Allen Rowe: With gold prices down, collectors face decisions

During the past few years we have seen a number of new people buying gold coins, but with the price waning, many are wondering what to buy now.

Bullion coins have always been the easiest to buy, as their price tracks along with the spot price of gold, dollar by dollar. The next level of gold coins to look at is common-dated gold coins. They will generally track with gold prices, yet the premiums can vary by a much larger margin. Full-on numismatic gold coins trade without usually being affected by the spot price of gold. Choosing what is right depends on your goals.

If you own gold to protect against currencies or inflation, buying bullion is the natural choice. Each coin is easily traded and follows the spot price of gold. The only real variation is the premium, or commission, on each coin. The only real risk or reward is the spot price of gold.

Common-date gold follows the same principle as bullion, but the premiums can vary much more widely. People looking to trade more often buy these types of coins because they can swap around positions between common gold and bullion as the premiums change. For example, today gold is just under $1,300. A common $20 Saint Gaudens in MS-64 is trading for about $350 over the gold price. When gold was $1,800, they were only about $200 over, yet when gold was $1,200 and headed up to $1,800 a few years ago, they were trading for nearly $1,000 over. Traders will try to buy when the premiums are low and sell when they are high, a little trickier but potentially rewarding.

True numismatic gold coins are a category of their own. Let’s take a Carson City $20 gold coin in average-circulated condition. When gold peaked around $1,800, these coins were trading around $2,500. Today, even with gold down to about $1,300, these coins are commanding about $3,000 each. Over time we have seen a steady increase in value without the downward fluctuation that can be seen in bullion or common gold coins. The trickier parts of numismatic coins are the factors that make them worth more. For example, a nice AU coin can bring in about $5,000, but a cleaning could knock the value in half. Buying a cleaned coin without knowing so could be detrimental to the bottom line. Certification can help this problem, but making sure you have knowledge and people you can trust to steer you in the right direction is important.

The three areas that gold falls under each act differently, so you have to choose which way is best for you. Finding a professional to help guide you through the strategies and pitfalls can pay off greatly. Whether putting together a world-class collection, accumulating wealth in a precious metal or trading in and out using your knowledge and experience, gold coins are a great vehicle in building a lasting value.

Allen Rowe owns Northern Nevada Coin in Carson City.