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America's Golden Heritage
From 1795 to 1933, the United States produced gold
coins for use in commerce, both within the U.S. and
internationally with our overseas trading partners. Mintages
ranged from a few hundred of certain coins to several million for
others.
U.S. gold coins were issued for circulation in six
denominations: $1.00, $2.50 (Quarter Eagle), $3.00, $5.00 (Half
Eagle), $10.00 (Eagle) and $20.00 (Double Eagle).
The total mintage of U.S. gold coins exceeded 100
million pieces from eight mints, yet very few of these coins,
ranging from seventy to over two hundred years old, remain today.
It is estimated that upwards of 95% of the original mintages are
forever lost to collector hoarding, mishandling or melting.
What is a Key Date Coin?
A Key Date coin is a coin originating from a
certain date from which samples are difficult to locate due to
rarity resulting from low survival rates and/or low original
mintages. However, the survival rate of the coin takes much
greater precedence and significance in determining the quality of
the coin, while the age and original mintage have little bearing
on the piece's current value.
Rare coins no longer are being produced, and in
fact, once a coin was minted, the original die was destroyed to
prevent further replication. However, the number of examples
surviving in a particular condition today determines the rarity of
a coin. While original mintage figures indicate the number of
coins struck lifetimes ago, these figures are not necessarily
indicative of current rarity. In 1986, the rare coin market was
revolutionized by the creation of nationally recognized,
independent professional graders, or numismatists, who examine
each coin for authenticity, and grade them according to
established standards, setting a universally accepted grading
scale in the marketplace. Population reports published by these
two services, Professional Coin Grading Service (PCGS) and
Numismatic Guaranty Corporation (NGC), have revealed that many
issues considered rare for years are actually relatively common.
Where Did All The Gold Coins Go?
Twice during the 200-year history of U.S. coinage,
U.S. gold coins were recalled and melted by the government. These
two government meltdowns helped transform U.S gold coinage from
common monetary units into excellent investments since the
meltings left a relatively small surviving population of U.S.
coins minted from 1795 to 1933.
The first melting occurred in 1834 when the gold
content of U.S. coins was reduced and nearly all gold coins minted
from the period 1795 to 1834 were melted because their intrinsic
value exceeded their face value.
The second melting resulted from the great Gold
Confiscation of 1933, when 90% to 95% of all U.S. gold coins held
by individuals, banks, and the Treasury were recalled, thrown into
huge melting pots, and poured into 100-ounce and 400-ounce gold
bars. Franklin Roosevelt's Gold Confiscation of 1933 marked the
end of regular issue, legal tender U.S. gold coinage.
Among the surviving populations of coins currently
remaining, not all are actively traded on the market, but instead
many have been obtained in complete sets or long-term investment
portfolios.
Static Supply, Increasing Demand
U.S. gold coins are among America's most popular
and sought collector coins. The availability of high profile,
valuable coins through European bank vaults and famous collections
have sparked enormous interest in U.S. gold that is matched by few
other areas in U.S. numismatics. Numismatic investments expand
investors' options to diversify and stabilize their portfolios in
a volatile stock market because tangible assets have intrinsic
value and provide certain financial protection that cannot be
gained with paper assets. An independent study of the investment
performance of U.S. rare coins between 1979 and 2006 by Professor
Raymond E. Lombra, PhD., Professor of Economics at Penn State
University, concludes that including rare U.S. coins within an
existing portfolio can improve investment performance and provide
portfolio stability.
Due to the popularity of U.S. gold coins, the
rarest samples within this sector generally tend to appreciate the
greatest over the long-term. The best performing coins are those
that are difficult to obtain because they require relatively small
increases in demand to drive prices higher. Therefore, serious
collectors and professional coin dealers seek ideal coins that few
or no other collectors could acquire.
An excellent way to examine the relative scarcity
of Key Date Gold examples is by considering their populations
compared to other rare coins. Key Date Gold populations of 1, 2,
3, 5, 10, 20, 50 or 100 coins compare to populations of 350,00+
for uncirculated Morgan Dollars, 150,000+ for uncirculated Peace
Dollars, 100,000+ for Franklin Half Dollars, or even 150,000+ for
certain Mint State Gold coins.
Outstanding Performance
One of the most well known success stories of hard
asset investing is the collection of New York attorney Harold S.
Bareford. Between 1945 and 1955 Mr. Bareford accumulated one of
the most complete collections of U.S. coins ever seen.
The total cost of the collection was $13, 832, yet when auctioned
on 1978, it realized $1,287,215.
A more substantial collector, Louis Eliasberg,
built a collection that originally cost approximately $300,000. In
1982, it brought a staggering $12,400,000 at auction.
Key Date Gold has outperformed many investment
areas since 1989, posting impressive gains for two primary
reasons: (1) a small, fixed supply and (2) increasing demand.
Key Date Gold
Key Date Gold has performed as the rare coin
forerunner in the numismatic market, which can prompt concern over
a decline in the investment. On the contrary, economic conditions
are more favorable today and indicate continued growth in the year
ahead.
The forces that have driven commodity prices higher
in the past couple of years remain largely in place. Global
economic growth is strong, liquidity is plentiful and investors
appear to still have an appetite for risk while simultaneously
securing stable and diverse investment portfolios. Historically,
gold coins realize their greatest performance during times of
increased inflation and rising gold prices. Furthermore, they
serve as an excellent hedge against falling stock and bond prices.
Rare coins top even gold bullion as a hedge against inflation and
have proven to produce significant profits even when the price of
gold is falling, making them an excellent addition to a
well-balanced portfolio.
We are currently experiencing the early stages of a
gold bull market and economic factors point to a rise in
inflation. These conditions have historically resulted in rising
rare coin prices due to increases in demand and market activity.
Key Date Gold coins have historically outpaced
rising gold bullion markets and rare coin markets for one simple
reason: the market for Key Date Gold coins is one of the thinnest
markets in all of hard assets. At the same time, Key Date Gold
coins offer the intrinsic security of gold. Not only have Key Date
Gold coins secured preservation of wealth in the flat gold market
of the 1990's, but they also provide investors the ultimate
protection from the effects of inflation in a gold bull market.
While Key Date Gold coins may be scarcer and more
expensive than common date coins, their historic performance
proves that they are well worth the investment.
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