...so not bad. A $50 morgan is a $44 coin...makes gold look kinda good when you do it this way.

BillJones

It depends upon the coin. Common date $20 gold pieces don't escape the bullion market until they reach at least MS-66. Common Gold dollars and $3 gold coins beat it in just about every grade down to maybe VG. For the others the bullion markets affect the numismatic prices to a certain extent. When bullion is flying high, the logic seems to be, "If gold gold bullion is a great investment, collector coins must be better."

On rare occasions the numismatic value can be lower than the melt value. This happened for a very brief time in the early 1990s. Nearly every numismatist and coin dealer thought that the gold bullion price was artificially high. As a result "junk grade" (VF or so) common date $20 gold coins were selling for a couple bucks under the melt value. Thank goodness this did not last for very long or we would have seen some old gold coins headed for the melting pot.