Gold and Silver Mine

The price of gold has been trading in a narrow range for the past several months, consistently over $1,200 per ounce, but not quite able to reach the level of $1,300 per ounce. The last time gold traded below $1,200 per ounce was just before the Brits voted to leave the European Union, when it was about $1,160 per ounce.

As soon as the unexpected results were in that the majority of British citizens wanted freedom from the European Unions’ laws, gold jumped $100 to about $1,260, where it has been hovering ever since. The price has varied slightly, but a change of $12 up or down is only a 1 percent difference, not enough to worry about.

What has been interesting is what has happened to the premiums asked for American gold coins minted before 1933. The U.S. Mint has been striking gold coins for investors since 1986 in sizes of one-tenth, one-quarter, one-half and 1-ounce sizes, with small premiums over the actual gold value. For many years, early gold coins had a much higher premium that collectors were willing to pay because of the numismatic value. That has changed.

The first gold coins struck by the Philadelphia Mint were the $5 and $10 coins minted in 1795 followed by the $2½ gold coin in 1796. As with all our early coinage, these coins contained no notation as to value and were not minted every year. All early gold coins from this period are quite valuable and can command prices into the tens of thousands of dollars and higher.

In 1849 a $1 gold coin was added to the mix, followed by a $20 gold coin in 1850 and a short-lived and unnecessary $3 gold coin first minted in 1854. The $20 gold coin contains .9765 ounces of pure gold, and the smaller denominations a proportional amount based on their size. While there are many rare (low mintage) coins in the series from 1850 through 1933 for the $2½, $5, $10 and $20 gold pieces, common date coins previously commanded a premium price over their actual gold content. No longer.

I have written about gold coins from other countries that used to be in demand by collectors and are now finding their way into the melting pot. Well, looks like some American coins are going to follow. The reason is an overabundance of these coins on the market and the lack of demand from collectors and gold buyers. Because these coins are not in even 1-ounce and fractions-of-an-ounce size. Gold buyers prefer the American Eagles for gold investing because the value of the content is easy to calculate. As a result, it becomes more profitable to just melt some of the commoner early American gold coins.

This is a double-edged sword, where there is no premium to the seller, but a collector who wishes to add some early American gold coins to his collection could probably do so by paying just a slight premium over the gold value. A smart investor always looks for a buying opportunity.

Douglas Keefe is the president of Beachcomber Coins Inc. He and his wife, Linda, operate Beachcomber Coins and Collectibles, formerly in the Shore Mall and now at 6692 Black Horse Pike in the old Wawa building just beyond the former Cardiff Circle. They have satellite offices in Brigantine and Absecon. Between them they have more than 70 years of experience in the coin and precious metals business. They are members of the American Numismatic Association, the Industry Council of Tangible Assets, the Numismatic Guarantee Corporation, the Certified Coin Exchange and the Professional Coin Grading Service.