In gold investment circles you’re certain to hear about ‘numismatics’ or numismatic investments. Some investors will tell you to steer clear of the whole business of investing in precious collectible coins, citing their significantly higher premiums and dependence on unpredictable trends, rather than the value of actual gold or the strength of the gold market.
At the other end of the spectrum, there are some that claim the rarity of a collectible piece of gold means that its value can only increase over time. Proponents of numismatic investments hold that, as supplies dwindle due to wear and tear, accidental loss and destruction, prices invariably go up.
The Middle Ground
Wherever you fall on the numismatic spectrum, there is money to be made buying and selling numismatic coins. If you’re on the fence about numismatics a good middle ground is investing in bullion coins such as the American Eagle, Canadian Maple Leaf, Chinese Panda or classic coins such as the Saint-Gauden Double Eagle.
These coins are collectible and may increase in value in the coming decades, but will is also likely to retain value based on gold content alone. While these coins will have much higher over spot premiums as compared to pure investment-grade bars, ingots and rounds, the long-term potential for appreciation may be worth the risk.
If you want to invest in rare coins and aren’t too concerned with precious metal content, know that you are taking a bigger risk compared to non-numismatic investments. On the other hand, the higher risk is offset with the possibility of a higher return. Simply put, numismatic investments are much more volatile and unpredictable.
Collectability vs. Investment Potential
Numismatic coins that derive their value from rarity, condition and grading represent high-risk, high-return investments. If purchased as a collectible, that is another matter altogether. Strictly from an ‘investment’ angle, the value may go up or down seemingly without rhyme or reason, leading to windfall profits or a complete loss of investment.
If new source of a rare coin is found (in a forgotten chest in an attic somewhere, for instance) that are in better condition than yours, the value of your investment will have dropped instantly. But the reverse could be true, as well: an intense house fire destroys a large collection of rare coins. You may suddenly own one of the rarest coins in the world. Both events are unlikely, but stranger things have happened in the world of gold investments. Either way, you’ll be paying much higher premiums over spot.
The Numismatic Appeal
Is it worth the risk? That’s for you to decide. If you are the type of investor who appreciates beauty and aesthetics, a numismatic investment may serve you well. Even if the value of your investment takes a nosedive, you’d still find solace from owning a rare and beautiful specimen.
On the other hand, if you are a pragmatic investor strictly looking to turn a quick profit, consider purchasing physical gold such as bullion bars and rounds that derive value solely from the strength of the gold market.