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There is an increasing demand in rare coins made from precious metals such as silver and gold. The value of these rare coins has grown dramatically in recent years due to increases in commodity prices as well as high demand. Rare coins have historically protected wealth against inflation. Gold Coins
With the price of gold having reached the more than $900 per ounce in May of 2009, this precious metal once again proves its strength in troubling financial times. Global market failures in recent years have prompted governments to attempt suppressing gold prices in an effort to to keep their economies stable. Central bankers, operating as bullion banks, aid governments through liquidity squeezing, arising because banks borrow short and lend long. Gold is the enemy of fiscal irresponsibility. As currencies such as the United States Dollar lose value, gold continues to gain investor confidence. Global investors are beginning to realize that gold will again prove itself as the only monetary asset to withstand ongoing debasement of paper currency. As investors lose confidence in paper currency, they continue turning to more tangible assets such as rare coins and precious metals. Inflation driven by surges in global demand of energy and natural resources is an ongoing issue for consumers and investors, as well as central bankers. As purchasing power is eroded by inflation, Americans seek the more reliable investments such as gold, which continues to pass the test of time. The 12 Piece US Gold Set is one of the best representations of gold performance over time. This set is comprised of the most common date gold coins in each respective series in MS65 "investment" grade as follows…  $1 Type I
$1 Type II
$1 Type III
$2.5 Liberty
$2.5 Indian
$3 Indian Princess
$5 Liberty w/motto
$5 Indian
$10 Liberty no motto
$10 Liberty w/motto
$10 Indian
$20 Liberty Type I
$20 Liberty Type II
$20 Liberty Type III
$20 St. Gaudens
$20 High Relief
While the 12 Piece US Gold Set soared to all-time highs during the bull market of the late 1980's, the correlation between the this set and gold bullion is in no way perfect. This is because rare coins operate more within their own bull market fundamentals due to alternative demand. A sharply rising bullion price is actually just icing on the cake, but should provide some very thick icing in the immediate years ahead. Analysts predict gold could exceed $2,000 or even $3,000 per ounce in coming years. As the central bankers of the world keep the global financial system pumped full of liquidity, collectors & investors will be able to send U.S. rare coins prices well beyond those of late 1980's bull market. For the long-range investor who does not need to generate income from this numismatic portion of his or her portfolio, the bull market doesn't matter. But looking at past performance, if you’re planning to hold your rare coins for the long term, the numismatic portion of your portfolio is likely to outperform any asset with comparable high liquidity and low risk. Had you invested $10,000 in gold bullion in 1999, your initial investment would have grown to $33,754 by 2008. That same $10,000 investment in stocks of the S&P index would have lost $3,987. Many astute investors have already discovered how the 12 Piece US Gold Set qualifies as a true investment value with today's bargain prices. Silver Coins
 The Morgan Silver Dollar, Deep Mirror Proof-Like (DMPL) series has been one of the strongest performers in United States silver coins over the past decade. The estimated surviving coins in MS65 condition is less than 2% of the regular business strikes, giving this specialized series an advantage for collectors.
An 18 coin collection of DMPL Morgan Silver Dollars could be used as an example to review anticipated performance in a collector's portfolio. Using wholesale prices based on the Coin Dealer Newsletter for MS65 grades of DMPL coins acquired in 1998, we estimate prices available with the final dealer averaging right around 30% to 40%. The example set includes combined PCGS and NGC coins. Looking at the historic prices for this portfolio in 2001, the four year cumulative gain was approximately 30.8%. Two years later the portfolio's cumulative gain was 30.4%. This depicts the typical non-linear price movement for United States rare coins. This portfolio could have provided a total gain of 77.0% in less than ten years, yielding an annual compound rate of return near 7.0%. Compare this to a typical money market struggling to stay above 4.0% annually. Furthermore, since 2004 this price activity of this set has been truly bullish. With virtually no associated risks, this historically significant asset remains a superior investment. Auction results from such noteworthy auction houses as Heritage Auction Galleries show demand to be well above retail prices based on Coin Dealer Newsletter wholesale prices with reasonable dealer markup of 30-40%. Margins for the most prized DMPL Morgan Silver Dollars can sell at auction for substantially more than 50% above suggested wholesale pricing. Auctions are capable of finding the true price at which a particular rare coin will sell — the true value of the coin. Given that the Carson City mint DMPL is probably the most desired of Morgan Silver Dollars, it is no surprise that it's value has risen at a rate of approximately 11.0% annually over the past decade. More interesting however, is that DMPL's of the San Francisco Mint have seen a slightly higher rate of return over the same period. Considering that the Morgan Silver Dollars struck at the San Francisco Mint have historically been weak performers, these high value Morgan DMPL's provide greater evidence to support the predictable performance of most, if not all, Morgan Silver Dollar DMPL series. Conclusion
If history is any guide, the rare coin bull market should rise 300-500% over the next few years before entering a true bear market. Rare coins are not suitable investments for investors seeking current income and there have been periods when rare coin prices have decreased substantially. For that reason, investors must view their rare coin holdings as a long-term investment and be prepared to hold their rare coin portfolios for at least three to five years. |
