A front-page article in Monday's Wall Street Journal titled “U.S. Mint Makes a Mint Selling Gold Coins at a 25% Markup” reinforces what I have been writing about for years, buying coins from the mint is not a wise means of investing. In fact, the mint is actually operating in the same fashion as a coin dealer with an extensive list of products for sale on their web site including a popup window that offers on-line chat with a live person. In fact, the mint has an unfair edge over my business, they don’t collect New Jersey sales tax where I am required to.
Although the mint has been striking one cent and five cent coins at a loss for years, the mark-up on their product list more than makes up for the difference. Take for example the proof gold and silver coins which the mint has struck since 1986. They are beautiful coins, and the proof condition refers to the fact they are struck twice on highly polished blanks, but the mark-up over the bullion value is exorbitant. On their website the mint quotes a price of $53.95 for a 1-ounce proof silver eagle, an over three times mark-up over the silver value when you can buy a 1-ounce uncirculated silver eagle for around $6 over the bullion value. Looking at the proof gold eagle, the mints’ quoted price is $1610, a 25% premium whereas a 1 ounce uncirculated gold eagle would cost around $1400. Granted, proof issues generally have a lower mintage and hence should command a premium over the price of uncirculated coins, but even the proof mintage figures are higher than what would be considered scarce.
In prior years proof gold coins and sets of the 1-ounce, 1/2-ounce,1/4-ounce and 1 1/10-ounce coins would bring a premium of $200 - $300 per ounce over their gold value in the secondary market. Currently however, there is no difference in the premium whether buying or selling the uncirculated or proof issues. In fact, I recommend if someone is interested in buying gold, they should try to find the proof examples at the same mark-up as uncirculated coins in case the premium returns. Even if it doesn’t, they still have bought the gold at the lower uncirculated premium.
The article goes on to quote several individuals who bought proof gold and silver coins, only to experience a substantial loss on their investment. While there was no indication about the difference in the spot price of gold and silver at the times or purchase and sale, it seems they were given indications that these were good investments. In this case I blame both the buyer and the dealer who sold these coins, not the government. First, the buyer evidently didn’t do his due diligence and instead of buying bullion near its’ value, he bought coins that would be considered collectibles at a higher premium. And the seller was probably motivated by offering a product that would bring a higher commission. Buyer beware.
In summary, the mint sells beautiful coins and medals on their website and if you want them because of their beauty and are not concerned about future value then by all means go ahead and order them. However, if you want a better deal it may pay to wait a few years to see if the price has gone down. But, if the price of gold or silver skyrockets, then even bad investments can turn out good.
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 in Egg Harbor Township. 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 Corp., the Certified Coin Exchange and the Professional Coin Grading Service.