Buying And Selling Precious Metal Coins
Precious metal coins can be an excellent investment. You should know, however, that precious metal coins are a unique type of commodity and that the rules for investing in them are a bit different from anything else. You also need to understand how the metal commodity markets and the valuable coin market work.
Two Components of Value
A precious metal coin’s value is made up of two components
- Its value as raw metal (what it would be worth to a precious metal buyer if you simply melted it down)
- Its numismatic value (its value to coin collectors)
As a general rule, the rarer the coin, the greater the percentage of its market value will be numismatic. Conversely, a very common coin will generally only be worth its raw metal value; for instance, US Gold Eagles sell for the value of their gold content only.
How the Metal Value is Determined
There are several world precious metal markets, but the price of a given metal is usually quite similar on a given day across all these markets. The cumulative average of a metal’s price is called its spot price, usually expressed in dollars per ounce. When you buy precious metals from a dealer (in coin form or otherwise), you will usually pay 1%-3% over “spot”; when you sell them, you will receive 1%-3% below spot. The larger the transaction, the lower the percentage you will pay.
How the Numismatic Value is Determined
Coin dealers worldwide keep careful track of the prices rare and valuable coins are selling for. As there are hundreds of thousands of types of such coins, this is a huge and complex database of information. The market fluctuates daily, and because of these factors, only a dealer will know what the “correct” numismatic value of a precious metal coin should be. Lacking this knowledge, your best bet is to get a quote from several dealers (whether you are buying or selling).
Fluctuations in the Markets
Precious metal prices fluctuate greatly. This can make precious metal coins a risky investment by themselves, and generally speaking, they should therefore be a part but not all of your investment portfolio. Precious metals (and precious metal coins) do best in times of uncertainty and crisis, or when other investment markets (such as the stock and bond markets) are doing poorly. As such, when they are part of your investment portfolio, they can provide a “cushion” against losses.
Get more info at your local coin dealers!