5 Tips to Investing in Gold Coins
Ken MacKenzie
May 26, 2008
During the last several years, gold coins have increased a great deal in value and since they are now so expensive, there are a few things you should watch for when making your purchases. Since just about every coin dealer across the country now has a presence on the internet, you are not limited to your local coin dealer. You will have a larger selection of coins to choose from and the opportunity to get better prices on many coins, but also may introduce a few issues for you to think about when buying your gold coins.
1. How do you know whether the seller is a fly-by-night operator or a legitimate dealer? Whether you are buying from a bricks and mortar dealer or buying online through a website or and auction site like EBay, you need to check the reputation of the dealer first. For a store, at a minimum check with the local Better Business Bureau. If the dealer is a member of the Professional Numismatists Guild (PNG), that is a big plus. If it's an EBay dealer, look at the seller's feedback rating. If it's very low, or there are many negatives, think twice (and a third time) before spending a large sum with them. Sometimes feedback can look good, but looking closer, you may see that they have bought or sold a number of very inexpensive items to build up their ratings, then jumped in selling big ticket items. Or a seller may have a bunch of good feedbacks, but all he has been doing in the past is buying and this is his first foray into selling. On large ticket items, ask if the seller will agree to use Escrow.com. They act as a middleman in the transaction and the money doesn´t pass to the seller until the buyer is satisfied with the item. There is a charge, which the buyer would be expected to pay, but its well worth it when big money is changing hands.
2. One of the biggest problems buying collectible gold coins is grading. Your idea of an MS63 may be very different than the dealer's. One thing you don't want to do is buy a coin graded MS65 that you end up having to sell at an MS63 price. There can be a huge gap in value between grades. Avoid the issue by buying only certified gold coins that have been graded by one of the third party grading services. Make sure that you only accept the major services (ANACS, NCG, PCGS, NCS, ICG) grading, there are some lesser known grading services whose grading may be suspect. You should also want the grading to have been done in the recent past. Grading standards have changed over time and what was an MS67 five or ten years ago, might only be an MS65 or 66 today.
3. Make sure the seller has a return policy that will allow you a refund if you are not satisfied with the coin or if your grading service returns a lower grade for the coin. This should apply to both on-line and off-line dealers. This is especially important if you are buying a non-certified coin.
4. Don't just buy the cheapest coins that you can find. There is usually a good reason for the lower price. Buy the scarcest coin in the best condition that you can afford. Many collectible gold coins sell near the melt price of gold because there are more than enough around to cover demand. This is especially true in the lower grades. When gold increases or decreases in value, these coins will follow by a like percentage. But the higher the grade, the lower the population and demand will push up the price rather than just following the price of gold.
5. If possible, invest regularly. It's not likely that you will be able to call the tops and bottoms in the rare coin market. Over the course of time, you will fare better by dollar cost averaging than investing a large amount at one time.
1. How do you know whether the seller is a fly-by-night operator or a legitimate dealer? Whether you are buying from a bricks and mortar dealer or buying online through a website or and auction site like EBay, you need to check the reputation of the dealer first. For a store, at a minimum check with the local Better Business Bureau. If the dealer is a member of the Professional Numismatists Guild (PNG), that is a big plus. If it's an EBay dealer, look at the seller's feedback rating. If it's very low, or there are many negatives, think twice (and a third time) before spending a large sum with them. Sometimes feedback can look good, but looking closer, you may see that they have bought or sold a number of very inexpensive items to build up their ratings, then jumped in selling big ticket items. Or a seller may have a bunch of good feedbacks, but all he has been doing in the past is buying and this is his first foray into selling. On large ticket items, ask if the seller will agree to use Escrow.com. They act as a middleman in the transaction and the money doesn´t pass to the seller until the buyer is satisfied with the item. There is a charge, which the buyer would be expected to pay, but its well worth it when big money is changing hands.
2. One of the biggest problems buying collectible gold coins is grading. Your idea of an MS63 may be very different than the dealer's. One thing you don't want to do is buy a coin graded MS65 that you end up having to sell at an MS63 price. There can be a huge gap in value between grades. Avoid the issue by buying only certified gold coins that have been graded by one of the third party grading services. Make sure that you only accept the major services (ANACS, NCG, PCGS, NCS, ICG) grading, there are some lesser known grading services whose grading may be suspect. You should also want the grading to have been done in the recent past. Grading standards have changed over time and what was an MS67 five or ten years ago, might only be an MS65 or 66 today.
3. Make sure the seller has a return policy that will allow you a refund if you are not satisfied with the coin or if your grading service returns a lower grade for the coin. This should apply to both on-line and off-line dealers. This is especially important if you are buying a non-certified coin.
4. Don't just buy the cheapest coins that you can find. There is usually a good reason for the lower price. Buy the scarcest coin in the best condition that you can afford. Many collectible gold coins sell near the melt price of gold because there are more than enough around to cover demand. This is especially true in the lower grades. When gold increases or decreases in value, these coins will follow by a like percentage. But the higher the grade, the lower the population and demand will push up the price rather than just following the price of gold.
5. If possible, invest regularly. It's not likely that you will be able to call the tops and bottoms in the rare coin market. Over the course of time, you will fare better by dollar cost averaging than investing a large amount at one time.